Blog

big featured images, fullwidth

Smart Business February Insight 2013

1 February 2013 Posted by Danone Simpson Press No Comments

How to understand health care reform’s Employer Shared Responsibility

By Tobias Kennedy

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. (URL where it can be downloaded can be a link on the page: http://cciio.cms.gov/resources/regulations/index.html#pm)
• 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 1 (888) 839-2147 or [email protected].

Smart Business January Insight 2013

1 January 2013 Posted by Danone Simpson Press No Comments

How employers with non-Jan. 1 effective date health plans can get transitional relief – Tobias Kennedy

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 1 (888) 839-2147 or [email protected].

Smart Business October Insight 2012

15 October 2012 Posted by Danone Simpson Press No Comments

Batten Down the Hatches as the P&C Market Hardens … or Not? – Danone Simpson

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.