how to successfully navigate the latest changes to the affordable care act

HOW TO SUCCESSFULLY

NAVIGATE THE LATEST

CHANGES TO THE AFFORDABLE

CARE ACT May 25, 2016

Michael D. Thomas, J.D.

Manager, Product Development, National Underwriter Company/ALM

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Agenda

• Employer Mandate Penalties

• Reporting Requirements

• Small Business Health Options (SHOP) Changes

• Cadillac Tax Delay

• Delay of Menu Labeling Rule

• Other Affordable Care Act Changes

• Changes to IRS Forms

• Statistics

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Changes to the Employer Mandate

FULL IMPLEMENTATION OF THE EMPLOYER MANDATE

• EMPLOYER MANDATE – SECTION 4980H – “PLAY OR PAY”• The Affordable Care Act does not mandate that employers provide

healthcare – BUT – if they do not, they may be subject to monetary

penalties

• DEFINITIONS• Full-Time Employee: An employee who works an average of 30 hour per

week or 130 hours per calendar month.

• Full-Time Equivalent (FTE) Employee: “combination of employees, each of

whom individually is not a full-time employee, but who, in combination, are

equivalent to a full-time employee."

• calculated by combining the number of hours of service of all non-full-time

employees for the month (not including more than 120 hours for each

employee), and dividing the total by 120.

• BACKGROUND OF THE EMPLOYER MANDATE• Initially was to be implemented in 2014

• IRS delayed implementation to 2015 for employers with 100 or more

employees/FTEs

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FULL IMPLEMENTATION OF THE EMPLOYER MANDATE

• CHANGES TO THE EMPLOYER MANDATE• 2015 Requirements

• Businesses with 100 or more Full Time Employees had to offer at

least 70% of full time employees insurance to avoid penalties

• 2016 Changes

• Businesses with at least 50 Full Time Employees must offer at least

95% of full time employees insurance to avoid penalties.

• Businesses will also have to pay a penalty if a full-time employee receives a tax

credit or subsidy through the ACA Marketplace because employer provided

coverage was UNAFFORDABLE or did not meet MINIMUM VALUE

• DEFINITIONS• AFFORDABLE – CHANGE IN SAFE HARBOR PERCENTAGE

• 2015: if a health care plan costs no more than 9.5 percent of an employee’s

total household income, it’s an affordable plan.

• 2016 – raised to 9.66%

• Employer can use Form W-2 wages, an employee’s rate of pay, or the federal

poverty line as safe harbors to calculate affordability

• MINIMUM VALUE• An employer-sponsored plan provides minimum value if it covers at least 60

percent of the total allowed cost of benefits that are expected to be incurred

under the plan

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EMPLOYER MANDATE PENALTIES

• SECTION 4980H(a) “Minimum Essential Coverage”

• 2015 Penalty is $2,080 x number of FTEs in excess of 80 employees

• 2016 Penalty is $2,160 x number of FTEs in excess of 30 employees• Penalty is indexed annually for inflation

• SECTION 4980H(b) “Minimum Value” and “Affordable” Coverage• If any full time employee receives a premium tax credit to purchase insurance

on exchanges because • the employer health coverage offered did not provide "minimum value" (the plan's

share of the total allowed costs of benefits provided under the plan is not at least 60%

of those costs)

• the employer health coverage offered was "unaffordable"; or

• the employee was not among the 95% (70% in 2015) of full-time employees offered

coverage.

• The penalty under 4980H(b) is the lesser of• what the "A" penalty would have been had it been levied $2,080 in 2015/ $2,160 in

2016 multiplied by the number of each full-time employee in excess of 30 (80 in

2015)) or

• $3,120 in 2015 and $3,240 in 2016 per full-time employee who procures coverage

from a health insurance exchange who receives a premium tax credit to enable him or

her to purchase coverage through the health insurance exchanges.

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Reporting Requirements

NEW REPORTING REQUIREMENTS FOR THE ACA

• The ACA requires employers and/or health insurance issuers to report to the IRS

information about employer-sponsored health coverage.

• Reporting requirements were delayed from 2014 until the 2015 tax year to coincide with the

delay in the employer play-or-pay mandate.

• IRS has offered some relief for the 2015 reporting forms, due in 2016. • Penalties will not be imposed on a filer for reporting incorrect or incomplete information if the filer

can show that it made good-faith efforts to comply with the information reporting requirements for

2015.

• IRS Notice 2016-4 issued on December 28, 2015, announced an extension for 2015

information reporting.

• The notice extends the due date • for furnishing to individuals the 2015 Form 1095-B, Health Coverage, and the 2015 Form

1095-C, Employer-Provided Health Insurance Offer and Coverage, from February 1, 2016, to

March 31, 2016, and

• for filing with the IRS the 2015 Form 1094-B, Transmittal of Health Coverage Information

Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of

Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from February 29,

2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016,

if filing electronically.

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Reporting Requirements

NEW REPORTING REQUIREMENTS FOR THE ACA

• WHO NEEDS TO REPORT?

Small Company 1-49 FTEs ALE - Large Employer > 49 FTEs

Form Self-Insured Fully Insured Self-Insured Fully Insured

1094-B Employer Insurance Carrier Not Applicable Insurance Carrier

1095-B Employer Insurance Carrier Not Applicable Insurance Carrier

1094-C Not Applicable Not Applicable Employer Employer ( not Part III)

1095-C Not Applicable Not Applicable Employer Employer

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Reporting Requirements – Penalties

IRS PENALTIES FOR FAILING TO MEET APPLICABLE LARGE EMPLOYER

REPORTING REQUIREMENTS

• The penalty for failure to file an information return generally is $100 for each return for

which such failure occurs. The total penalty imposed for all failures during a calendar

year cannot exceed $1,500,000.

• For returns required to be filed after December 31, 2015, the penalty for failure to file

an information return generally is increased from $100 to $250 for each return for

which such failure occurs. The total penalty imposed for all failures during a calendar

year after December 15, 2015 cannot exceed $3,000,000.

• The penalty for failure to provide a correct payee statement is $100 for each

statement with respect to which such failure occurs, with the total penalty for a

calendar year not to exceed $1,500,000.

• The penalty for failure to provide a correct payee statement is increased from $100 to

$250 for each statement for which the failure occurs, with the total penalty for a

calendar year not to exceed $3,000,000. The increased penalty amount applies to

statements required to be provided after December 31, 2015.

• Special rules apply that increase the per-statement and total penalties if there is

intentional disregard of the requirement to furnish a payee statement.

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CHANGES TO SHOP

SMALL BUSINESS HEALTH OPTIONS PROGRAM – SHOP

• Starting November 2015: Businesses with 51 to 100 employees can use SHOP to

purchase health care plans for employees (Prior to November 2015 SHOP was only

open to businesses with 50 or fewer FTE)

• SMALL EMPLOYER HEALTH TAX CREDIT: Small employers that provide at least 50

percent of full-time employee’s premium costs – AND – have fewer than 25 full-time

equivalent employees with average annual wages of less than $50,000 may be

eligible for the Small Business Health Care Tax Credit• With some exceptions, the plan must have been purchased through the SHOP

• Maximum Credit. The maximum credit is 50 percent of premiums paid by small business

employers. The maximum credit is 35 percent of premiums paid by small tax-exempt

employers, such as charities.

• Number of Employees. The small business must have fewer than 25 full-time employees,

or a combination of full-time and part-time employees.

• Average Annual Wages. For 2015, the average annual wages of the employees must have

been less than $52,000.

• Paying for Half the Premiums. The small business must have paid a uniform percentage,

at least 50%, of the cost of premiums for all enrolled employees.

• Qualified Health Plan. Generally, the business must have purchased a qualified health

plan from the SHOP

• Two Year Limit. As of 2014, an eligible employer may claim the credit only for two

consecutive taxable years.

• Form 8941 Credit for Small Employer Health Insurance Premiums - Calculates credit

• March 2016: GAO – only 181,000 took advantage in 2014 – fewer than the upward of 4

million expected

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CADILLAC TAX DELAY

CADILLAC TAX DELAY UNTIL 2020

• “Cadillac Tax” is a 40% Excise Tax on the cost of health coverage that exceeds pre-

determined threshold amounts and is imposed on coverage providers high-premium health

insurance plans

• Cost of health coverage includes total cost by both employer and employee

• Plans costing more than $10,200 for individual

• Plans costing more than $27,500 for family coverage

• This tax is calculated on a monthly and per-person basis, where any plan above $850 per

month for single coverage and $2,292 per month for family coverage is subject to it.

• Potentially 75% of employee health plans could subject to the tax by 2029.

• Delayed (again) by 2016 Consolidated Appropriations Act

• Originally scheduled to implement in 2013

• Implementation delayed until 2018

• Now Delayed until January 1, 2020

• Also makes payment of Cadillac Tax to be tax-deductible

• Questionable whether it will be implemented at all

• Popular to repeal, but was intended to fund part of ACA

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Delay of Menu Labeling Rule

MENU LABELING REQUIREMENTS

• Section 4205 of the Affordable Care Act details menu labeling requirements

• This ACA provision and the Final rule requires calorie and other nutrition information for

standard menu items, including food on display and self-service food.

• The FDA announced that enforcement of the final rule will begin on May 5, 2017, one year

after the date of publication of this final guidance notice in the Federal Register (81 FR

27067, May 5, 2016).

• Restaurants were initially exempt but section 4205 of the Affordable Care Act removed this

exemption for restaurants, retail food establishments, and vending machine chains with 20

or more locations. • The ACA modified the FDC Act’s exemptions and required these establishments to disclose in a

clear and conspicuous manner, for each standard menu item on menus and menu boards, the

calories for the items prepared and the suggested daily caloric intake specified by HHS.

• The ACA required restaurant and retail establishments offering food for sale in salad bars, buffet

lines, cafeteria lines, other self-service facilities, self-service beverage lines, and displays visible to

customers, to place signs adjacent to each food offering noting calories per displayed item or

serving. In addition the menu must specify nutrition information of food items available in written

form on the premises.

• On December 18, 2015, the Consolidated Appropriations Act, 2016 delayed enforcement of

the menu label final rule until the later of December 1, 2016, or the date that is one year

after the date on which the FDA publishes a final guidance on the subject

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OTHER AFFORDABLE CARE ACT CHANGES

REPEAL OF AUTOMATIC ENROLLMENT• Implemented by the Bipartisan Budget Act of 2015 – enacted on November 2, 2015

• Contains repeal of the ACA automatic healthcare enrollment requirement

• Automatic enrollment required:• Employers with more than 200 full time employees to automatically enroll employees in health

coverage unless employee opted out

• Repeal estimated to raise $8 Billion in revenue because fewer employees will enroll in

employer health plans• Higher taxable wages

• This provision was in doubt because of• Confusion in interpretation of the statutory language

• Likely to be administrative burden for employers

MEDICIAL DEVICE TAX MORATORIUM• Moratorium imposed by the PATH Act – Protection of Americans from Tax Hikes Act

• Initially applied a 2.3% tax to devices sold after the end of 2012, is now under a two-year

moratorium. • Moratorium effective 2016 and 2017

• The tax is now slated to take effect on devices sold on or after January 1, 2018, but will be under

further analysis and review during this suspension period.

HEALTH INSURANCE TAX MORATORIUM• Moratorium imposed by the Consolidated Appropriations Act – for 2017, on the collection of

the annual health insurance provider fee which has been in effect since 2013

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REQUIRED DEPENDENT COVERAGE• Beginning in 2016 dependent coverage must be offered in addition to employees

MAXIMUM OUT-OF-POCKET EXPENSES• 2016 ANNUAL IN-NETWORK, OUT OF POCKET MAXIMUM COST INCREASES

• Deductibles, co-pays, coinsurance

• $6,850 for individual / $13,700 for family coverage

• Maximum out of pocket coverage for any individual with family coverage is $6,850

INDIVIDUAL TAX PENALTIES• If an individual goes without minimum essential coverage for more than a single period of

up to three months in a year, they may owe the Shared Responsibility payment.

• The penalty increases annually. In 2016 it will be the higher of these amounts:• 2.5 % of annual household income above the tax filing threshold to a cap of the

national average bronze plan premium

• $695/adult and $347.50/child under 18 to a maximum penalty of $2,085 per family

• Those exempt from having qualified health coverage will need to apply for exemption.

PREMIUM RATE CHANGES FOR 2016• Kaiser Family Foundation analysis of silver plans in major cities in 13 states showed the

following average rate increases from 2015 to 2016:• 4.1 percent –the second lowest cost silver plan before tax credits

• 1.9 percent – the second lowest cost silver after tax credits

• 5.1 percent – the lowest-cost silver plan before tax credits

• 2.9 percent – the lowest-cost silver plan after tax credits

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EXPANDED HARDSHIP WAIVER • The hardship waiver – which exempts people from the individual mandate and allows some

people who have had their plans canceled to purchase catastrophic health insurance and

extended this waiver until October 1, 2016.

RISK CORRIDOR PROGRAM CHANGE (Section 1342)• The risk corridors were intended to help some insurance companies if they ended up with

too many new sick people on their rolls and too little cash from premiums to cover their

medical bills in the first three years under the health law.

• The Consolidated and Further Continuing Appropriations Act of 2015 provides that CMS

may not transfer funds from other accounts to pay for the risk corridor program.

Expenditures cannot exceed the funds collected in 2014, blocking CMS from making multi-

year calculations.

• This budget-neutrality provision for the risk corridor program was extended to payments for

2015 in the Consolidate Appropriations Act for 2016.

DEFUNDING OF IPAB (Sections 3403 and 10320)• The Consolidated Appropriations Act for 2016 cuts funding for the Independent

Payment Advisory Board for 2016 by $15 million

• The IPAB is a 15-member board appointed by the president and charged with

enforcing the Medicare spending targets.

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Changes to IRS Forms

CHANGED TAX FORMS

• Several Changes to Taxpayer Filing Requirements

• Law requires everyone be covered by ACA-accepted health

care or face tax penalty

• Several forms come into play

• Forms 1040, 1040A, 1040EZ

• Form 1095-A Health Insurance Marketplace Statement

• Form 1095-B Health Coverage

• Form 1095-C Employer Provided Health Insurance

Offer and Coverage

• Form 8962 Premium Tax Credit

• Form 8965 Health Insurance Exemptions (anyone who

didn’t maintain coverage throughout the entire year)

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Changes to IRS Forms

CHANGED TAX FORMS

Beginning with the 2016 filing season

• Form 1095-A is issued to Exchange policy purchasers (Health Insurance Marketplace

Statement)

• Form 1095-B is issued by health care insurance issuers or some smaller companies that

provide coverage for their workers. It confirms that you, your spouse (if you file a joint

return) and your dependents had at least minimum qualifying health insurance coverage for

some or all months of the prior tax year.

• Form 1095-C is issued by large employers to their employees, notifying the workers that

they, their spouses (if filing jointly) and dependents had minimum essential coverage for all

or part of the prior tax year.

• Both the B and C versions of the 1095 provide verification of coverage that helps the

covered individuals, and their families, avoid paying the tax penalty, known as the shared

responsibility payment, for not having coverage.

Minimum Essential Coverage – ACA required health care – for entire tax year for yourself, your

spouse, and dependents – indicate “full year coverage” on the appropriate line:

• Form 1040: Line 61

• Form 1040A: Line 38

• Form 1040EZ: Line 11

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Interesting Statistics

Insured Rates• 20 million people have gained health insurance according to the Obama administration figures.

• According to a 2015 study by the U.S. Census Bureau, the uninsured rate has dropped to 9.2%

Medicaid• Under the ACA, states have the option of expanding Medicaid to households that make up to 138 percent of

the federal poverty line.

• As of January 2016, 32 states, including the District of Columbia, have elected to expand Medicaid, while 19

states have opted against expansion.

• Over than 71 million people are enrolled in Medicaid and the Children’s Health Insurance Program (CHIP)

Subsidies• Approximately 87 percent of people enrolled in the Marketplace receive a premium tax subsidy.

• Subsidies average $272 per month.

• According to the IRS, 2.7 million taxpayers reported approximately $9 billion in subsidies

Tax Penalties• About 7.5 million Americans paid a penalty for not having health insurance in 2014—the first year in which

most Americans were mandated to have coverage under the ACA.

• The average penalty paid among these individuals was $200 per person, and the IRS collected about $1.5

billion from these fines in 2015.

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