The Challenge

Planned and designed to create a new landscape for American healthcare, the Patient Protection and Affordable Care Act (PPACA) has created a land of uncertainty for an employer’s decision of whether and how to offer health care coverage to their employees. Beginning January 1, 2015, employers with more than 50 full-time employees or full-time equivalents (FTE) could be subject to substantial penalties for failing to offer Affordable Health Coverage (“AHC”) that provides a minimum level of coverage to their full-time employees and their dependents.

PPACA introduces an entirely new vocabulary along with a sea of employee benefit requirements, monitoring, enrollment and reporting changes and obligations. Understanding these changes and obligations are critical for staffing employers to manage, mitigate and quantify the potential penalties which could be assessed not only on the staffing agency but possibly on the employees thereof. Although knowing the new terrain which must be navigated can help a staffing company coordinate its labor pool to minimize increased exposure and costs imposed by the PPACA, the real focus must be on finding and offering a health benefit that offers AHC.

And before PPACA was law, the staffing industry faced already a real challenge in finding affordable health benefits for a workforce defined by low to medium wages, high turnover and even high risks. Before PPACA the options available to the staffing industry often required either exorbitant employer contributions and/or impossible employee-participation rates. Although the PPACA could be perceived to limit health care options for staffing employers, we believe this new landscape provides opportunities for benefit management companies to better serve their clients. In a market where healthcare can be illusive and either unavailable or unaffordable, employers may feel the only “affordable” option is to pay the penalties imposed for not offering AHC to their employees. Unfortunately the world of professional staffing and the culture and climate of “Applicable Large Employers” (“ALE”) usually frowns on or will not accept the latter.

Competitive market forces usually create dynamics which cause the industry “players” to be creative and adaptive to meet market demands. With PPACA being the law of the land one clear dynamic is an ALE now knows that offering some form of real health care benefit even if employee supported is essential to attracting and maintaining the best candidates and human resources in a competitive workforce.

At the heart of this emerging frontier is a resource seasoned in employee benefit management and solutions: Benefits In A Card (“BIC”). For more than a decade, BIC has specialized in meeting the health insurance and benefit needs of the staffing industry and today is poised uniquely to deliver the best health care options for the individuals comprising an ALE workforce. With proprietary technologies and services BIC is the leader in collecting and analyzing personnel data to help an ALE make a fact-based, cost-benefit analysis regarding available employee health care solutions and the one which offers AHC and delivers minimum essential coverage to our client’s employees.

Frequently Asked Questions

FAQ #1 / WHICH EMPLOYERS ARE SUBJECT TO THE EMPLOYER SHARED RESPONSIBILITY (“ESR”) PROVISIONS OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT (“PPACA”)?

Speaking generally any employer with more than 50 Full Time + Full Time Equivalents, an Applicable Large Employer (“ALE”) will be subject to ESR originally as of January 1, 2014. Although that was the general rule of the PPACA nevertheless recent acts by the federal government have made changes which delayed the effective date of ESR until January 1, 2015 and for an ALE with 100 or less employees during 2014 and which meets other requirements, such effective date has been moved to January 1, 2016.


FAQ #2 / IF AN ENTERPRISE HAS MORE THAN ONE COMPANY UNDER ITS CONTROL ARE THE EMPLOYEES IN ALL RELATED AND CONTROLLED COMPANIES COUNTED FOR DETERMINING WHETHER AN ALE EXISTS?

Yes, section 4980H of the Internal Revenue Code which was added as part of the PPACA includes a reference to another IRC Code Section under which companies that have a common owner or are otherwise related generally are combined and treated as a single employer. Accordingly the determination of whether an ALE exists is based on whether collectively all of the related entities employ at least 50 full-time employees (including full-time equivalents). If the combined total meets the threshold, then each separate company is subject to the ESR even if a particular company of the control group did not employ directly enough employees (≥50) to meet the ALE threshold. Although the “attribution rules” apply to create an ALE, nevertheless they do not apply for purposes of determining whether a particular company in a control group owes an ESR payment or the amount of any payment. Rather the determination of the obligation and the amount of any “penalty” due for failing to meet an ESR is determined separately for each related company.


FAQ #3 / WHO IS THE EMPLOYER OF THE APPLICABLE INDIVIDUALS INCLUDED IN COUNTING THE EMPLOYEES NECESSARY FOR CLASSIFICATION AS AN ALE?

Speaking generally employee status under the PPACA is determined under well established “common law” standards which hold that the one who controls and directs the details, means and expected results of the individual providing the services is considered the employer of that individual. For the most part, staffing firms are considered the employer of the temporary employees which they place in one or more separate companies. The one exception to this rule is if the staffing relationship was established to avoid the staffing company’s client from being designated as an ALE. In the latter event the temporary employees will be considered the client’s employee under the PPACA.


FAQ #4 / WHAT DETERMINES WHETHER AN EMPLOYEE IS FULL TIME FOR PURPOSES OF THE PPACA?

There are two basic way to determine whether an employee is full time based on whether that individual has “sufficient hours of service”. The “monthly measurement method” is one way to determine the status of a full-time employee by counting the employee’s hours of service for each month. The second way is the “look-back measurement method” which determines the presence of full time status during a future period (the” stability period”), based upon the hours of service in a prior period (the “measurement period”). The look-back measurement method is available only for purposes of determining and computing liability for ESR; it cannot be used to determine if the employer is an ALE. Final Treasury Regulations provide exceptions and alternatives to the above methods for employees who work variable hour schedules, seasonal employees, and employees of educational organizations.


WHAT ARE THE CIRCUMSTANCES WHEREBY AN ALE WILL OWE THE IRS A PAYMENT FOR ESR?

For 2015 (2016 for some ALE’s with ≤ 100 FTEs) and after, an ESR payment will be due if:

(a)   The ALE does not offer health coverage or offers coverage to fewer than 95% of its FTEs and the dependents thereof, and at least one of the full-time employees receives financial assistance for coverage secured on the Exchange; or

(b)   The ALE offers health coverage to all or at least 95% of its full-time employees, but at least one full-time employee receives financial assistance for coverage secured on the Exchange, which may occur because the employer did not offer coverage to that employee or because the offered coverage was either unaffordable or did not provide minimum value.


FAQ #6 / IF AN ESR PAYMENT IS DUE BY AN ALE HOW IS THE AMOUNT CALCULATED?

Two environments will produce an obligation for an ALE to make a ESR payment. Either the ALE did not offer the required type of coverage and is subject to ESR, or the ALE did offer the required coverage to its FTEs and one or more FTE received financial assistance for coverage secured on the Exchange. If an ALE did not offer the coverage required by the PPACA and at least one FTE received financial assistance for coverage secured on the Exchange, then the ESR payment is equal to the number of FTEs greater than 30 (but not full time equivalents used to determine whether and ALE exists) employed by the ALE multiplied by $2,000. For 2016 it’s $2000 for all such FTEs and their dependents. If an ALE did offer coverage meeting the requirements of the PPACA but, nevertheless, one or more FTE received financial assistance for coverage secured on the Exchange, then the ESR payment is computed monthly to be an amount which equals the number of FTEs who receive financial assistance for coverage secured on the Exchange for that month multiplied by 1/12 of $3,000. The amount of the payment for any calendar month is capped so that the ESR payment for an ALE that did offer coverage is no greater than the ESR payment the ALE would owe if it did not offer coverage.


FAQ #7 / ARE THERE TRANSITIONAL RULES FOR ESR PAYMENT OBLIGATIONS OF AN ALE FOR 2015 AND 2016?

Yes. In 2015 and 2016 an ALE will be liable for an ESR payment only if:

(a)   the ALE does not offer health coverage or offers coverage to fewer than 70% of its FTEs and (unless the ALE qualifies for the 2015 dependent coverage transition relief) the dependents of those FTEs, and at least one FTE receives financial assistance for coverage secured on the Exchange; or

(b)   the ALE offers health coverage to at least 70% of its FTEs and (unless the ALE qualifies for the 2015 dependent coverage transition relief)  the dependents of those employees, but at least one FTE receives financial assistance for coverage secured on the Exchange, which may occur because coverage was not offered to the FTE  receiving the assistance or because the offered coverage  was either unaffordable or did not provide minimum value. If an ESR payment is due because the ALE did not offer coverage or offered coverage to fewer than 70% of its FTEs (and their dependents) the ESR payment in 2015 is calculated monthly to be an amount equal to the number of FTEs employed by the ALE for the month (minus 80) multiplied by 1/12 of $2,000, provided at least one FTE receives financial assistance for coverage secured on the Exchange.  If the ALE did offer coverage to at least 70% of its FTEs, and, nevertheless because one or more FTE receives financial assistance for coverage secured on the Exchange, an ALE owes an ESR payment, such monthly payment is equal to the number of FTEs who receive financial assistance for coverage secured on the Exchange for that month multiplied by 1/12 of $3,000. The ESR monthly payment amount for any calendar month is capped at the number of the FTEs for the month (minus up to 80) multiplied by 1/12 of $2,000; i.e. the ESR payment under the 2015/2016 transitional rules for an ALE that did offer coverage is no greater than the ESR payment the ALE would owe if it did not offer coverage.


FAQ #8 / WHAT IS AFFORDABLE HEALTHCARE COVERAGE THAT PROVIDES MINIMUM VALUES?

To be considered affordable the cost of the offered coverage cannot be greater than 9.5% of an employee’s annual household income. To assist in determining this 9.5% ceiling an ALE can take advantage of one or more of the three “affordability” safe harbors. If any of these safe harbors are met, then the offered coverage is affordable for purposes of ESR provisions and regardless of whether it was affordable to the employee for purposes of receiving financial assistance on the Exchange. An affordable plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. Proposed Treasury Regulations regarding the other methods available to determine minimum value have been issued by the IRS.


FAQ #9 / WHEN CAN AN FTE RECEIVE FINANCIAL ASSISTANCE FOR COVERAGE SECURED ON THE EXCHANGE?

Speaking generally, financial assistance (the “premium tax credit”) is available generally to help pay for coverage for FTEs who have household income between 100% and 400% of the federal poverty line and enroll in coverage through an Exchange on the “ Marketplace” and who are not eligible for coverage through a government-sponsored program like Medicaid or CHIP, and who are not eligible for coverage offered by an employer or are eligible only for employer coverage that is unaffordable or that does not provide minimum value. Even if an employer is not an ALE and therefore not subject to the ESR provisions of the PPACA, nevertheless its FTEs can still receive financial assistance through the Exchange if they meet the above household income parameters.


FAQ #10 / WHAT PENALTIES WILL MY EMPLOYEES FACE IF THEY DO NOT SECURE COMPLIANT COVERAGE THROUGH THEIR EMPLOYER OR THE EXCHANGE?

In 2014 individuals are required to obtain minimum essential health coverage (“MEC”) for themselves and their dependents or pay a monthly penalty tax for each month without coverage. The monthly penalty tax is one-twelfth of the greater of the dollar penalty or gross income penalty amounts. The dollar penalty is an amount per individual of $95 for 2014 (capped at $285 per family),$325 for 2015 (capped at $975 per family), and $695 for 2016 (capped at $2085 per family). In 2017 these dollar penalties are indexed for inflation.  The gross income penalty is a percentage of household income in excess of a specified filing threshold of -1 percent for 2014, 2 percent for 2015, and 2.5 percent for 2016 and later years. Both the dollar penalty and the gross income penalty is capped at an amount that will not exceed the national average premium for bronze-level exchange plans for families of the same size.

MEC includes Medicare, Medicaid, CHIP, TRICARE, individual insurance, grandfathered plans, and eligible employer-sponsored plans. Workers’ compensation and limited-scope dental or vision benefits are not considered MEC coverage. 

ABOUT BENEFITS IN A CARD

With a focus on the staffing industry, BIC has grown into one of the county’s leading benefits consultant and benefit servicing companies. This growth and recognition is built upon our reputation for providing our clients and their employees with exemplary benefits products and services. Today, as benefit needs are changing, BIC continues to develop new solutions and answers to the sea of uncertainty brought about by PPACA. We offer a variety of benefits packages specifically designed for temporary and hourly employees. Our solutions include Medical, Dental, Disability, Term Life, and Prescription Drug insurance, with the ability to add other valuable benefits such as cancer insurance, vision options, and much more. BIC can customize a benefit platform that best suits each employer’s health insurance needs. We handle all aspects of the employee enrollment process and offer flexible, convenient enrollment options through our website, phone, email and fax.

Contact

For more information on how Benefits in a Card can assist your company navigate this new landscape, please contact us below.

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