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January 2013

January 2013. Agenda and Presenters. 1. Market Trends Resulting From Healthcare Reform Mike Suttman / Erick Schmidt – McGohan Brabender 2. Employer Mandate aka Pay or Play Rules Paul Routh, Esq. - Weprin, Folkerth & Routh LLC 3. Impact Of Penalties To An Employer

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January 2013

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  1. January 2013

  2. Agenda and Presenters 1. Market Trends Resulting From Healthcare Reform Mike Suttman / Erick Schmidt – McGohan Brabender 2. Employer Mandate aka Pay or Play Rules Paul Routh, Esq. - Weprin, Folkerth & Routh LLC 3. Impact Of Penalties To An Employer Grant Reed – McGohan Brabender 4. What Options Should An Employer Consider Grant Reed – McGohan Brabender 5. Summary Comments Mike Suttman / Erick Schmidt – McGohan Brabender

  3. Macro Market Trends: • Modifications of workforce • Growth of self-insurance • Options considered by employers

  4. 1. Modification of Workforce – Redefine Employee Status • Offshore Employees • Replacing Full-Time Employees With Part-Time Employees Small Employers - Attempt to remain <50 employees • Offshore – Do not count • Part-Time – Fractionalize Part-Time Employees Large Employers - Employees to Penalty Free Class • Offshore • Part-Time Note: Anti-Abuse Rules Leased Employees – Still count for employer size and penalty assessment

  5. 2. Growth of Self Insurance • Higher fees, assessments, taxes, etc. to fully-insured premiums • $20 - $30 PMPM • Community rating • Was 7:1 to 9:1 • Must be 3:1

  6. Employer Mandates of Pay or Play Rules • Government Issued 144 Pages of Proposed Regulations Plus Q&As – December 28, 2012 • Rules Are Effective Plan Years Beginning On Or After January 1, 2014 January 1, 2014

  7. Employer Mandates of Pay or Play Rules continued Small Employers • No Penalties • Large Employers  • 50 or More Full Time Employees • Full Time Employee = 30 Hours Per Week • Look to Previous Calendar Year • Fractionalize Part Time Employees • Control Group Rules Apply

  8. Employer Mandates of Pay or Play Rules continued • Potential Penalty for Large Employer Two Types of Penalties • Offer No Coverage*; or • Offer Coverage That: • Not Quality Coverage and/or • Not Affordable Coverage is Affordable if Employee’s Cost of Single Coverage <9.5% of Wages (Form W-2 Box 1) Safe Harbor 9.5% of FPL for Single = Approximately $90 Per Month *5% Safe Harbor

  9. Employer Mandates of Pay or Play Rules continued Two Types of Subsidies Under Exchange – Both Based on Income • Premium Subsidy • Cost Sharing Subsidy • Employee Not Eligible for Subsidy • if Offered Quality Affordable Coverage

  10. Employer Mandates of Pay or Play Rules continued Penalty Amounts • Offer No Coverage = Number of Full-Time Employees – 30 x $2,000 Annual or $166.67 Per Month. • Offer Coverage Not Quality and/or Not Affordable = FTE Who Goes to Exchange and Gets Subsidy x $3,000 Annual or Not To Exceed $250.00 Per Month. Penalty only applies to full-time employees = 30 hours per week

  11. Employer Mandates of Pay or Play Rules continued How to Determine Full-Time Status for Penalty Purpose • Measurement Period – 3 to 12 months • Administrative Period – Up to 90 Days • Stability Period – Longer of 6 Months or Measurement Period New Hires Ongoing Employees Need to Keep Records

  12. Employer Mandates of Pay or Play Rules continued Reports • Form W-2 for Health Coverage – 250 or more Form W-2s issued previous calendar year – Effective for 2012 Form W-2s. Fees • Patient-Centered Outcomes Research Fee = $1 First Year Then $2 Afterward. October 1, 2012 through October 1, 2019 – Reported on IRS Form 720 • Reinsurance Fund - $63.00 Per Person – First Year

  13. Pay or Play Cost Comparison for ABC Company Overview

  14. Pay or Play Comparison for ABC Company For Policy Year Starting in 2014

  15. Options Considered by Employers: What does the solution look like? ** Optimal solution will allow an employee to pursue the option that is best for themselves and the employer – stay on Employer’s Plan or go to Health Care Exchange. • Create a Leash for Future Years or Connection to Employees • Penalties • In definition of full-time (ex. 30 20)

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