FAQs

1. How is FreedomCare any different than other self-funded MEC plans?

How is FreedomCare any different than other self-funded MEC plans?

Here are the Top Ten major difference between FreedomCare and other self-funded MEC plans:

(1)Penalties:  Employers who implement FreedomCare avoid both Penalty A ($2,000 per employee per month) and Penalty B ($3,000 per employee per month).  Most MEC plans only address Penalty A and leave employers exposed to Penalty B.

2. Why are Employers allowed to do parallel plans?

Why are Employers allowed to do parallel plans? And what is the best way to implement a parallel plan with FreedomCare?

Historically, employers had broad discretion in how they implemented their health care plans, including offering more than one health plan option to their employees.  Prior to the ACA, only self-insured plans were subject to non-discrimination rules (Section 105(h) of the Tax Code).    The ACA has an as-yet undefined non-discrimination provision that will apply to fully-insured plans as well, but the IRS has stated that enforcement is delayed until final non-discrimination rules are released.  Once released, the IRS has stated that employers will be given transition time to comply.

3. Gone for more than 13 weeks can I treat them as a new-hire?

My company uses thousands of seasonal workers who leave after the growing season. If they are gone for longer than 13 weeks does that mean I can treat them as a new-hire?

It is not clear in the regulations or the official commentary whether or not a break in service due to the end of a growing season, will qualify as a break in service triggering the 13-week rule.

4. I have a lot of employees who leave and come back.

I have a lot of employees who leave and come back. Do I still have to offer them insurance if they do this?

The basic rule of thumb is that if an employee has no hours of service for a minimum of 13 consecutive weeks, then you can treat that employee as a new hire upon their return.

5. How am I supposed to figure out their household income?

I understand that I cannot charge my employees more than 9.5% of their household income toward the cost of insurance. How am I supposed to figure out their household income?

The IRS has provided three optional safe harbors for determining household income. An employer may use the same safe harbor for all of its employees or it may use different safe harbors for different reasonable categories of employees. The reasonable categories include (1) manner of compensation (e.g. salary vs. hourly); (2) specified job categories; (3) geographic location; and (4) similar bona fide business criteria.

6. Can one company choose to offer insurance & the other not?

If I have more than one corporation, can one corporation choose to offer insurance and the other one pay a penalty?

Yes. The controlled group test is used to determine if the employer mandate rule applies. However, the coverage tests and the penalty assessments are to be calculated and imposed separately on each company within the group. This means that one corporation in a controlled group can choose to offer insurance while another company in the controlled group can choose to pay the penalty.

7. Do I need to provide coverage to my employees dependents?

Do I need to provide coverage to my employees dependents?

Yes, the so-called “Shared Responsibility” section of the ACA requires applicable large employers to offer Minimum Essential Coverage to full-time employees and their dependents or pay a penalty. In the final regulations “dependents” include biological children and adopted children up to the age of 26. Coverage for dependents must be offered through the end of the month in which a child turns 26.

8. Employees who are already in MEDI-CAL

I own a few Fast Food restaurants in California. Do I need to offer anything to my employees who are already in MEDI-CAL?

This can be a tricky question. The ACA requires an applicable large employer to offer coverage to all full-time employees or face penalties. Therefore, per the letter of the law, if you are a large employer, you must offer coverage to all of your full-time employees regardless of whether or not you believe your employees are on Medi-Cal or any other insurance program. You will be exposed to penalties if you either do not offer coverage or if the coverage you offer is not affordable or minimum value. Your penalties will only be triggered if any of your full-time employees qualify for a subsidy on the insurance exchange.

9. Where do the 63 essential benefits come from?

I am a consultant who has presented FreedomCare about 5 times in the last month, everybody loves it, but one question has come up a couple of times, “where do the 63 essential benefits come from and how can I be sure that I will be compliant offering FreedomCare-Basic”. If you could help me out on this I would appreciate it.

Under the ACA, all Individuals are required to have “Minimum Essential Coverage” (“MEC”) beginning in 2014, or pay a tax penalty. MEC is not defined with reference to certain minimum benefits. Instead it is only defined as a type of plan (ie. employer-sponsored, individual or government plans). FreedomCare is MEC because it is a qualified employer-sponsored plan as defined by the ACA.

10. Carve Out

I was presented FreedomCare by my broker and a competing broker (with a more expensive product) told me that FreedomCare wouldn’t work because the ACA doesn’t allow me to do a “Carve Out” for my upper management. Is this true?

The ACA only requires that an applicable Large Employer offer MEC to a certain percentage of their full-time employees or pay the shared responsibility taxes. There is nothing in the ACA prohibiting an employer from doing a “Carve Out” for upper management.

11. Why is FreedomCare+Plus allowed?

FreedomCare was presented to a large agricultural client today and his “ACA expert” questioned the ability of FreedomCare+Plus to charge a separate deductible for the medical and a separate deductible for the RX portions of the policy. Why is FreedomCare+Plus allowed to do this?

The ACA sets the maximum limits on how much consumers can be required to pay out of their pocket for medical care. We refer to these as the Maximum Out Of Pocket (“MOOP”) rules. In 2014, the MOOP for an individual is $6,350 and $12,700 for a family.

12. Self-Insured retention

I heard FC use the following when explaining the cash flow: Self-Insured retention of $10,000, $50,000 Spec Stop, 125% Aggregate Stop. What does all this mean and can you give an example?

Yes, but first let us first define each of the terms:

13. Contractual Liability Indemnity Policy

I am a little confused regarding my understanding of how my SDIT covers my employees Health expenses. Can you explain what you mean by the Contractual Liability Indemnity Policy “CLIP” that it issues to me?

Excellent question. A little background might be helpful. As a self-insured employer, you have the ultimate obligation to pay for your employees Health expenses as long as they are covered under the FreedomCare Health Plan.

These Frequently asked questions and responses were generated by Kaya Bromley.  Kaya may be contact directly by navigating to the FreedomCare Benefits website.

Kaya B. Bromley

Kaya B. Bromley is a recognized business strategist and founder of Your Obamacare Advisors, LLC (YOA). Ms. Bromley created YOA to meet the needs of business owners and their teams as they work to understand and implement the requirements of the Affordable Care Act (more commonly known as Obamacare).

An attorney of 11 years, Ms. Bromley has served as General Counsel for Marco’s Pizza and as the Executive Director of the National Jack-in-the-Box Franchisee Association. She is currently a Trustee of the largest Workers Comp Self Insured Group for restaurants in the State of California and she is a Franchisee of Tropical Smoothie Café.

In addition to Marco’s Pizza and Tropical Smoothie Café, the businesses Ms. Bromley has advised on Obamacare include franchisees of McDonald’s, Burger King, El Pollo Loco, and Carl’s Jr as well as wineries, manufacturers, service providers and payroll companies. Ms. Bromley’s gift of simplifying complex concepts has assisted hundreds of organizations in designing and implementing individualized strategic plans necessary to comply with the Obamacare mandates.

Have Questions? Contact Kaya Bromley