The Small Business Health Insurance Roller Coaster – What is Next?

I have spent my entire 24 year career helping employers shop for, buy and manage their employee benefits.  In that time, the vast majority of large employers (50+ employees – for this discussion) have offered (and plan to continue to offer) their employees health insurance.  In 2010, the Affordable Care Act introduced new incentives (see employer shared responsibility penalties) to make sure that continues.  So far, it looks like that is happening as expected.

However, the small employer market (under 50 employees – not subject to employer mandate) has been much more volatile over the last 15 years.  That volatility has intensified in recent years. – peaking at 66% in 2010 and then bottoming out at 52% just 4 years later.

2015-employer-health-benefits-chart-pack-12-1024

 

Why has this happened and what does the future hold for small employers?

For small businesses, the initial decision to offer benefits is almost always driven by a key employee/employees who push the issue with the business owner.  Leading up to the 2010 passage of the Affordable Care Act, every news organization, talk show, politician, etc. talked about healthcare and health reform in some form just about every day. So, naturally, employees who had not thought about it before, were now asking about it.  Employers who hadn’t offered coverage before decided to make an offer for the first time.

This led to an almost 10% jump in firms offering health benefits from 2009 to 2010.  But, that increase completely vanished in 2011.  And, over the following years, the trend to away from group insurance increased as the % of firms offering health benefits reached a 15+ year low in 2014.

For employers with a higher percentage of low income employees, the move away from group insurance may continue.  This is because these employers cannot (and do not want to) compete financially with the subsidy available to low income employees.  Here is an example of how income impacts an individual’s coverage choices:

An unmarried 40 year old with 2 children under 18 years old can expect to pay about $391/month for herself or about $779/month for her and her children with no subsidy or medicaid available. She will also have the following subsidy options at different income levels:
Household Income Medicaid? Subsidy – Net cost
$25,000 Yes – entire family None – $0/month
$35,000 Yes – children only $180/month – $211/month
$45,000 Yes – children only $59/month – $332/month
$55,000 No $254/month – $525/month
$65,000 No $138/month – $641/month
$75,000 No $57/month – $722/month
$85,000 No None – $779/month

However, I expect that employers with higher-paid and geographically diverse employees will see that trend of moving away from group coverage reverse considerably.  This has already started and will accelerate very quickly.  Here are the 3 main drivers of that move:

  • Taxation of Employer Contribution to Individual Plans – In an updated Q&A about the practice of reimbursing individual health premiums, the IRS Q&A warns: “such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.”  Though there are pockets that disagree with this interpretation and are fighting for a change, most have come to grips that it is best to avoid the practice rather than risk penalties.
  • Implosion of the Individual Health Insurance Market – Just about every carrier that has offered products on the individual exchange has lost money.  Some have lost so much money, they have decided to get out of the exchanges altogether.  The carriers that have remained have increased their prices significantly while drastically limiting their product offering – eliminating platinum-level plans, restricting the number of zip codes that they offer policies AND introducing more and more “narrow” network options.
  • Small Group Relative Stability – Trend price increases for small group (and group in general) have been modest in comparison to what we were seeing a few years back (pre-ACA) AND are modest compared to increases we have seen and expect to see in the individual market. In addition, there are now considerably more plan options to choose from in group vs. individual.  And finally, the price of comparable group plans are less than individual plans with similar benefit levels.

Individuals who are not eligible for subsidies because of their income will discover this discrepancy and push for change from their employer.  It will start with the business owner who is just a phone call or email away from discovering what this means to them and their families.

If you own a small business and want to see how all of this impacts you, your family and your employees we are always here to help.

 

Small Business Health Options Program (SHOP) Marketplace

The Small Business Health Options Program (SHOP) Marketplace on HealthCare.gov is open to small employers with 1-50 employees. Small employers can offer their employees (and, dependents, if they choose) health and dental insurance at any time of year through the SHOP Marketplace.

Below are a few new videos that give a quick overview of the program.  It only takes a few minutes to see if you qualify.

The Small Business Health Care Tax Credit

small-business-health-insurance-minYou may qualify for employer health care tax credits if you have fewer than 25 full-time equivalent employees making an average of about $50,000 a year or less.

See if you qualify for the Small Business Health Care Tax Credit

To qualify for the tax credit, all of the following must apply:

  • You have fewer than 25 full-time equivalent (FTE) employees
  • Your average employee salary is about $50,000 per year or less
  • You pay at least 50% of your full-time employees’ premium costs
  • You offer coverage to your full-time employees through the SHOP Marketplace. (You don’t have to offer it to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)

The tax credit is worth up to 50% of your contribution toward your employees’ premium costs (up to 35% for tax-exempt employers).

Higher benefits for smaller businesses

The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.

Questions?

ACA Shared Responsibility: 2015 Versus 2016

Image result for ACA Shared Responsibility

Determining ALE Status
• An employer is considered an ALE if they average 50
or more full-time employees and equivalents per
month in the previous calendar year
– Full-time employees automatically count as one “head”
– Non full-time employees have an equivalency calculated where their total hours of service in a
month (capped at the first 120 hours) are divided by 120 to determine their FT equivalency.
• An employee that worked 90 hours in a month would be 0.75
equivalent

2015

2016

 

·     Determined by reviewing average monthly Full-time and FTE counts from 2014

 

 

·     Determined by reviewing average monthly Full-time and FTE counts from 2015

 

 

·     2015 Transition relief permitted use of any consecutive 6-month period in 2014

 

·     Transition relief no longer applies, ALE determination based on full 2015 calendar year

 

 

Affordability Safe Harbors

2015

2016

 

• Affordability threshold 9.56%

• Federal Poverty Level $11,770

• Affordable FPL premium $93.77

• Affordability threshold 9.66%

• Federal Poverty Level $11,880

• Affordable FPL premium $95.63 (+2%)

 

Penalties for non-compliance: 4980(a) – The “A” Penalty

2015

2016
• Employers with 100 or more Full-time employees and equivalents must offer coverage (2015 Transition Relief)

• Coverage must be offered to 70% of all full-time employees

 

 

• When calculating the ‘A’ penalty, the full-time employee count is reduced by 80

 

• 4980(a) annual penalty of $2,080 per FT employee

 

 

• Employers with 50 or more Full-time employees and equivalents must offer coverage (Transition Relief ends)

• Coverage must be offered to 95% of all full-time employees

• When calculating the ‘A’ penalty, the full-time employee count is reduced by 30 (Transition Relief ends)

• 4980(a) annual penalty of $2,160 per FT employee

 

Penalties for non-compliance: 4980(b) – The “B” Penalty

2015

2016

 

 

• Penalty of $260 per month for each employee offered unaffordable or non-MV coverage AND qualifies for a subsidy to purchase marketplace coverage

• Increase to $270 per month (indexed for inflation)

 

IRS Reporting (1094-C / 1095-C)

2015

2016
 

 

 

• Required of all ALEs

• Employee statements due March 31, 2016

• IRS eFile Due June 30, 2016

• eFile required when filing 250 or more forms

 

 

 

 

• Required of all ALEs

• Employee statements due January 31, 2017

• IRS eFile Due March 31, 2017

• eFile required when filing 250 or more forms

 

1095-C Coding – 1I No longer valid

Series Code Usage

Description

1A Qualifying Offer

 

Affordable by FPL standard, MEC/MV for employee, MEC for spouse and dependent all 12 mo.

 

1B

Employee Only

MEC, MV Coverage

 

1C Employee + Dependent(s) MEC, MV for employee, MEC for dependents

 

1D

Employee + Spouse MEC, MV for employee, MEC for dependents

 

1E Employee + Family

MEC, MV for employee, MEC for dependents and spouse

 

1F Non-MV coverage (all coverage tiers)

Coverage does not provide MV

 

1G

Offer to no Full-Time employees

 

1H

No MEC coverage offered Often explained by Series 2 codes

 

1l Qualifying Offer Transition Relief

No Longer Valid

1095-C Coding – New Codes

Series Code

Usage

Description

1J

Conditional Spouse Offer

 

MEC/MV to Employee, no offer for dependents, conditional offer for spouse

 

1l

Conditional Spouse Offer

 

MEC/MV to Employee, MEC for dependents, conditional offer for spouse

 

Penalties for non-compliance: Failure to file

2015

2016

 

• Failure to file an informational return to the IRS will result in a per-form penalty of $250

• Failure to furnish a payee statement to an employee will result in a per-instance penalty of $250

 

• Failure to file penalties remain unchanged

 

Marketplace Notice Challenges

Sample 2016 Employer Notice

• Currently issued by a handful of state-run exchanges
and state exchanges operated by the federal
government
• Sent to address indicated by employee (usually the
location worked) – have a plan to ensure notices are
funneled to the appropriate department
• Not the final word on ESR penalties, responding to the
notice doesn’t mean that you won’t have to respond
to the IRS again later.

Marketplace Appeal Request

Marketplace Employer Appeal Request Form

• Appeals are shared with the employee – consider
employee relations implications and communication
strategies to inform affected employees
• Only the IRS can levy ESR penalties

 

Health Insurance Marketplace Subsidy Notices

Have you received a Health Insurance Marketplace Subsidy Notice (Subsidy Notice) from the Department of Health and Human Services (HHS)? If so, your response may affect whether or not the IRS later assesses a pay or play penalty. This article explains the appropriate way to respond to these notices.

Background
HHS recently began sending Subsidy Notices to employers. The purpose of the Subsidy Notice is to inform employers that an individual—who identified the employer as his or her employer—enrolled in health insurance through the Health Insurance Marketplace and was certified as eligible for an Advanced Payment of Premium Tax Credit (APTC).

Pay or play penalties are potentially triggered when at least one of an applicable large employer’s (ALE) “full-time employees” (as that term is defined under the Affordable Care Act or ACA) receives an APTC.

Subsidy Notices are sent by HHS. Only the IRS can assess a pay or play penalty. So, it is important for employers to understand:

  • The Subsidy Notices do not determine whether the employer is subject to a pay or play penalty; and
  • Failure to appeal the Subsidy Notice does not preclude the employer from later appealing the assessment of a pay or play penalty by the IRS.

Applicable Large Employer Responses to Subsidy Notices
First and foremost, an employer should not appeal a Subsidy Notice on behalf of an employee for whom the employer did not: (1) offer coverage under its group health plan; or (2) offer coverage that was both affordable and of minimum value.

As explained below, however, employers should carefully consider whether to appeal the Subsidy Notices received on behalf of other employees—especially full-time employees—who were offered coverage under the employer’s group health plan that is both affordable and of minimum value.

Full-Time Employees
Only full-time employees can trigger a pay or play penalty. If an employer receives a Subsidy Notice on behalf of a full-time employee who was offered affordable, minimum value coverage, it may be in the employer’s best interest to appeal the Subsidy Notice. This may allow the employer to “nip in the bud” the issue of a later assessment of a pay or play penalty by the IRS. (Alternatively, if the IRS still assesses a pay or play penalty on behalf of a full-time employee who the employer successfully appealed a Subsidy Notice, the evidence of the successful appeal may be helpful to the employer in contesting the IRS’s assessment of a pay or play penalty.)

It may not only be in the employer’s best interest to appeal the Subsidy Notice—it may also be in the employee’s best interest because the employee may be ineligible for the APTC. In other words, a successful appeal of the Subsidy Notice may also limit the amount of the APTC that the ineligible employee must repay.

Non-Full-Time Employees
A non-full-time employee cannot trigger a pay or play penalty. So, it is unnecessary to appeal a Subsidy Notice received on behalf of a non-full-time employee for purposes of the pay or play penalty.

If an ALE offered a non-full-time employee affordable, minimum value coverage, however, the ALE may want to appeal the Subsidy Notice to limit the amount of the APTC that the employee must repay.

Non-Applicable Large Employer Responses to Subsidy Notices
Non-ALEs (generally employers with less than 50 full-time and full-time equivalent employees) are not subject to the pay or play penalty. So, again, there is no reason for a non-ALE to appeal a Subsidy Notice for pay or play penalty purposes.

But a non-ALE may consider appealing a Subsidy Notice on behalf of an employee who was offered affordable, minimum value coverage, to limit the amount of the APTC that the employee must repay.

How to Appeal the Subsidy Notice
To appeal the Subsidy Notice, an employer should use the form provided by HHS, which is available at healthcare.gov (https://www.healthcare.gov/marketplace-appeals/employer-appeals). This form provides a space for the employer to include a narrative explaining why the employee is ineligible for an APTC. In this narrative, the employer should indicate that the employee was either enrolled in coverage under the employer’s group health plan or that the employee was offered coverage under the employer’s group health plan. The employer should also include the employee’s cost of employee-only coverage under the employer’s lowest-cost group health plan and an affirmative statement that the group health plan provides minimum value.

In addition to the narrative, the employer may include supporting documentation, such as:

  • A copy of the election form (or a screenshot from an electronic enrollment platform) showing that the employee is enrolled in the employer’s group health plan, or was offered and waived coverage under the employer’s group health plan.
  • If the employee didn’t affirmatively waive coverage, the employer should include plan records showing that the employee was offered coverage but failed to elect coverage under the employer’s group health plan.
  • Any materials evidencing the employee’s cost of coverage. (Evidence of satisfying an affordability safe harbor may be helpful, but will not be determinative of actual affordability.)
  • Evidence that the employer’s group health plan is of minimum value (e.g., a summary of benefits showing that the group health plan covers at least 60% of eligible expenses).
  • A copy of the Subsidy Notice

Conclusion
As a reminder, an ALE’s decision to appeal Subsidy Notices has no bearing on the ALE’s ability to later appeal the IRS’s assessment of a pay or play penalty. But being proactive in appealing Subsidy Notices may prevent the IRS from later assessing a pay or play penalty.

If you have any questions about Subsidy Notices or how you should respond, please contact the Benefit Administration Group.

bernard bamboo

What does a St. Bernard, a Pineapple, a Unicorn and Bamboo have to do with HR/Benefits Administration?

 

Life is pretty funny sometimes.

I have been in the insurance business since graduating from college in 1992 (24 years if you are doing the math).  Back then, I didn’t know much about anything. I loved math (especially the kind with dollar signs in front), technology (the kind that had a real problem solving purpose) AND working with people (as a trusted resource).  The more I got to know about the insurance industry and specifically employee benefits, the more I realized a fit for me and my personality. And, though I am a horrible salesperson, I have always had business development (SALES) as a big part of my role.  So, much as it pains me to write this in a public forum. . .I am an insurance salesman!

It has taken me a long time to understand and appreciate the role I play and what value I bring to my client relationships.  In my early days, when I would meet someone and they asked what I did, I would go to great lengths to make selling insurance sound more exciting than it is.  It became clear to me relatively quickly that most people do not like talking about, thinking about and definitely not dealing with insurance.

Now comes the funny part. . .

About 3 years ago, a company named Zenefits hit the scene.  They were going to be the fastest growing SaS (software as a service) company since Salesforce – Uber for the insurance/benefits world.  Their story is too long and winding to detail here.  But, here is the latest article that will give you sense of what has happened to them since their founding.

Their “success” (at least in raising money/creating buzz) has had a significant ripple effect.  Today, everyone (that is only a slight exaggeration) wants to get into the insurance/benefits management game.  This includes – Bernie Portal (from Bernard Health), Pineapple HR, Unicorn HRO and Bamboo HR – to name just a few.

While maintaining my day job as an insurance guy, I have always kept tabs on web-based HR/Benefits Administration systems.  Over the years, I have demoed literally hundreds of platforms.  I even took a shot at building my own (that was fun)!

What I have learned from all of these experiences is that properly engineered, implemented and maintained software systems are necessities for any business that has employees.  There is simply too much data/information to gather, share, evaluate and report.  Doing that on paper forms, spreadsheets and sticky notes will lead to missing information, improper documentation, etc. etc.  With the Federal Government now grading your work and enforcing penalties when it’s incorrect, the stakes are too high.

Technology is not THE solution.  But, it is a part of the solution.  It will evolve as technology always does.  So, pick your platforms and partners wisely.  If you ever need help sifting through the options, my team and I are happy to lend a hand.

Hire Your First Employee (in 8 Steps)

we-are-hiring-940x517If your business is booming, but you are struggling to keep up, perhaps it’s time to hire some help.

The eight steps below can help you start the hiring process and ensure you are compliant with key federal and state regulations.

Step 1. Obtain an Employer Identification Number (EIN)

Before hiring your first employee, you need to get an employment identification number (EIN) from theU.S. Internal Revenue Service. The EIN is often referred to as an Employer Tax ID or as Form SS-4. The EIN is necessary for reporting taxes and other documents to the IRS. In addition, the EIN is necessary when reporting information about your employees to state agencies. Apply for EIN online or contact the IRS at 1-800-829-4933 FREE.

Step 2. Set up Records for Withholding Taxes

According to the IRS, you must keep records of employment taxes for at least four years. Keeping good records can also help you monitor the progress of your business, prepare financial statements, identify sources of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.

Below are three types of withholding taxes you need for your business:

  • Federal Wage and Tax Statement
    Every year, employers must report to the federal government wages paid and taxes withheld for each employee. This report is filed using Form W-2, wage and tax statement. Employers must complete a W-2 form for each employee who they pay a salary, wage or other compensation.

Employers must send Copy A of  W-2 forms to the Social Security Administration by the last day of February to report wages and taxes of your employees for the previous calendar year. In addition, employers should send copies of W-2 forms to their employees by Jan. 31 of the year following the reporting period. Visit SSA.gov/employer for more information.

  • State Taxes
    Depending on the state where your employees are located, you may be required to withhold state income taxes. Visit the state and local tax page for more information.

Step 3. Employee Eligibility Verification

Federal law requires employers to verify an employee’s eligibility to work in the United States. Within three days of hire, employers must complete Form I-9, employment eligibility verification, which requires employers to examine documents to confirm the employee’s citizenship or eligibility to work in the U.S. Employers can only request documentation specified on the I-9 form.

Employers do not need to submit the I-9 form with the federal government but are required to keep them on file for three years after the date of hire or one year after the date of the employee’s termination, whichever is later.

Employers can use information taken from the Form I-9 to electronically verify the employment eligibility of newly hired employees by registering with E-Verify.

Visit the U.S. Immigration and Customs Enforcement agency’s I-9 website to download the form and find more information.

Step 4. Register with Your State’s New Hire Reporting Program

All employers are required to report newly hired and re-hired employees to a state directory within 20 days of their hire or rehire date. Visit the New Hires Reporting Requirements page to learn more and find links to your state’s New Hire Reporting System.

Step 5. Obtain Workers’ Compensation Insurance

All businesses with employees are required to carry workers’ compensation insurance coverage through a commercial carrier, on a self-insured basis or through their state’s Workers’ Compensation Insurance program.

Step 6. Post Required Notices

Employers are required to display certain posters in the workplace that inform employees of their rights and employer responsibilities under labor laws. Visit the Workplace Posters page for specific federal and state posters you’ll need for your business.

Step 7. File Your Taxes

Generally, employers who pay wages subject to income tax withholding, Social Security and Medicare taxes must file IRS Form 941, Employer’s Quarterly Federal Tax Return. For more information, visit IRS.gov.

New and existing employers should consult the IRS Employer’s Tax Guide to understand all their federal tax filing requirements.

Visit the state and local tax page for specific tax filing requirements for employers.Download Adobe Reader to read this link content

Step 8. Get Organized and Keep Yourself Informed

Being a good employer doesn’t stop with fulfilling your various tax and reporting obligations. Maintaining a healthy and fair workplace, providing benefits and keeping employees informed about your company’s policies are key to your business’ success. Here are some additional steps you should take after you’ve hired your first employee:

Set up Recordkeeping

In addition to requirements for keeping payroll records of your employees for tax purposes, certain federal employment laws also require you to keep records about your employees. The following sites provide more information about federal reporting requirements:

Complying with standards for employee rights in regards to equal opportunity and fair labor standards is a requirement. Following statutes and regulations for minimum wage, overtime, and child labor will help you avoid error and a lawsuit. See the Department of Labor’s Employment Law Guide for up-to-date information on these statutes and regulations.

Also, visit the Equal Employment Opportunity Commission and Fair Labor Standards Act.