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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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.

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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.

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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.

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Under the Patient Protection and Accountable Care Act (PPACA), large employers may know that to avoid penalties, they need to offer coverage that is affordable and qualified to full-time staff. But how do you treat a new hire to fold him or her into full-time staff so the employer shared responsibility rule can be applied?

Smart Business spoke with Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions, about how to handle new hires, in the final of a three-part series on the employer shared responsibility provision.

When must health coverage be offered to new hires?

Per the PPACA, new hires must be offered coverage within 90 days if you reasonably expect the person to be full time. However, if, at the time of hire, you cannot reasonably predict whether the person will be full or part time, you can submit the employee to a similar set of measurement/stability periods as the full-time ongoing staff. (For more information on ongoing staff measurement/stability periods, see the second article in this series.) The term ‘standard measurement’ was created to distinguish ongoing staff from what you can use for new hires, which is called an initial measurement period.

How does the initial measurement period work?

Like the standard measurement, the initial measurement period must be continuous months of between three and 12 months. Also, you have an administration period and an associated stability period where, as long as the person remains employed, you treat him or her according to the results of the hourly average from the measurement period.

What administration period rules need to be satisfied for new hires?

First, the period is no longer than 90 days — same as for ongoing staff. However, there is a caveat that the 90 days actually starts counting upon date of hire, keeps counting until you start your initial measurement period, where it pauses, and begins counting again for the period from the close of the measurement period through to the start of coverage. This is pertinent if you don’t measure from date of hire, such as beginning to measure the first of the month following date of hire, so some days between hire date and measurement beginning are deducted from the total 90-day allotment.

Also, the administration period when added to the initial measurement period cannot exceed the first of the month following 30 days of an employee’s anniversary. The longest an employee can possibly go from date of hire to coverage effective is 13 months and some change.

How does the stability period operate for new hires?

Like the ongoing staff, if a 12-month measurement period is chosen, then a 12-month stability period must be chosen. So, if an employee were hired on May 15, 2014, the employer would use a 12-month initial measurement period beginning the first of the month following date of hire, June 1, 2014, to May 31, 2015. Because the employee’s anniversary is May 15, 2015, the first of the month following 30 days of that is July 1, and the employer’s only option for administration is the month of June. If the new hire was deemed full time, he or she is offered coverage for a 12-month stability period beginning July 1, 2015, through June 30, 2016.

So, in this example, what happens with the employee on June 30, 2016?

The employee’s timeline runs from May 15, 2014, to June 30, 2016, so there is enough time for him or her to have eclipsed whatever time frame the employer uses as the standard measurement period for ongoing staff. If this new hire worked for an employer who measures ongoing employees from Nov. 1 to Oct. 31 every year, what happens to benefits on June 30 would be contingent upon the average hours worked from Nov. 1, 2014, to Oct. 31, 2015.

If the employee were full time during this time frame, the benefits would continue to the end of the year, per a 2016 stability period associated with that standard measurement period. If the employee was not full time in the standard measurement period but was during his or her initial measurement, benefits will continue through to June 30, 2016. And if the employee was not full time in either measurement period, benefits don’t have to be offered through the end of 2016.

It’s important to note that if an employee was not full time during the initial measurement but was full time during the standard measurement, you will need to add him or her to the benefits. So, in the running example, if an employee didn’t qualify based on June 1, 2014, to May 31, 2015, hours worked, but you re-measure according to your ongoing rules and find the person was full time during the Nov. 1, 2014, to Oct. 31, 2015 period, then the 12-month new hire stability period of not having benefits is clipped short. It’s replaced by the guarantee of benefits for the full 2016 plan year with an effective date of coverage of Jan. 1, 2016.

This can be complicated, but you should be fine as long as you work with a good consultant and utilize the tools your payroll vendor provides.

Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

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The Patient Protection and Accountable Care Act (PPACA) has a number of employer provisions generally called the “employer shared responsibility.” So, with this responsibility, who, exactly, do you have to offer coverage to as full-time employees?

“It’s not always as easy as 100 percent of your staff sitting in a chair from 8 a.m. to noon, then again from 1 to 5 p.m.,” says Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions. “The reality is employers will have project-based staff, variable-hour employees and other factors that make figuring out ‘full time’ slightly tricky.”

Smart Business spoke with Kennedy about the PPACA’s look back/stability safe harbor, in this second of a three-part series on the employer shared responsibility provision. The first article discussed how the penalties are triggered under employer shared responsibility.

How does the look back/stability safe harbor work?

This provision allows an employer to look at ongoing staff and make a technical calculation on whether or not a person is supposed to be offered benefits under the PPACA. The legislation applies month-to-month, but because the government realizes that a monthly application would be administratively crippling, an optional safe harbor exists where you can extend the length of time used to measure employee hours, and then that data determines which employees qualify.

For ongoing staff, you get three new time frames to calculate with: a measurement period, an administration period and a stability period.

What is a measurement period?

The measurement period is a time frame you get to select — it has to be continuous months and can last anywhere from three to 12 months. Obviously, the shorter the period, the more likely to have irregular spikes; the longer the period, the more it’s a true measure of an employee’s average.

Essentially, you simply define the period of time, and those are the months that an employer uses to calculate employee hours worked. For example, the employer might select a 12-month measurement period and choose to run it from Nov. 1 to Oct. 31 every year. In this case, the employer would look at the hours worked over this period of time to determine each employee’s average hours worked to see if it is more or less than the PPACA-mandated 30 hours — thus qualifying, or not qualifying, for benefits.

What’s involved during the administration period?

The administration period is where you, the employer, have time to evaluate the results of your measurement period, and take care of logistics. This period cannot be longer than 90 days. For practical purposes, this would be used to see who is benefit eligible, plan your open enrollment meetings, distribute benefit information and then collect/process all of the applications for the upcoming plan year.

Using the previous example’s time frame, an employer might have this period run from the end of the measurement period to the end of the year, e.g., Nov. 1 to Dec. 31.

Once an employer moves on to the stability period, what happens?

In the stability period, as long as an employee remains employed, employers must treat him or her according to whatever average the measurement period deemed them — either full time or part time — regardless of the hours worked. So, if an employee measured as full time during the measurement period, you have to continue to offer him or her benefits through the entire stability period even if hours dip lower, as long as the person is still employed.

The stability period has to be at least six months and also no shorter than the time chosen as the measurement period. So, in the example from before, because the measurement was 12 months, the stability period also needs to be 12 months. If employees were measured from Nov. 1, 2014, through to Oct. 31, 2015, the employer would enroll employees throughout the end of 2015 for their 2016 plan year.

Then, the measurement, administration and stability periods continue to go on, overlapping such that every plan year occurs back to back without a break, and each plan year’s eligibility is associated with the hourly performance of employees during the preceding associated measurement period.

In the final of this three-part series, we’ll discuss how to treat a new hire to eventually fold him or her into your employee hourly average calculations.

Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

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The Patient Protection and Accountable Care Act (PPACA) has a number of employer provisions that all seem to fall, generally speaking, under an umbrella called “employer shared responsibility.”

Briefly, the PPACA mandates that large employers, those more than 50 employees including full-time equivalents, offer affordable coverage, which is that the lowest cost option for an employee is less than 9.5 percent of income. The coverage also must carry a minimum robustness — an actuarial value of at least 60 percent — to all eligible employees. If the employer doesn’t follow this, it must pay some kind of penalty.

Smart Business spoke with Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions, about how these penalties are triggered, in the first of a three-part series on the employer shared responsibility provision.

How can the employer shared responsibility penalties be triggered?

The penalties are only triggered by an employee of yours receiving a subsidy to purchase an individual policy through the coming exchanges. And, employees are only eligible for a subsidy if they earn less than 400 percent of the federal poverty level and are not eligible for another qualifying coverage like Medicare, Medicaid (Medi-Cal) or a qualified employer plan.

How does the penalty for not offering enough coverage impact employers?

The way this fine is triggered is you, the employer, do not offer insurance coverage to at least 95 percent of your staff. The key words are ‘offer’ and ‘95 percent.’ If they decline, you are not at fault, and at 95 percent there is some minimal leeway. So if you fail to offer coverage to at least 95 percent of your people, and one of them goes to the exchange and gets a subsidy, you are fined. It’s important to note this penalty, like all PPACA penalties, is a non-deductible tax penalty — so finance teams really need to factor that in when evaluating costs.

This penalty’s costs are — pro-rated monthly for each violating month — $2,000 per year multiplied by every single full-time employee you have, which obviously can add up. The bill has a provision where you can, for the purposes of calculating the penalty dollar amount, deduct 30 employees from your full-time equivalent count. In other words, if you have 530 full-time employees, you’re fined on only 500 at $2,000 per person, per year for an annual fine of $1 million.

How does the affordability penalty work?

The second penalty, also non-deductible, centers on affordability. In this case, while you are still fined an annual amount that is pro-rated monthly, the fine is actually $3,000 annually but only assessed on people affected. It also is only up to a maximum of what you would have paid for not offering coverage at all.

It’s important to note that the employer is only going to be penalized on the people for which coverage is unaffordable. In other words, there are going to be times where you want to be strategic about this. You may have a situation where your employee/employer premium split is in compliance for most of your staff — where the dollar amount you ask the employees to pay for premium is less than 9.5 percent of most employees’ incomes. But, a couple of employees actually earn a smaller salary, so they are outside of the 9.5 percent. In this case, the employer needs to know it has a choice: Either raise your employer contribution or pay a fine on those couple of employees. Again, the penalty is only $3,000 per person affected, so it may be less expensive to pay those couple of fines than to completely restructure the way you split premiums.

Next, we’ll address how you know which employees qualify for coverage. A lot of employers have part timers, variable-hour people and project-based staff. So with all of these fines, it’s important to know exactly how you find the safe harbor of which employees qualify and don’t qualify for benefits.

Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

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The Patient Protection and Affordable Care Act (PPACA) is full of employer mandates, but the most prominent and pressing for employers is the Shared Responsibility provision where large employers need to offer affordable coverage.

“The Employer Shared Responsibility part of PPACA is one of the most onerous and complex parts of the legislation, with employers needing as much guidance as possible,” says Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions.

Smart Business spoke with Kennedy for an overview of the provision, as there are several intricacies that can confuse one from gaining a broad, basic knowledge on the topic.

How do you know if you’re a large employer?

Generally speaking, a large employer has 50 full-time equivalent employees. It’s important to note the word equivalent, because when the legislation defines 50 employees it is actually counting full-time workers plus full-time equivalent employees. As an example, if you have 45 full timers, and you also have a few people doing part-time work, the reform bill would have you add up all of those hours worked by the part-time people and figure out how many full-time equivalents that equates to.

The penalty for not offering coverage at all is basically $2,000 per year, per person, minus the first 30, applying only to full timers.

What does affordable coverage mean?

Talking high-level affordable coverage would ask an employer to evaluate two things. For any person where you are in violation of either of these two things, the employer is fined $3,000 annually.

  • Does the plan have an actuarial value of at least 60 percent? To figure this you have several options, but the easiest is to use the calculator provided by the Department of Health and Human Services.

  • Are the employee’s premiums affordable? This is asking for the employee-only portion of your cheapest — above 60 percent, of course — plan not to exceed 9.5 percent of an employee’s income. Income can be calculated a few ways, but the easiest is probably using the wages inserted in the most recent W-2.

Who are employers supposed to cover?

Any employee who works an average of 30 hours or more per week is considered full time, and therefore needs to be offered affordable coverage to avoid fines. If you do not know whether certain employees average more than 30 hours because of varying hours, busy seasons, etc., employers can use a measurement safe harbor.

It can be complicated, but generally speaking, if an employer choses to, the legislation allows for a measurement period. During the measurement period, you look at the employee’s hours and average it out over time. How long the measurement period lasts is up to the employer, but needs to be between three to 12 months.

Once the measurement period ends, an employer must enter a stability period. During the stability period, an employer treats all ongoing employees according to the results of the measurement period. In other words, regardless of hours worked during the stability period, if an employee was full time during the measurement period, you have to offer coverage for the stability period. And, regardless of hours worked during the stability period if an employee averaged below 30 hours per week during the measurement period, the employer does not have to offer insurance.

The measurement/stability period is quite complicated with very particular time frames; the option to implement an administration period; different treatment for new hires versus ongoing employees; rules to transition employees from new hires to ongoing; and a host of other technicalities that truly require the assistance of a trained PPACA professional.

As with all parts of the health care reform bill, consult your professionals for help in the details of this and other provisions.

Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or toby@montageinsurance.com.

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As the 2014 date looms, a lot of news is spreading about having to offer affordable coverage to all employees by Jan. 1, 2014, or pay big fines.

“Employers, you may be asking yourself, ‘Hey, our plan year starts on July 1 every year. Does the employer mandate apply to us on Jan. 1, 2014, or does it start on July 1, 2014?’” says Tobias Kennedy, vice president at Montage Insurance Solutions.

Smart Business spoke with Kennedy about possible transitional relief for some employers.

How does the employer mandate work for plans that don’t start with the calendar year?

The good news is there has been special transitional relief for employers to avoid the unaffordable coverage fines and the ‘pay or play’ mandate until later in the year. Generally speaking, the employer shared responsibility mandate is effective on Jan. 1, 2014, but there are special transitional rules that might apply and, if they do, they delay the assessment of penalties until the first day of your first plan year that starts after Jan. 1, 2014.

In other words, if you are that employer with a July 1 plan date and you qualify for the special transitional relief, you don’t face penalties until July 1, 2014, and will not be fined for the January through June months — even if you are out of compliance.

So, how can you qualify for this special transitional relief?

Basically, the transition rules say that if you maintained a non-calendar plan as of Dec. 27, 2012, you might be eligible. There are two parts to eligibility. The first one is whether or not you had a plan in place on Dec. 27, 2012, which is easy enough to figure out.

The second part is based on whom your plan was offered to. If your plan was either offered to at least a third of your employees or covered at least a quarter of your employees, then you quality. For the purposes of figuring out if you offered it to one-third of your employees, you’d look at the number of people offered coverage at your most recent open enrollment season, and for the purposes of figuring out if it covered one-fourth of your people, you can pick any day between Oct. 31, 2012, and Dec. 27, 2012, and check on what percentage of your employees were enrolled.

You still have to correct any violations — unaffordable or under-accessible plans — by your anniversary date or you will be fined. But if you qualify, you have the full year to assess the situation and to make plans to come into compliance by your 2014 plan anniversary.

Which companies can’t get the transitional relief?

The federal government has specifically stated that companies who already have a calendar year plan can certainly change now to a different anniversary date, but they will not be eligible for this relief and those companies — ones who had a Jan. 1 anniversary as of this year or prior — will still be assessed the ‘shared responsibility’ fines as of Jan. 1, 2014.

Additionally, if your company does not qualify for this transitional relief because you either didn’t offer insurance or didn’t cover enough people, beginning Jan. 1, 2014, you will need to offer affordable coverage to at least 95 percent of your employees or be fined. In other words, even if you did have a plan in place but it covered so few people it doesn’t fit the transitional relief provision, you’ll need to either change the plan year date to Jan. 1., 2014, or consider offering coverage to your employees at the 2013 renewal to avoid any fines.

Is there anything else employers should know?

If your employees do not have a medical plan effective Jan. 1, 2014, they will be fined personally. At this plan year, it’s recommended that you sit down and audit your employee benefits program to make sure your employees are offered the coverage and the coverage is affordable, per the 9.5 percent rule that begins in 2014.

Next month we will further review these potential fines for ‘unaffordability’ and the details of that 9.5 percent rule so you know how to comply.

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

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Published in Los Angeles

On the heels of the Affordable Care Act and health care reform, business owners are going to deal with the shakeout of more costs or potential fines, exchanges and other uncertainties. All the while, the sleeping giant of the commercial Property & Casualty (P&C) industry is awakening with wide speculation of a potential hardening market in workers’ compensation and property casualty. Frankly, it seems to have arrived here in California and other states, as workers’ compensation renewals are causing sheer exasperation.

Gloria Lam of Risk Placement Services lets us know that the market is gyrating; low-price carriers have started high and the clients are demanding quote revisions up to three times for price reductions. It is our job as brokers to persist on behalf of clients by presenting high-deductible plans and other options. Professional Employer Organizations (PEOs) and captives may not be the best shelter, and the repercussions can be costly and can be felt for years to come. It feels as though CEOs are in the eye of the storm that is circling around them, taking bits and pieces, as CFOs are boarding up the windows trying to hold on to what they have.

Ken A. Crerar, president and CEO of the Council of Insurance Agents and Brokers (CIAB), said the P&C market has officially achieved hard-market status. With price increases in the last two quarters and tightening in underwriting, the market has made a hard turn. He goes on to say, “It is hard to predict the length and severity, but the market has turned.”

Mark Lyons, CEO of Arch World Wide Insurance Group said, “Overcapitalization is hiding losses on business. We have had $12 billion in reserves released in the 2011 calendar year alone. … It has been three loss-ratio points of reserve releases over the past three to four years on average. … This sheltering losses on current-year business and masking how unprofitable current business is because of releases in this year for accidents which occurred prior.”  The soft-market pricing is catching up and the longer-tails in commercial lines are causing depleting cushions in reserves.  Acts of God and other disasters have an aftermath effect and there has been frequency internationally.

Market Scout says workers’ compensation and commercial property rates both rose 4 percent in April, which was the highest of the product lines. Richard Kerr, CEO of Market Scout, notices admitted and nonadmitted insurers are showing similar pricing models. This is against historical approaches to underwriting which, in the past, showed considerable differences. These similar pricing strategies could lead to more business for the nonadmitted insurers. The admitted insurers may begin to restrict their risk appetite and begin to decline tougher risks.

The last 10 quarters have generated negative cash reserves, which are beginning to impact companies. Business leaders are looking for leadership that will re-energize local economies and lower the cost of doing business. Brian Allen in National Underwriter goes on to state how these business leaders are demanding improvements in state's business climates. “These changes include reforms to workers’ comp laws that deal with how medical treatment and benefits are delivered to injured workers and the costs that are ultimately passed on to local businesses.”

California is beginning to see double-digit increases in workers’ compensation and some businesses are responding by closing their doors in the state. U.S. Legislators, State Department of Industrial Relations and Governors are demanding more than piecemeal reform and taking a hard look at the delivery of care, prescriptions and costs. The broker’s role is to go to the insured and make sure they know what is happening. The only safety net is to be prepared for the storm as it continues to pass through.

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


Published in Los Angeles
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