When evaluating the Affordable Care Act (ACA), there are two angles — the employer’s angle and the individual American’s angle. Setting aside what employers need to know, in the individual world, the first thing people bring up is the individual mandate.

“It is important to discuss the individual side of the legislation, so employers know what their people face if they are not offered coverage and, also, what their part timers face who may not be eligible for the employer’s plan,” says Tobias Kennedy, executive vice president, Montage Insurance Solutions. “Employers may be considering reducing hours of certain staff down to part time, and countless American small business owners may be getting rid of coverage entirely, so a dive into the ACA’s impact on individuals is very important.”

Smart Business spoke with Kennedy about the individual mandate.

How exactly does the individual mandate work?

The individual mandate is the part of the legislation that says most U.S. citizens and legal residents must carry minimal essential coverage for themselves and their dependents. Exceptions are very rare and really only extended to incarcerated people or those who belong to a specifically recognized religiously exempt group. Other than that, pretty much all citizens and legal residents have to comply.

The good news is there are many ways for an individual to satisfy this mandate. Most commonly, people will be complying with this via employer coverage, social service programs like Medicare or Medicaid, certain Veterans Affairs programs like TRICARE or through plans purchased on the individual market including the new exchange marketplaces created by the ACA.

What happens if individuals don’t have coverage?

If a person doesn’t have coverage, there is risk of a tax penalty. The penalty begins humbly enough in 2014 at 1 percent of income, or $95 — whichever’s greater. However, in 2016, by the time it’s fully phased in, the penalty is 2.5 percent of income or $695 — again, whichever’s greater.

In fact, even though it’s called the ‘individual mandate’ people should be aware it extends beyond your self. People are not only responsible for themselves, but they’re responsible for dependents as well. If someone is on your tax return, you’re responsible for the fines if he or she doesn’t have coverage. Children’s fines are half of an adult’s, and there’s an annual cap per household, which keeps the maximum allowable penalty amount to three adults. But people will want to talk to tax professionals with an understanding that, for many folks, the individual mandate extends beyond just the individual.

How can people get help with coverage costs?

Thankfully, there is some financial help available for certain people, so it’s important to explore all of the options. This assistance comes by way of the ‘subsidies’ that have been in the news.

The subsidies are a way for people who qualify to get premium assistance, so their plan is more affordable. They are only redeemable in the exchanges and are set off of the silver plans, which are the middle of the road plans that carry a 70 percent actuarial value. Actuarial value is a broad-strokes term that describes the average a plan is designed to pay for claims expenses like deductibles and co-pays — the remainder is the average that a member is designed to pay. So, qualifying people can get a subsidy to purchase a 70 percent plan through the exchange. 

The subsidy basically says ‘you are only responsible for a certain premium dollar figure per month, and we’ll cut a check to the insurance company for any overage.’ This keeps the plan’s monthly premium from going over a certain amount of out-of-pocket costs.

Qualification for the subsidy is based on a lot of factors, including having an income below 400 percent of the Federal Poverty Limit but also not having affordable coverage available elsewhere. Examples of other coverage that disqualify you for a subsidy are access to things like affordable employer coverage or social service programs like Medicare/Medicaid.

Next month, we’ll discuss all of the information surrounding how to qualify, what exactly qualification gets you, and the financial assistance’s extension beyond premiums to help with co-pays and deductibles, too.

Tobias Kennedy is an executive vice president at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

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Published in Los Angeles

With so many health care reform law changes and updates, human resources professionals and companies are asking for a boiled down version of some of the main points that need to be highlighted, regarding the Affordable Care Act (ACA) and key pending action items.

Smart Business spoke with Tobias Kennedy, executive vice president, Montage Insurance Solutions, about what you need to know and do with the ACA.

What are a couple of immediate concerns for everyone?

First and foremost, make sure you got your notice out to your employees on their rights to the new marketplaces, or exchanges. Then, make sure the notice gets added to your new hire kit for future staff.

Next, employers need to look at their waiting periods and their compliance with California’s Assembly Bill 1083, which is a state law that expounds a little on the ACA. If this law applies to you, you may need to clip your waiting period if it extends beyond the allotted 60 days. Be aware this is separate than the federal bill and is set for a 2014 start date.

What extra steps do large employers need to take?

To find out if you need to comply with the employer shared responsibility provision, you have to evaluate your employees. Basically, the question is: Do you employ an average of at least 50 full-time people, including full- time equivalents. For some groups, this is an easy question. Others may waiver near the border, so it’s important to know the correct method for calculation.

If you do trigger the shared responsibility provision, you now need to be aware of exactly whom you are supposed to be offering benefits to, and exactly what types of benefits will qualify.

How should large employers keep track of their employees’ hours?

It’s a good idea for employer groups to start doing a regular check — monthly, quarterly, etc. — to see which employees are being offered coverage versus which employees are averaging more than 30 hours per week. Remember, just because you think they’re part-timers doesn’t mean they aren’t a manager’s go-to when someone calls in sick, or the workload gets hefty. It’s not uncommon for overtime hours to add up and alter a person’s average hours worked.

You’ll want to have a handle on the average hours worked by people that are not offered your benefits by running a payroll report and watching out for staff who edge up near the 30-hour average mark.

What’s key to know about insurance renewals?

You will want to note that, beginning with the upcoming January 2014 renewals, this is your last renewal to come into compliance before facing fines. Are your plan designs compliant? Is your employer/employee premium split compliant? If not, you may want to see where you are versus where you need to be. You’ll need to see what, if any, transitional steps you want to take this renewal, so you’re not so far off in 2015 when the potential for fines enters the picture.

Tobias Kennedy is an executive vice president at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

Insights Business Insurance is brought to you by Montage Insurance Solutions

Published in Los Angeles

The biggest employer piece of the Affordable Care Act (ACA) has been delayed until 2015. Unfortunately, it looks like some of the transitional relief rules for the 2013 year went by the wayside with it, so it is incredibly important for employers to know that, as of now, the government is expecting you to use the 2014 gift year to get yourself into compliance — a year in which, technically, the ACA is still the law of the land, although there will be no penalties for the shared responsibility provision.

“Employers should really be aware of the fact that, beginning with the upcoming Jan. 1 renewals, your next renewal is your last renewal to implement the necessary changes before we enter 2015 and you begin to ‘go live’ in terms of facing noncompliance penalties,” says Tobias Kennedy, executive vice president, Montage Insurance Solutions.

Smart Business spoke with Kennedy about what exactly is the employer shared responsibility.

What does the employer responsibility really entail?

To break it down, you need to know the answer to three questions:

  • Are you large enough to trigger it?
  • If so, is your coverage considered affordable?
  • Are you covering all of the people you’re required to cover?

How can employer groups know if they are large enough?

Technically the provision only applies to companies with 50 full-time or full-time equivalent employees. If you have more than 50 full-timers, it’s easy to know that you must comply.

Groups that can be trickier are those with part-timers. Even though you are not required to cover them, you are required to count their hours worked for the purposes of determining large employer status. Basically, most every hour worked by a part-timer goes into the calculation and you assign one full-time equivalent for every 120 hours your part-time staff works. In other words, if you add up all the part-timers’ hours and it comes to 1,200 hours for the month, you would add 10 bodies to your head count because that’s the equivalent of 10 full-timers, per the law. If you average more than 50 for the year, you must offer the people who are truly full-timers affordable coverage or face a penalty.

When is coverage considered affordable?

This actually has two parts to it. The first is the actuarial value of the plan, which is a fancy way of ensuring the plan is not a mini-med plan. So, first and foremost, regardless of what you charge the employees in premium, the plan has to have a 60 percent actuarial value. A Kaiser Family Foundation study set 60 percent at, approximately, a $2,750 deductible, 30 percent coinsurance and an out-of-pocket max of $6,350 — so it’s a fairly lenient plan design to meet.

Apart from that, you have to make sure that the employee-only tier costs less than 9.5 percent of an employee’s salary. You don’t need to worry about dependent buy-ups. There are a few safe harbors for figuring employees’ salaries, including using what’s reported in Box 1 on Form W-2 or comparing the premium to the Federal Poverty Level. You are only responsible for ensuring one of your plan options meets this threshold. In other words, dependent buy-ups can still be done at the cost of the employee, as well as buy-ups to richer coverage/lower deductible plans.

How do you know if you’re offering the plan to the right people?

First, the legislation defines full time as 30 hours or more per week, which might be a change for some employers still using the traditional 40-hour threshold.

Apart from that, one of the more complicated parts of the ACA centers on how employers with variable-hour employees offer coverage. Basically, you have the option of averaging out hours worked over a pre-defined time frame, up to 12 months. You can use that longer time frame to level out spikes in work for employees who toggle between working more some weeks and less in others. You can review their annual average and offer them coverage based on hours worked in the year.

You need to cover at least 95 percent of those the law says you’re supposed to cover, so you’ll want to work with your consultant to be sure you cast an appropriate net over the people that you’re required to make eligible.

Tobias Kennedy is an executive vice president at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

Insights Business Insurance is brought to you by Montage Insurance Solutions.

Published in Los Angeles

There has been an overwhelming amount of news surrounding the health care reform bill, the Affordable Care Act (ACA), and now there’s more talk that Washington, D.C., might try and kill it. Again.

“As much as companies don’t want to admit, it is truly now time to say, ‘This thing is here to stay and I need to know what to do about it,’” says Tobias Kennedy, executive vice president, Montage Insurance Solutions.

With the employer shared responsibility penalties delayed until 2015, the keyword is delayed — not eliminated.

“With the early Fourth of July present the administration announced for us, there is a bit of a ‘dry run’ opportunity that really benefits a lot of companies,” he says.

Smart Business spoke with Kennedy about what the delay of the penalties means for employer groups.

With the delay, what do employers need to keep in mind going forward?

No. 1: This really isn’t the time to hit the snooze button for 12 months. The delay shouldn’t be seen as an opportunity to waste another 12 months in figuring out compliance. It should be used as a practice run to see if you’re in compliance, and if not, what steps need to be taken to correct your course.

No. 2: Just because the employer shared responsibility provision was delayed, it doesn’t mean the ACA was delayed. If you’re an employer group, you still have requirements.

You won’t be penalized for failing to offer insurance or failing to offer affordable coverage, but that doesn’t get you off the hook for the mandatory issuance of the employees’ rights in the exchange notification, or certain plan design changes. Be sure you are working with your consultant(s) to be totally clear on exactly which provisions were delayed and which have action items pending in the near future. 

While most companies know, at least in broad strokes, that large employers will soon be responsible for providing affordable coverage, there is more to the employer shared responsibility. Again, the best time to figure out the intricacies is during a practice year — not when there are penalties looming and a hungry IRS over your shoulder. 

What should employer groups specifically be doing in 2014?

Aside from figuring out what you need to do in the short term, such as identifying the parts of the ACA that were not delayed as they relate to your insurance plans, use 2014 to really get a handle on a few questions:

  • Are you a large enough employer that you need to offer coverage?
  • If you are large enough, what type of coverage is compliant and what are you allowed to charge your employees for this compliant coverage?
  • To whom do you need to offer coverage? If it is not as simple as ‘everyone works from 8 a.m. to 5 p.m.,’ then you may have some variable hour employees who straddle the line of part-timer and full-timer. These employees may be technically over the 30-hour threshold, so you’ll want to be sure you know which people in your population you would be legally required to offer benefits to.

Tobias Kennedy is an executive vice president at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

Insights Business Insurance is brought to you by Montage Insurance Solutions

Published in Los Angeles