Article

Affordable Care Act FAQ
Based on regulatory guidance issued as of March 2014 and subject to change.

Contents

ACA Marketplace

ACA Employer Shared Responsibility

ACA Individual Mandate Shared Responsibility for Individuals

Medical Loss Ratio (MLR) Rebates

Summary of Benefits and Coverage (SBC)

Notice of Marketplace

Non-Discrimination Testing Requirements

Worksite Employees Enrolling in New Marketplace Coverage

General ACA Questions

How will the ACA impact TriNet clients in the next year?

Some of the ACA provisions that will impact TriNet clients in the next one to two years include :

  • Maximum benefits waiting period of no more than 90 days
  • Overall limit on cost-sharing including deductibles, copayments and other out-of-pocket charges
  • Requirement to distribute a Marketplace Notice
  • Additional Medicare payroll tax on high wage earners
  • New fees that will impact premiums including the Patient Center Outcome Research Institute Fee, Health Insurer Fee and Transitional Insurance Fee

Where can TriNet clients find information about the ACA?

TriNet maintains an ACA microsite, TriNet.com/affordablecareact,
to share information about how the ACA will affect companies and
how TriNet will support compliance with ACA health plan design,
reporting, communication and eligibility requirements. Current
topics on the ACA microsite include :

  • Summary of Benefits and Coverage (SBC) distribution requirements
  • Reporting the value of company-sponsored health coverage on Form W-2
  • Additional Medicare Tax for high wage earners
  • Status of nondiscrimination testing requirements

TriNet medical insurance carriers have also established comprehensive ACA microsites. You can find more information by visiting their sites directly.

ACA Marketplace

What is a Marketplace (formerly known as the Exchange) and how does it work?

The Marketplace will allow individuals to "shop"for insurance plans. Low income individuals may be eligible for a premium tax credit, or subsidy, for insurance coverage obtained through the exchange. Some states will choose to run their own exchanges, some will partner with the federal government, and some will allow the federal government to run the state exchange.

Who may be eligible for a subsidy through the Marketplace?

The subsidy may be available on a sliding-scale basis depending on an individual’s household income, family size, and the availability or affordability of employer provided coverage. Generally, individuals whose household incomes are between 100% - 400% of the Federal Poverty Level (FPL) (e.g., $11,490 - $45,960 for an individual in 2013) may be eligible for the subsidy. Individuals whose income is below 100% of the FPL can apply for expanded Medicaid and are not eligible for Marketplace subsidies.

If a client's worksite employees would qualify for a subsidy, why would a client continue to offer TriNet medical coverage?

Eligibility for the subsidy is a complex determination and depends on several factors, such as the worksite employee's total household income (for the tax year that ends two years prior to his or her enrollment period) and whether client coverage is considered "unaffordable"; for that individual under ACA. Therefore, even though the worksite employee may earn between 100% and 400% of the FPL, he/she still may not be subsidy eligible merely based on total household income.

Even if a worksite employee qualifies for a subsidy, the choice of medical plans and premiums will vary significantly depending on the state of residence. Many states may have a limited selection of insurance carriers and plan designs, and worksite employees might end up paying more for coverage that may not fit their needs. TriNet will continue to offer worksite employees a comprehensive lineup of medical benefits plans from national and regional carriers.

Finally, Marketplace medical plan premiums (not covered by the subsidy) would be paid for on an after tax basis. Thus, worksite employees would lose the ability to pay for medical premiums using pre-tax dollars.

Can a client contribute towards coverage a worksite employee purchases through a Marketplace?

There is currently no ability to utilize the traditional methods for making pre-tax contributions on behalf of worksite employees in order to pay for Marketplace medical plan premiums. Clients may choose to increase the WSE’;s compensation, for example by providing a bonus, as an indirect method of contributing towards Marketplace coverage. This compensation would be taxable income, and there would be no way to confirm that the WSE will use the payment to purchase Marketplace coverage.

ACA Employer Shared Responsibility

Please refer to the ACA microsite "Relevant Now" section for more information about the delay in the large employer shared responsibility penalty until 2015.

What is the ACA employer responsibility provision, also known as the "pay or play" requirement?

Beginning in 2015, certain large employers may be subject to a tax penalty if a full-time employee receives a premium tax credit or costs sharing subsidy through a Marketplace and the company:

  • failed to offer minimum essential health care coverage to at least 70% of its full-time employees and their dependent children up to age 26 (increases to 95% of full-time employees for plan years that begin in 2016); or
  • failed to offer eligible employer-sponsored coverage that is "affordable" (i.e. employee premium exceeds 9.5% of the employee's household income, or using one of three IRS safe harbors) and/or does not meet "minimum value" (i.e. the plan's share of the total allowed cost of benefits is not at least 60%).

How will a TriNet client determine if it is a "large employer" subject to the ACA employer responsibility provision?

Based on regulatory guidance issued to date, each TriNet client will look at its worksite Full Time Equivalent ("FTE") count for purposes of determining applicability of the ACA employer responsibility provision. This ACA provision will generally apply to companies with 100 or more FTEs starting in 2015. To determine 2015 large employer status, a company may use employment data from a consecutive 6-month period during 2014 or the full 12 months.

Starting in 2016, the FTE threshold for large employer status drops to 50 or more FTEs during the prior calendar year.

Who will calculate the FTE count?

TriNet does not have all of the information required to perform the FTE calculation for the client, including controlled group, predecessor employer and seasonal worksite employee information. Therefore, the client.

Does the TriNet worksite employee benefits eligibility requirement align with the ACA full-time employee definition?

Yes. Under the ACA, full-time employees are those who, with respect to any month, work at least 30 hours per week. Client worksite employees that work 30 hours per week are eligible for TriNet medical plans, in compliance with the ACA requirement.

By offering TriNet benefits, will a client automatically meet the ACA requirement to offer minimum essential health care coverage to all full-time worksite employees and their dependents?

Not necessarily. TriNet clients are responsible for inputting the status code that designates which worksite employees are regular, full-time employees (working 30 or more hours per week) and therefore eligible for TriNet benefits. So it is very important that clients input a correct status code for each worksite employee.

If the client correctly classifies its worksite employees, then the client will meet the ACA requirements to offer minimum essential health care coverage.

TriNet is currently reviewing ACA requirements to determine if additional reporting capabilities or tools are required to assist clients in accurately classifying worksite employees in the TriNet payroll system, including variable hour worksite employees, and auditing hours for worksite employees classified as part-time.

Will worksite employees have access to a TriNet medical plan that meets the minimum value requirements?

For plan years beginning on or after October 1, 2014, all of the TriNet medical plans will meet or exceed the minimum value requirements. If a client offers TriNet medical benefits, all of its worksite employees will have an opportunity to elect a TriNet medical plan that meets this requirement, regardless of the client’s total FTE count.

How will TriNet or the client determine the worksite employee’s household income for purposes of calculating if the worksite employee’s premium exceeds 9.5%?

Because household income is determined by variables unknown to an employer, the IRS has issued guidance that allows employers to base the affordability calculation on 9.5% of the worksite employee’s income by using one of three safe harbor definitions.

Does the 9.5% affordability requirement apply to the worksite employee’s portion of employee-only premium, or the employee + dependent(s) premium?

The affordability requirement only applies to the employee-only premium. It does not apply to spouse or dependent premium.

Will all worksite employees of "large employer" clients that offer TriNet medical benefits have access to elect a TriNet medical plan that does not exceed 9.5% of the worksite employee’s income?

The client is only required to offer one medical plan that meets the affordability requirement. We are currently considering how TriNet will support clients in complying with the affordability requirement, utilizing one of the safe harbor definitions of worksite employee income.

TriNet will communicate with the clients during the BIS.

In the event that a full-time worksite employee is not offered one medical plan where the employee- only medical premium does not exceed the 9.5% threshold and that individual obtains a subsidy through the Marketplace, which entity is responsible for the ACA $3,000 penalty?

The client will be responsible for paying the ACA shared responsibility penalties, including penalties for offering non-affordable plans or not offering medical coverage to all worksite employees that meet the ACA’s full-time employee definition.

Can a client prevent a full time worksite employee from obtaining insurance through a Marketplace?

No, an employer may not prevent an employee from obtaining insurance through a Marketplace.

If a client is classified as an ACA large employer, will TriNet or the client be responsible for submitting the health insurance reporting requirements to the IRS?

The IRS has released draft forms and instructions on health insurance reporting requirements applicable to large employers. TriNet is reviewing the draft forms and instructions, but doesn’t expect to determine which entity will be responsible for filing the report until after final forms and instructions are issued. Regardless of whether TriNet or the client is required to submit the report, TriNet intends to support our clients and make the required TriNet medical coverage data accessible.

ACA Individual Mandate (Shared Responsibility for Individuals)

What is the ACA shared responsibility for individuals, also known as the "individual mandate"?

Beginning in 2014, taxpayers (with limited exemptions) will be assessed a "shared responsibility" penalty for any months during which they or their spouse or dependents lack "minimum essential coverage." Because this tax penalty has the effect of "requiring" individuals to have coverage or pay a penalty, this ACA provision is commonly referred to as the "individual mandate."

Will all of the TriNet medical plans meet the individual mandate’s minimum essential coverage standard?

Yes. All of the TriNet medical plans meet the minimum essential coverage standard. A worksite employee that elects a TriNet medical plan will comply with the ACA individual mandate for each calendar month in which the employee, spouse and dependents are covered.

Which individuals are exempt from the requirement to obtain minimum essential coverage?

There are nine statutory exemptions from the individual mandate requirement, as listed below. TriNet recommends that a worksite employee consults with a tax advisor or accountant to determine if an exception applies to that employee and/or to his or her dependents (if any).

  • Religious conscience: A member of a religious sect recognized by the Social Security Administration as conscientiously opposed to accepting any insurance benefits.
  • Unaffordable coverage: The minimum amount that must be paid for premiums is more than 8% of household income. Hardship: The Health Insurance Marketplace has certified that an individual has suffered a hardship that makes him or her unable to obtain coverage.
  • Health care sharing ministry: A member of a recognized health care sharing ministry. Indian tribes: A member of a federally recognized Indian tribe.
  • No tax filing requirement: An individual whose household income is below the minimum threshold for filing a tax return.
  • Short coverage gap: An individual who went without coverage for less than three consecutive months during the year.
  • Incarceration: An individual who is incarcerated in a jail, prison, or correctional facility. Not lawfully present: An individual who is not a U.S. citizen, a U.S. national or an alien lawfully present in the U.S.

Medical Loss Ratio (MLR) Rebates

Please refer to the ACA microsite “Relevant Now” section for more information about the Medical Loss Ratio Rebates

What is the Medical Loss Ratio and the ACA rebate requirement?

As part of the Affordable Care Act, Congress set MLR benchmarks for insurers to help ensure that a certain proportion of premium dollars are being spent towards clinical services and health care quality improvement. The MLR requirements set forth in the law requires that health insurance companies spend 80 to 85 percent of health care insurance premiums on health care services versus administrative and overhead costs. The MLR requirement is calculated on a state by state basis for each calendar year. If an insurance company fails to meet the requirement, it will have to issue rebates to policyholders or subscribers to cover the shortfall.

Will TriNet or the insurance carrier notify clients or worksite employees if the carrier does not meet the MLR requirement?

The insurance carrier will send notification to worksite employees enrolled in the TriNet group medical plan if it does not meet the MLR requirements for a calendar year. Notice will be sent no later than August 1 of the following calendar year. Enrollees will be directed to contact TriNet if they have any questions about how the rebate will be used.

If the insurance carrier meets or exceeds the MLR requirement, a notice will be included in the certificate of coverage. Separate notification will not be sent directly to a participant if the carrier meets or exceeds the MLR requirement.

If an insurance carrier issues a rebate, what will happen with the rebate money?

TriNet will use all rebate money to reduce medical premiums for the group health insurance plan in an upcoming plan year in order to help keep costs down and continue to provide quality coverage.

Summary of Benefits and Coverage (SBC)

Please refer to the ACA microsite “Relevant Now” section for more information about the SBC requirement.

What is the SBC?

The SBC is a standardized plan comparison tool intended to help individuals more easily review the main cost-sharing and coverage features of a given medical plan. The SBC information must be presented on a government-required template that is four pages long (double-sided) and include plan-specific information that describes the plan’s benefits and cost-sharing provisions, mainly in chart form. The goal of the template is to make it easier for an individual to compare, for example, his or her company-provided plans to a spouse’s employer-provided plans and individual plans.

When will worksite employees receive the SBC?

The final regulations published in February 2012 require that the SBC and Uniform Glossary must be provided to participants and beneficiaries:

  • before the first day of the first open enrollment period that begins on or after September 23, 2012 and,
  • to participants and beneficiaries that are newly eligible for coverage beginning on the first day of the first plan year that begins on or after September 23, 2012.

How will worksite employees receive the SBC?

TriNet will post the SBCs online, and send the SBC by postal mail upon request.

Notice of Marketplace

What is the Marketplace Notice?

The ACA requires employers to provide all new hires and current employees with a written notice about the Marketplace, the services provided by the Marketplace, eligibility for subsidized coverage, some of the consequences if an employee decides to purchase a qualified health plan through the Marketplace in lieu of company-sponsored health coverage and basic information about the company-sponsored plan, etc.

The notice requirement was originally scheduled to go into effect March 1, 2013, but was postponed until final regulations were issued on May 8, 2013. The Department of Labor also issued a model notice for employers that do not offer a health plan and another model notice for employers that offer a health plan for some or all employees.

Who must receive the notice?

Companies must provide the Marketplace Notice to all employees regardless of part-time or full-time status, plan eligibility or plan enrollment status (if applicable). Companies are not required to provide a separate notice to spouses or eligible dependents.

What is the deadline for distributing the Marketplace Notice?

With respect to employees who were hired before October 1, 2013, companies are required to provide the Notice no later than October 1, 2013. Companies are required to provide the Notice to each new employee hired on or after October 1, 2013, within 14 days of the employee’s start date.

Can the Marketplace Notice be distributed electronically?

Yes. The Marketplace Notice may be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor (under 29 CFR 2520.104b-1(c)) are met. Otherwise, the Notice may be provided by first-class mail

Who will distribute the Marketplace Notice to worksite employees?

TriNet distributed the Notice to current worksite employees no later than October 1, 2013, and will distribute to new worksite employees hired after this date. TriNet will send the Marketplace Notice via email to each worksite employee with a valid email address on file. If a worksite employee has not provided a valid email address, TriNet will send the Notice via U.S. mail.

Is there a requirement to distribute a new notice if a worksite employee’s eligibility for benefits changes?

The regulatory guidance issued by the Department of Labor didn’t include a requirement to issue an updated notice if an employee’s status changes.

Does this notification requirement change the TriNet coverage that is available to worksite employees?

No. The Marketplace Notice is only intended to make worksite employees aware of the health insurance Marketplaces. It doesn’t change the TriNet benefits that are available or the premium costs.

Is TriNet required to distribute the Marketplace Notice to COBRA participants?

No. However, TriNet will notify current and new COBRA participants that they may purchase coverage through a health insurance Marketplace and should review whether they may be eligible for a subsidy that would lower the premium cost.

Non-Discrimination Testing Requirements

Please refer to the ACA microsite “Relevant Now” and “FAQs” sections for more information about non-discrimination testing requirements.

When will the non-discrimination requirements become applicable?

The ACA non-discriminations rules for insurance plans are effective as of the first day of the first plan year beginning on or after September 23, 2010. However because no regulatory guidance has been issued by any of the government agencies, compliance with the rules has been delayed until after the government agencies issue regulatory guidance (see IRS Notice 2011-1). Until regulations and administrative guidance are issued, we will not know when the nondiscrimination requirements will be effective. However, any such guidance that is issued will not apply until the plan year following its issuance.

Worksite Employees Enrolling in New Marketplace Coverage

If a worksite employee qualifies for a subsidy through the Marketplace, can he/she waive TriNet medical benefits effective January 1, 2014 and enroll in a subsidized Marketplace plan?

No. Enrolling in a Marketplace medical plan is not an event that allows a worksite employee to waive TriNet medical coverage, even if the worksite employee qualifies for a subsidy

If a worksite employee is eligible for a lower cost medical plan in the Marketplace, is that a “Change in the cost in benefits” LSC and can the worksite employee waive a TriNet medical plan election?

No. A “Change in the cost of benefits” occurs only when there is a change to the cost of premiums charged for a TriNet or other employer group benefit plan. Therefore, the worksite employee cannot waive TriNet medical coverage merely because he/she may be eligible for a lower cost medical plan offered through the Marketplace.

Can a worksite employee waive spouse or child medical coverage if he/she enrolls in a Marketplace plan?

No, enrolling in a Marketplace medical plan is not an event that allows a worksite employee to waive TriNet medical benefits for a spouse or eligible child.

Can a COBRA participant drop medical coverage effective January 1, 2015 to enroll in a Marketplace medical plan?

Yes, if the COBRA participant notifies the COBRA department before January 1st. Alternately, the COBRA participant can stop paying for medical benefits after submitting the December 2014 COBRA premium payment. In either instance, COBRA benefits will end after December 31, 2014 and cannot be resumed at a future date