HEALTHCARE 2014What You Need to Know

Cheryl Yarbrough, CPAValerie BarckhoffNovember 13, 2014

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General Thoughts

• 318 Million Lives in the US• 30 Million uninsured• 4 Million will pay fine in 2016• 8 Million in government exchanges• 87% of the 8 Million received the premium

assistance credit• 76% of the premiums are covered by it

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Predictions

• Employers will move to private exchanges• Employers will switch from defined benefit plans for

insurance to defined contribution• Spouses will be dropped from coverage by more

large employers

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Legal Issues

• Outstanding issue is whether premium assistance can be given to states that do not have state exchanges– Virginia said yes– Washington DC and Oklahoma said no

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Pricing of Insurance

• Age – older people can’t pay more than 3 times the amount younger people pay

• Premium Rating Areas are permissible – higher cost areas have higher premiums

• Number of family members covered• Tobacco use (not in every state) ($50 per month

surcharge in Georgia)

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Other insurance requirements

• Guaranteed issue – must be sold regardless of health status

• Community rating – same age group of people pay same premiums regardless of health status

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No annual or lifetime limits

• Benefits– Ambulatory services– Emergency services– Hospitalization– Maternity and newborn care– Mental health and substance abuse– Prescription drugs– Rehabilitative services– Laboratory services– Pediatric services including oral and vision– Preventative and wellness services and chronic disease

management

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Three Groups to be Considered

• Individuals• Small employers• Large employers

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Individuals

• Health insurance requirements and penalties1. All individuals (with certain exemptions) must have

health insurance. If they do not, without one of the exemptions, they are subject to penalty.

2. All individuals will need to include the insurance information in their 2014 tax return. The tax preparer will need this information for your return.

3. The policy must have minimum essential benefits. 4. Coverage must be for at least 10 months of the year;

1 day per month of coverage counts as a full mount.

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Individuals (continued)

• Health insurance requirements and penalties5. Individuals may receive a 1095A, B or C this year. 1095A

comes from the Exchange; 1095B comes from health plans and plan sponsors of self-insured plans. Form 1095C is filed by large employers. These (other than the 1095A) are optional for 2014. Their purpose is to help the IRS administer the penalty calculations and premium credits.

6. Penalties do include dependents if no insurance on dependents.

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Individuals (continued)

• Health insurance requirements and penalties7. Penalty is by month and is calculated as:

a. The greater ofi. the penalty per adult (under 18 is ½). For 2014 it is

$95; for 2016 it is $695, orii. 1 % of household income for 2014 (this rises to 2.5% in

2016; 2% in 2015), which includes all income including dependent income (detail rules on how this is calculated)

b. This number is then compared to the national average premium for Bronze Level Coverage (for 2014 this is $204 per person)

c. The final penalty is the lesser of (a) or (b)

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Individuals (continued)

• Health insurance requirements and penalties8. Premium assistance calculations will be done on the

Form 8962 and if assistance exceeds actual amounts allowed, there will be a tax payment. Excess payment is limited to $1,250 for an individual and $2,500 for a family. Note that in the calculations if income exceeds the thresholds by even $1, the full penalty is due. It is not pro-rated.

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Individual Tax

• Net investment income tax (begin in 2013)• Net investment income tax of 3.8% is due (as was

the case in 2013) on the lesser of net investment income or the excess of modified adjusted gross income over the threshold amount. Threshold is $250,000 for joint return, $125,000 for married filing separate, and $200,000 for all others.

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Employers

• For large employers (over 100), 2015 will result in reporting requirements in January, 2016. New forms for this include the 1095-C which must be completed for all employees and their dependents. For 2014 this form is optional; it is required in 2015. 2014 is the measurement year. Seasonal employees aren’t counted if they work less than 6 months, but their hours are used in computed whether you are a large employer. – Measurement year – can be from 6-12 months. – Administrative period – can be no longer than 3 months– Stability period – no longer than 12 months.

• For these employers, they must cover 70% of its employees in 2015 and 95% in 2016 to avoid penalty.

• Dependent coverage is not necessary in 2015 if the ER can show they are taking steps for such coverage to begin in 2016.

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Employers (continued)

• For employers from 50-99 full time, the mandate has been extended until 2016 (probably; it actually says until “after 2015”).

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Employer HRA

• HRAs can only be used in conjunction with a group health plan. IRS in Notice 2013-54 said that ACA does apply to HRAs, FSAs, and employer payment plans. No longer can an employer give money to an employee in an HRA and each employee goes out and purchases their own insurance. The HRA must be integrated with a group health plan or it must provide only “excepted benefits”.

• Penalty for plans not complying is $100 per person per day excise tax beginning Jan 1, 2014.

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Employer Requirements

• Withholding of Additional Medicare Tax (began in 2013)– Employer is responsible for withholding the

additional Medicare tax of .9% for income about $250,000 for married and $125,000 for others. Taxable non-cash fringe benefits are subject to the tax.

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Employer Requirements (continued)

• Health Plan Identifier Number (HPID) (Postponed)– No later than November 5, 2014 large health plans

must obtain a health plan ID. Small Plans (less than $5MM in receipts) must do so by November 5, 2015.

– Guidelines say that fully insured health plans who do not report annual receipts to the IRS should use the total premiums paid for health insurance.

– Self insured plans (both funded and unfunded) should use the total of healthcare claims paid by the employer, plan sponsor or benefit fund on behalf of the plan.

• Plans must register at CMS’ website.

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Employer Requirements (continued)

• Transitional Reinsurance Fee– This fee is to establish the reinsurance entity for all

states from which high risk individuals. The HHS is to establish standards for the determination of who a high risk individual is, as well as other items.

– The fee is paid by the insurance company if the employer’s plan is fully insured. It is paid at $63 per covered life for 2014. Note that this includes HRAs that are part of any group insurance plan; the HRA portion will not be done generally by the insurance plan and the employer is responsible.

– This fee is supposed to be temporary and will expire in 2016.

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Employer Requirements (continued)

• Transitional Reinsurance Fee– For self-funded plans, the employer is responsible for funding

the fee. Note there are some clarifications for self funded plans in 2015 for payments when a TPA is involved. In the case the HRAs that are integrated with the self-insured group health plan does not have to be included; note, however that “integrated HRA” is not defined. The calculation for the participants are the same as for the Patience Centered Outcomes Research Institute fee. The enrollment count must be submitted no later than November 15, 2014; first contribution amount for 2014 is due no later than January 15, 2015 ($52.50 per covered life); and the second contribution amount of $10.50 per enrollee is due during the fourth quarter of 2015 (if you make it in installments). Must be paid through pay.gov.

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Employer Requirements (continued)

• Patient Centered Outcomes Research Institute Fee– This fee was paid in 2013 and is calculated based on

covered lives under the plan; for 2014 this fee is $2.08 for policy years between October 1, 2014 and October 1, 2015 and is reported on the Form 720). Data for the calculation must be maintained for 10 years.

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Employer Reporting

• Section 6055 and 6056 Reporting Requirements• Information return• The filing requirement under 6055 will apply to all “persons” who

provide MEC, and for our purposes this is the self-insured plans of plan sponsors. This return reports name, address and TIN number of responsible individual; name and SSN of all individuals covered under the policy, and for each covered individual the months for which at least one day the individual was enrolled in MEC and entitled to receive benefits. If this insurance is provided through a group employer health plan (rather than self insured), the return is filed by the insurance company. It must also include the EIN , name and address of the employer sponsoring the plan; whether it is through the SHOP marketplace; and any other information they may request.

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Employer Reporting (continued)

• This information is reported on the 1095-B. These forms must be filed electronically with the IRS if the entity is required to file at least 250 Forms during the calendar year. Filing for 2014 is voluntary. In 2015 they are required; they will be due in early 2016, and penalties can be assessed from $30 to $100 for each incorrect return; maximum penalty is $1.5MM.

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Employer Reporting (continued)

• To avoid duplicative reporting, the IRS will allow applicable large employers to combine reporting into 1095-C. The 1095-C is prepared based on Section 6056 Reporting requirements, and it requires the information noted above, plus information on waiting periods, monthly premiums for lowest cost option; employer’s share of total costs of benefits; number of full time employees each month.

• While these returns can be contracted to others, the responsibility remains with the plan sponsor or employer.