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Item H1 BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date:_ October 17.,2014 Division:--E=LoXee Services Bulk Item: yes No X Department:_EMpjo ee Benefit, Staff Contact Person/Phone#: Maria Gonzalez ext. 4448 AGENDA ITEM WORDING: Discussion and approval on addressing Internal Revenue Code (IRC Section 4980H(b) (known as "Shared Responsibility for Employers Regarding Health Coverage) ) effective 2015 under the Affordable Care Act. ITEM BACKGROUND: The Affordable Care Act(ACA) contains provisions which would impose penalties on"applicable large employers", such as Monroe County BoCC,regarding an employer's health coverage. There: are two types of penalties under IRS Code Section 4980H(a) and Section 498011(b): Section 4980H(a)—'This penalty if assessed against large employers who fail to offer medical coverage to a sufficient percentage Of its full-time employees. There is no current exposure to this penalty based on the data provided and the County well exceeds the required threshold. Section 498011(b)—This penalty may be faced by employer if they fail to offer medic coverage that's affordable to al its full-time employees. There is one (1)identified temporary employee and one (1) identified variable hour(on-call) employee who worked on average of more than 30 hpw and therefore could pose a penalty exposure to the County, if.• • The employee enrolls in the Marketplace plan; and • Qualifies for the:Premium Tax Credits through the Marketplace. The County's cost to cover an employee on the health plan is $790 per month and the cost of the penalty(if the employee decides to go to the Marketplace and qualifies to obtain insurance from the marketplace) is $250 per month. The cost to insure an employee far exceeds the cost of the penalty. .PREVIOUS RELEVANT BOCC ACTION: N/A CONTRACT/AGREEMENT CHANGES: N/A STAFF RECOMMENDATIONS: Maintain the current eligibility provisions of the County's plan. Continue to monitor the hours worked by the Temporary and Variable hour(on-call) employees and report to the Board, on an annual basis, the potential exposure to the County under the ACA. TOTAL COST: INDIRECT COST: BUDGETED: Yes —No_ DIFFERENTIAL OF LOCAL PREFERENCE: COST TO COUNTY: SOURCE OF FUNDS: REVENUE PRODUCING: Yes No X AMOUNT PER MONTH Year APPROVED BY: County Atty OMB/Purchasingti,- Risk Managemeil� DOCUMENTATION: Included Not Required DISPOSITION: AGENDA ITEM# Revised 7/09 SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING HEALTH COVERAGE (SECTION 4980H INTERNAL REVENUE CODE) BACKGROUND: The Affordable Care Act(ACA) contains provisions which would impose penalties on %applicable large Section ers 4980 regarding and ardfn a an employers e known as "Shared Responsibility These penalties are under Internal Revenue Code employers" health coverage. for Employers Regarding Health Coverage' and there are two types of penalties as follows, ' Sectia�H : This penalty is assessed against large employers who fail to offer medical coverage to a sufficient percentage of its full-time employees. The minimum percentage is 70% for 2015 and 95% for 2016 and later years. The penalty would equal $2,000 (annualized) for each full time employee employed by the employer (i.e., the penalty Is assessed on the employer's entire full-time workforce). • Section 4gRn U: An employer that avoids penalties under 4980H(a) may still face penalties under 4980H(b) if they fall to offer medical coverage that's affordable to certain of its full-time This penalty is assessed on an employer for each full-time employee who is either not offeredoyees. medical coverage (or who is offered ""unaffordable"coverage), but only if that fall-time employee: o enrolls in a Marketplace plan; and o qualifies for the Premium Tax Credits through the Marketplace. The penalty would' equal $3,000 (annualized) or $250 (monthly) for each full-time employee who enrolls in a Marketplace plan and qualifies for Premium Tax Credits. DEFINITIONS AND CONCEPTS: Premium tax credits; Premium tax credits are available to individuals and families with incomes between 100 percent of the federal poverty level ($23,550 for a family of four) and 400 percent of the federal poverty level ($94,200 for a family of four) who purchase coverage in the health insurance marketplace in their state. To be eligible for a Premium Tax Credit an individual must buy insurance through the Marketplace; be within certain income limits; not file a "Married Filing Separately"ta not be claimed as a dependent by another person, nd a ineli able f r afF rdable co ra e x return; em er or governmental plan. • tired v an Full-Time Employees: For purposes of the ACA, full-time employees are defined as anyone who works on average 30 or more hours per week, and there are several classifications of employees described in the ACA. • Full- ime: employees who work on average 30 hours per week; Part-time: employees who work less than 30 hours per week and their hours do not vary; • Tem ra ; employees hired to work an average of 30 hours per week, regardless of length of position, will be considered Full-time for ACA purposes. • Variable hour and seasonal employees: based on facts at start date, the employer cann determine whether the employee Is reasonably expected to work on average at le, of hours p week. Employers are permitted to measure the hours of these employees during an establisheder Measurement Period (up to 12 months) before they would be considered "full-time"for ACA purposes. The County will use a Measurement Period as follows: ■ For plan year 2015 (Initial Measurement Period): January 1, 2014 — October 31, 2014. • For plan year 2016 and later: November 1 — October 31 I , MONROE COUNTY 13OCC ANALYSIS: Monroe County BOCC is a large employer for ACA purposes and therefore is exposed to the Responsibility penalties. Since the assessable payments under Section 4980H(a) and Section 4980H b are based on "full-time employees"as defined by the ACA it was important to determine who the C ( ) "Full-time employees"are under the ACA rules and, of those, which are not benefit eligible. ounty's Data was requested and received from the BOCC and Constitutional offices regarding employees durin the period January 1, 2014—June 30, 2014, as follows: g Cate o Number of Em to ees Number workin 30+ hours Full Time Em to ees 1 254 er week Part-Time r=m to ees* 13 1 254 Variable Hour Em to ees 20 0 Temporary Fmininviame 1 1 *Plan is available to any Part Time, Employee regularly scheduled for 25+ hours er w p eek. Monroe County BOCC offers coverage to its full-time employees and Its regular part-time employees (defined as those who are scheduled to work 25 or more hours per its but does not offer coverage to part-time employees working less than 25 hours per week; variable hour employees; or temporary employees. • 4980 a Penal, dies; o There appears to be no current exposure to this penalty based on the data provided and should not pose a future issue if similar numbers continue. o Based on the data provided, Monroe County BOCC offers coverage to 98% of its full-time workforce. This well-exceeds the 70% threshold for 2015; and exceeds the 95% threshold for 2016 and later years. • 4980H(� Pe. realties: o Full-time employees;. There is no penalty exposure regarding these 1,254 employees since all of these, employees are offered medical coverage that is affordable. o Part-time employees: There is no penalty exposure regarding these 13 employees assuming they continue to work Less than 30 hours pier week since ACA penalties are assessed on full-time employees only. Note. Some of these employees are offered coverage if they are regularly scheduled to work 25 or more hours per week. o Temporary employees: Temporary employees are not currently benefit-eligible and they could trigger a penalty for Monroe County BOCC if they work full-time hours. Penalties would begin starting the 1'day of the a month after their date of hire. The 1 identified Temporary employee does work on average more than 30 hours therefore could pose a penalty exposure to the Coun air week and a Marketplace plan and qualifies for the Premium TaxCredit s through he rolls in Marketplace!. o Variable Hour: Variable hour employees are not currently benefit-eligible and they could trigger a penalty for the County if they work full-time hours. Of the 20 variable hour employees identified, 1 has worked on average more than 30 hours per week and therefore could pose a penalty exposure to the County,enrolls in a Marketplace plan and qualifies for the Premium Tax if tCredits through the Marketplace. COUNTY CONSIDERATIONS: Based on the data obtained, the County appears to have a very low risk of penalty exposure. However, the County should consider how to handle the penalty exposure that does exist. This primarily involves Temporary employees and Variable Hour employees who work on a full-time basis i.e. per week). The County can consider the following: ( , 30 or more hours • Cast Benefit Analysis: The County should compare the penalty risk to the cost of enrolling employees in the plan. o The cost to enroll an employee in the plan is $9,480 per year (or$790 per month); while the potential ACA penalty exposure for failing to offer coverage to a full-time employee is $3,000 per year. o Based on the 6-month period reviewed, the County has 2 individuals that worked full-time as defined by ACA. The cost to the County to include these 2 individuals in the Plan for an entire year would be $18,960 compared to the potential penalty exposure of$6,000. The $3,000 ACA penalty is only triggered if that particular full-time employee: (1) enrolls in a Marketplace plan; and (2) qualifies for Premium Tax Credits. Therefore, there is a possibility that the County might not face a penalty assessment for such employees If those hurdles are not met. • Penalty Mi iaation: The County could consider monitoring/controlling hours of Variable Hour and Temporary employees to maintain a less than 30 hour average work week. o Variable hour employees are not considered full-time until after the end of a Lookback Measurement Period. The County will use a measurement period as follows: • For plan year 2015: January 1, 2014 — October 31, 2014. • For plan year 2016 and later: November 1 — October 31 o If the County wants to limit hours of these types of employees to less than 30 week, it would have to work with the various Constitutionals and the BOCC to oll�ou per relevant policies to mitigate and reduce the penalty exposure, • Penal Avoidance: For any Variable Hour employee who works Full-time during the Measurement Period or Temporary employees who works an average of 30+ hours per week (regardless of length of time), the County can offer such Variable Hour and Temporary Full-time employee eligibility in the medical plan. This would protect the County from these ACA penalties; however, the County may decide that the Cost/Benefit Analysis described above dictates a different solution. • Additio al' Plan Desi� 5 a ation: ACA penalties are assessed on "full-time"employees (defined by the ACA as anyone working on average 30 or more hours per week). The County currently allows regular part-time employees working 25 or more hours per week the ability to enroll in the County's medical plan. The County could change the plan's eligibility provisions and increase this to 30 or more hours per week without incurring additional ACA penalty exposure. -'' zDc r 0 rn = 0 I - s �L _ oj CI S O rn co 0 = CT c CD CD V Imi' 'l 0 M � _ . CD CO MINION a > CT CD M 4 3 D 0 W _.\ k, 17:3yD lb- D y 5. 0 N i k< k • cu Da' r_ liaq Q. n Q • 0. • I. O O I I CD O I °.,i 0; Cup C y 04) 0 c) _... 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