EXPLORING THE “PLAY OR
PAY” RULES AND OPTIONS
From Health Care Reform
This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of
regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish
additional guidance. American Fidelity Assurance Company does not provide tax or legal advice.
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Copyright 2014 American Fidelity Assurance Company
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2014
STATE EXCHANGES
• Cornerstone year of Health Care Reform
– State Exchanges
– Individual mandate
– Federal premium tax credit to purchase
Exchange coverage
– “Employer responsibility”
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Copyright 2014 American Fidelity Assurance Company
• States must build Exchanges or federal
government will provide default
• Bronze, silver, gold, and platinum options
• Coverage will be guaranteed issue, no
preexisting condition limits, no individual
medical underwriting
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• May use to purchase Exchange coverage
• Available to certain individuals with household
income up to 400% Federal Poverty Level
(FPL)
• Credit not available if eligible for:
• Must obtain minimum essential coverage or
pay a tax
• Penalty is capped at average cost of bronze
level Exchange coverage
• Exceptions if coverage is unaffordable, for low
income taxpayers, and short coverage gaps
Copyright 2014 American Fidelity Assurance Company
Copyright 2014 American Fidelity Assurance Company
FEDERAL PREMIUM
TAX CREDIT
INDIVIDUAL MANDATE
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– Adequate/affordable employer coverage
– Government provided coverage
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Copyright 2014 American Fidelity Assurance Company
2014 Tax Credit Example:
$14,425 premium for family of four
FREE RIDER PENALTY
Penalty may apply if:
– No coverage offered to full-time employees and
dependents
– Coverage is “unaffordable” or “inadequate”
– Employee enrolls in Exchange coverage and
qualifies for a federal premium tax credit
Information calculated using Kaiser Family Foundation’s “Health Reform Subsidy Calculator,” accessed on July 12, 2011
and available at http://healthreform.kff.org/SubsidyCalculator.aspx.
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Copyright 2014 American Fidelity Assurance Company
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FREE RIDER PENALTY
(CONT’D)
FREE RIDER PENALTY
(CONT’D)
• Transition relief for non-calendar year plans
• Large employer :
Full-time employees:
– Include common law employees
– Full-time is 30+ hours/week or 130+ hours/month
– Counting hours
• Work and non-work time for which pay is due
• Service records or use of equivalency
• Aggregate across controlled group
– 50+ full time equivalent employees
– Employers with 50-99 full-time equivalent
employees required to comply by 2016 plan year
– Members of a controlled group treated as single
entity to determine “large employer”
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FREE RIDER PENALTY
(CONT’D)
Look back measurement period:
– Students
– Bona fide volunteers
– Employees paid a stipend
– Leased employees
Copyright 2014 American Fidelity Assurance Company
Copyright 2014 American Fidelity Assurance Company
FREE RIDER PENALTY
(CONT’D)
Special rules for certain employees:
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Copyright 2014 American Fidelity Assurance Company
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– Used to calculate actual hours worked for variable
hour and seasonal employees
– Measurement period may be 3-12 months
– Stability period must be as long as measurement
and not less than 6 months
– Alternative: monthly measurement
period
Copyright 2014 American Fidelity Assurance Company
FREE RIDER PENALTY
(CONT’D)
FREE RIDER PENALTY
(CONT’D)
Special rules for educational institutions:
• Final notes on counting hours worked
– Apply if 4+ week break in service
– Two methods for determining full-time employees
• Use “measurement period” excluding break
• Treat employee as credited with hours for the
employment break
– Includes anti-abuse rule
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Copyright 2014 American Fidelity Assurance Company
– Changes in employment
– Breaks in service
• 26+ weeks
• Rule of parity
• Special unpaid leave
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FREE RIDER PENALTY
(CONT’D)
FREE RIDER PENALTY
(CONT’D)
Penalty for failing to offer coverage:
Final notes on requirement to offer coverage or
pay a penalty
– 1/12th x $2,000 per month/per FTE (after first 80
employees in 2015, 30 employees thereafter)
– Must offer to “substantially all” FTEs
– Must offer to biological and adopted children
through the end of the month in which the child
turns age 26
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Copyright 2014 American Fidelity Assurance Company
– Requirement is to offer coverage
– Must provide opportunity to accept/opt out
– Payment grace period
– Coverage not required to be adequate/affordable
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FREE RIDER PENALTY
(CONT’D)
Household income safe harbors:
– Employee’s current W-2 wages
– Employee’s monthly rate of salary
• Hourly rate x 130 for hourly employees
– The federal poverty level for a single individual
– 1/12th x $3,000 per month (per employee who
qualifies for a premium tax credit)
– Inadequate: plan pays <60% allowable costs
– Unaffordable: employee pays >9.5% of household
income for employee-only coverage
Copyright 2014 American Fidelity Assurance Company
Copyright 2014 American Fidelity Assurance Company
FREE RIDER PENALTY
(CONT’D)
Penalty if available coverage is inadequate or
unaffordable (or unavailable):
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Copyright 2014 American Fidelity Assurance Company
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Copyright 2014 American Fidelity Assurance Company
FREE RIDER PENALTY
(CONT’D)
FREE RIDER PENALTY
(CONT’D)
Affordability examples:
• Mechanics:
– Coverage is affordable
– Coverage is unaffordable
• Enroll in coverage anyway
• Enroll in spouse’s plan
• Enroll in Exchange
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WILL YOUR
ORGANIZATION BE
IMPACTED?
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QUESTIONS TO CONSIDER
– Employer reporting
– IRS Notice
– Timing
– Method of payment
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QUESTIONS TO CONSIDER
• Do you have 50+ full-time equivalent
employees?
• Do you need to restructure major medical plan
eligibility to ensure all employees working 30+
hours per week (and their dependents) are
eligible for major medical coverage?
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Copyright 2014 American Fidelity Assurance Company
Copyright 2014 American Fidelity Assurance Company
QUESTIONS TO CONSIDER
• Would it be beneficial to consider restructuring
work policies to ensure part-time employees
(who are not eligible for major medical
coverage) do not work 30 or more hours per
week?
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Copyright 2014 American Fidelity Assurance Company
• Will coverage potentially be considered
unaffordable for any of your employees?
• Would it be beneficial to restructure major
medical plan contributions to ensure self-only
coverage for at least one benefit plan option
will be affordable for all full-time employees?
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Copyright 2014 American Fidelity Assurance Company
CHOICE SPECTRUM
WHAT DO YOU DO NOW?
1.
2.
3.
4.
5.
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Understand your responsibilities
Assess whether costs are sustainable
Understand your choices
Design an implementation strategy
Implement your plan
Copyright 2014 American Fidelity Assurance Company
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Copyright 2014 American Fidelity Assurance Company
HEALTH CARE REFORM
MADE EASY
• AFAS is ready to assist:
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Copyright 2014 American Fidelity Assurance Company
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– HCReducation.com
– http://benefitsblog.americanfidelity.com
– VIP emails and monthly webinars
– Health Care Reform consulting (packages, retainer
arrangements, and custom solutions)
– In-depth Workshops
Copyright 2014 American Fidelity Assurance Company
HEALTH CARE REFORM
MADE EASY
• AFAS is ready to assist (cont'd):
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– Time management software to assist with the Free
Rider Penalty
– Variable hour employee billing
– Notice compliance support and fulfillment
– Resources to help communicate plan changes to
employees
Copyright 2014 American Fidelity Assurance Company
Thank you!
This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of
regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional
guidance. American Fidelity Assurance Company does not provide tax or legal advice.
ESB-2144-0214
Copyright 2014 American Fidelity Assurance Company