AFFORDABLE CARE ACT (ACA)

June 18, 2014

Anil Comelo

The Problem: Soaring Healthcare Costs

(The Scary Story)

The Problem: 45M Uninsured

Health Insurance Coverage in the U.S., 2008
Total = 300.5 million
Uninsured = 45 million

NOTE: Includes those over age 65. Medicaid/Other Public includes Medicaid, SCHIP, other state programs, and military-related
coverage. Those enrolled in both Medicare and Medicaid (1.9% of total population) are shown as Medicare beneficiaries.
SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of March 2009 CPS

Core Problem and Solution

Use incentives to increase health care quality/
access or pay fines.
Insurance companies
Healthcare providers
Employers
Individuals

Access To Comprehensive Coverage

(Minimum Essential Coverage)

Dependent coverage until age 26

Healthcare Exchanges
No limits on Essential Health Benefits
No pre-existing conditions
Guaranteed issue coverage
Improved preventive/womens healthcare
Coverage must be Minimum Value (60%)
st
Limit waiting periods benefits begin by 91 day

Revenue Sources

Pay or Play penalties

Flexible Spending Limits (FSA) limits
Cadillac tax (Starting 2018)
Various taxes and fees

Individual Mandate: IRC 5000A

When

Beginning in 2014

What

Individuals must have Minimum Essential

Coverage

Who

All U.S. citizens and legal residents

How

If individual or individuals spouse or dependent

does not have Minimum Essential Coverage,
penalty will be assessed against that individual

Penalty is charged for each individual without coverage:

2014: Capped at greater of $285/family or 1% of family income
2016: Capped at greater of $2,085/family or 2.5% of family income

Who Can Get Subsidy

Income less than 4x federal poverty line in 2016

2 person family income up to $62,920

4 person family income up to $95,400
6 person family income up to $127,880

Pay or Play: Employer Shared Responsibility

When

January 1, 2015

What

Health plan offers Minimum Essential

Coverage that provides (a) Minimum Value
(60% actuarial) and is (b) Affordable

Who

Large Employers (100+ full-time + FTEs)

How

Provided coverage to substantially all (95% in

2016) of full-time employees (130+ hrs/mo)
and their dependents

Citys Profile
CalPERS plans provide MEC and 60% actuarial value
Most eligible employees receive Affordable medical care
(depending upon Safe Harbor calculation methodology.)
The City currently spends $51.4 million in medical care of which
$46.7 million pays for healthcare of current employees.
Assuming City FTE of 3066, we can have a max of 153
employees (5% in 2016) not receive adequate coverage before
being liable for a $6,072,000 penalty.

Employer Penalties
Penalty A = $2,000 x (3066- 30) = $6,072,000
Coverage not offered at all OR fail to offer Minimum

Essential Coverage for (95% in 2016) full-time employees

Penalty B = $3,000 per employee

that enrolls in subsidized exchange coverage if
(a) Affordable, (b) Minimum Value coverage not offered

Penalty Decision Flowchart

Is Minimum Essential
Coverage offered?

No

Exposure for Penalty A

Yes
Is coverage offered to
substantially all of
full-time employees
and dependents?
No
Yes
No exposure to
Penalty A

Exposure for Penalty A

Penalty Decision Flowchart

Does the plan provide
Maximum Value?

No

Exposure for Penalty B

Yes

Is the plan affordable?

No
Yes
No exposure for
Penalty B

Exposure for Penalty B

Safe Harbor Test: Federal Poverty

Rate
Total # of
positions*

(sample
position)

Lowest
Monthly
Premium **

Custodian

64

52

$742.42

$742.42

$0

affordable

Library Aide

76

$742.42

$742.42

$0

affordable

Payroll Personnel Clerk I

$742.42

$742.42

$0

affordable

Jail Cooks Assistant

$742.42

$742.42

$0

affordable

Park Attendant

17

$742.42

$742.42

$0

affordable

Office Assistant I

$742.42

$742.42

$0

affordable

Position

FTE

* Includes ALL positions; Step & FTE may vary.

** As negotiated based on Kaiser 1- party rate
***More than $90.96 is NOT affordable for 2013

City
Contribution

Employee
Share

Affordability
Test** *

Safe Harbor Test: Hourly Wage

FTE

Hourly
Wage

Lowest
Monthly
Premium*

Custodian

52

$17.03

$742.42

$742.42

$0

$210.32

affordable

Library Aide

$15.37

$742.42

$742.42

$0

$189.82

affordable

Payroll Personnel Clerk I

$17.12

$742.42

$742.42

$0

$211.44

affordable

Jail Cooks Assistant

$16.91

$742.42

$742.42

$0

$208.84

affordable

Park Attendant

$15.38

$742.42

$742.42

$0

$189.95

affordable

$16.22

$742.42

$742.42

$0

$200.32

affordable

Position

Office Assistant I

*As negotiated based on Kaiser 1-party rate

**Hourly Wage x 130 hours * 9.5%

City
Contribution

Employee
Share

9.5% to
value**

Affordability Test

Proposed Measurement Periods

Mandated ACA periods will be as follows:
Measurement period Dec 1, 2013 to Nov 30, 2014
Admin period
Dec 1, 2014 to Dec 31, 2014
Stability period
Jan 1, 2015 to Dec 31, 2015

PAY OR PLAY FULL-TIME SAFE HARBOR

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Nov-14

Oct-14

Dec-14
Admin

1st Standard Measurement Period

(12 months)

Sep-14

Aug-14

Jul-14

Jun-14

May-14

Apr-14

Mar-14

Feb-14

Jan-14

Dec-13

Standard Measurement Period January 1 plan year

1st Stability Period

(12 months)

2nd Standard Measurement Period

(12 months)

Employee Classification
Employee Category

Definition

In 2015

Full Time

Expected to work on average of 130+

hrs/month (30 hrs/week)

Medical benefits must begin by the 91st day

Part Time

Expected to work less than 130 hrs per

month on average during measurement
period

Variable Hour

Hours vary, unable to determine if

employee will exceed 130 hrs/month

Same as Part Time

However, if working more than 30 hours per week
must assume will work for entire measurement period
and offer benefits by 91st day

Seasonal

Hired into a customary cycled position that

usually lasts less than 6 months

Same as Part Time

Not required to offer medical benefits

Initiate measurement period

New Employees
New Employee @ Start Date, Ask:
Is it reasonably expected he/she will average 30 or more
hours/week?
If yes must offer coverage within 90 days in 2015
If no New Variable Hour employee start
measuring

What does it mean for the City?

Starting 2015, City needs to provide medical coverage to all
employees working 30 or more hours per week. Even those
who are appointed in ELDE positions
Continually ascertain that all full-time employees (over 30
hours/week) receive affordable healthcare.
Track measurement periods for all new variable hour
employees.
Now more than ever, need to be diligent about Independent
Contractor status.

ACA Management Strategies

Address coverage/affordability for individuals or groups of
employees
HR.

Ensure all part-time employees budgeted to be non-benefit

eligible in the budget work 30 hours/week or less
Departments.
Ensure at least 13 weeks of gap between assignments for
seasonal employees
Departments.

And the Future?

Health Costs will continue to rise in the

near future.
Reform is here to stay.

Monitor the potential impact of the

Cadillac tax.
Encourage CalPERS to explore lower cost
plans as part of the menu of options.