obamacare, ppaca, health care reform: it’s coming, are you ready? april 17, 2013

fosterswift.com

Obamacare, PPACA, Health Care Reform:It’s Coming, are You Ready?

April 17, 2013

Michigan Medical Billers AssociationApril 17, 2013

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2013, Foster Swift Collins & Smith, PC.

PPACA Background

Enactment in 2010 Supreme Court Decision in 2012 Effective Date (generally) is January 1,

2014


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Individual Mandate

If an applicable individual fails to obtain minimum essential coverage beginning in 2014, then a penalty will be imposed, equal to the greater of: $95, or 1% of the excess of the taxpayer's household income

over the taxpayer's filing threshold in 2014. 2015: $325 or 2% 2016: $695 or 2.5%


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Individual Mandate

The Individual Mandate does not apply to: Religious conscience objectors Members of health care-sharing ministries Non-citizens, non-nationals or aliens Incarcerated individuals Certain individuals with low incomes Members of certain Indian tribes Individuals with gaps in coverage of less than 3 months Individuals with hardships


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Individual Mandate

Minimum Essential Coverage is coverage under any of the following: A government-sponsored program An “eligible employer-sponsored plan” A health plan offered in the individual market A grandfathered health plan Other health benefits coverage.


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Individual Mandate

Enforcement of penalty- Shared responsibility payment is reported on

the individual’s federal income tax return. IRS will most likely offset tax refunds in order

to refund the amount due.


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Individual Mandate

Insurance Affordability Programs Starting in 2014, there are premium assistance tax

credits and cost sharing subsidies to offer assistance to those who have difficulty in affording to pay for coverage.

In order to be eligible, the individual’s income must meet fall between 100% - 400% of the federal poverty level.

• $11,500 - $46,000 for an individual• $23,500 - $94,000 for a family of 4


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Individual Mandate

Insurance Affordability Programs An individual will be ineligible for tax credits

or cost-sharing subsidies if he or she is eligible for an employer sponsored plan that is affordable and of minimum value.


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Health Insurance Exchanges

What is an Exchange? An online marketplace for health insurance

Exchanges will be in place by January 1, 2014. Purposes:

Provide individuals and small employers a place to purchase qualified health plans

Enhance competition in the health insurance market Improve choice of affordable health insurance Give small businesses the same purchasing clout as

large businesses


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Types of Exchanges include state-run, federally-facilitated and partnership

Functions: Plan Management (certification of qualified

health plans) Consumer Assistance (eligibility for

enrollment and assistance programs)


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A qualified health plan is an Exchange-certified health plan that offers an “essential health benefits” package.

Essential Health Benefits: Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services Prescription drugs Rehabilitation services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services


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Plans offered by the Exchange require that each plan pay for the specified percentage of costs as follows:

• Bronze: 60 percent • Silver: 70 percent • Gold: 80 percent • Platinum: 90 percent


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Eligibility for Enrollment 2014: All individuals 2014: Small employers 2017: Large employers (101+ employees)

Exchange is not required for employers. If an employer chooses to obtain coverage through an Exchange, it must elect to make all of its full time employees eligible for one or more qualified health plans offered through the Exchange.


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Notice of Exchange

By late summer/early fall of 2013, all employers must provide employees with a notice that informs employees of the Exchange (among other things)

Provide to new hires on date of hire DOL is preparing a template


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Employer Mandate

Starting in 2014, certain large employers may be subject to a penalty tax for: Failing to offer health care minimum essential

coverage to 95% of full time employees and their dependents;

Offering minimum essential coverage that is unaffordable; or

Offering minimum essential coverage where the Plan pays less than 60% of cost.


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Employer Mandate

Large employers are those that employ an average of at least 50 full time equivalents on business days in the preceding calendar year.


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Employer Mandate

Large employers- continued In making this determination, the employer

must include part time employees. Full time employees are those employed on

average at least 30 hours per week (130 hours per month).

Hours of service include certain categories of paid time off.

Controlled group rules apply.


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Employer Mandate

Large Employer calculation:1. Determine number of full-time employees

2. Determine number of full-time equivalents by counting all hours of part time employees and dividing that number by 120

3. Add together the numbers from steps 1 and 2

4. Repeat for remaining 11 months of the year

5. Calculate the total sum over 12 months and divide by 12


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Employer Mandate

Seasonal Worker Exception- An employer is not considered to employ more than 50 full time employees if: Its workforce only exceeds 50 full time employees for 120

days or less during the year, and The employees in excess of 50 employed during the 120 day

period were “seasonal workers.”

Seasonal Workers: those whose employment is of the kind exclusively performed during certain periods of the year and which may not be carried on throughout the year.


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Employer Mandate

Minimum Essential Coverage: coverage under any of the following: A government-sponsored program An “eligible employer-sponsored plan” A health plan offered in the individual market A grandfathered health plan Other health benefits coverage.

Eligible employer-sponsored plan: group health plan that is a governmental plan or any other plan or coverage offered in a state’s small or large group market.


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Employer Mandate

Penalties are triggered when at least 1 full time employee obtains coverage through the Exchange and receives a premium tax credit or cost sharing subsidy.


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Employer Mandate

Penalty- No Coverage Provided The employer will be subject to a $2,000 annual penalty for

each full time employee, regardless of the number of employees who actually trigger the penalty.

However, when calculating this penalty, the large employer is permitted to disregard the first 30 of its full time employees.

*Note: No penalty will be assessed for failure to offer coverage to part time employees.


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Employer Mandate

Example 1: Assume that a large employer has 100 full time employees and does not provide employee health insurance coverage. If at least one full time employee independently obtains health coverage through the Exchange and qualifies for a premium tax credit or cost sharing subsidy, the penalty would be calculated as follows: (100 – 30) x $2,000 = $140,000 penalty per year.


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Employer Mandate

Example 2: Assume that a large employer has 25 full time employees, 200 part time employees, and does not provide employee health insurance coverage. If at least one full time employee independently obtains health coverage through the Exchange and qualifies for a premium tax credit or cost sharing subsidy, the penalty would be calculated as follows: (25 – 30) x $2,000 = $0 penalty.


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Employer Mandate

Penalty- Some Coverage Provided, but coverage is unaffordable or does not provide a minimum value

The large employer will be penalized $3,000 per year for each full time employee who purchases his or her own coverage through the Exchange, if the employee qualifies for a tax credit or cost sharing assistance.

*Note: There is no 30 employee reduction, but there is a cap on the penalty.


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Employer Mandate

Coverage will be considered unaffordable if the employee's required contribution to the health insurance premiums is greater than 9.5% of the employee's household income.

This is based on the lowest cost plan option for single individuals provided by the employer.

Safe harbor allows an employer to use the employee’s W-2 earnings instead of household income.

*Note: This is an employee-by-employee determination that allows for planning opportunities.


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Employer Mandate

Coverage will be deemed not to provide a minimum value if it does not cover at least 60% of medical costs.

Minimum value is determined by 3 potential approaches: Minimum value calculator Design-based safe harbor checklists Actuarial certification


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Employer Mandate

Example 3: Assume that a large employer with low value health coverage has 100 full time employees. If 3 of those full time employees purchase their own health coverage through the Exchange and qualify for a premium tax credit or cost sharing subsidy, the employer would be penalized $3,000 x 3, or $9,000.

Note: If the same employer did not offer any coverage, the penalty would be $140,000 (see Example 1).


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Employer Mandate

Measurement and Stability Period safe harbor methods assist employers in determining the number of full time employees. Allow employers to avoid complicated month-to-month

determinations Are especially helpful for employers with seasonal

workers, variable workweeks or high employee turnover


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Measurement and Stability Period Safe Harbor

Basic Concept: Employers identify full-time employees by calculating hours during a specified period of time (measurement period) and then locking in that status for a separate period of time (stability period).

Administrative period also allowed


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Measurement and Stability Periods

When should this safe harbor be considered? If the employer’s full time employee number

approaches 50. If the employer employs variable hour

employees who may be full-time one month and part-time the next month


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Transitional Rule for 2014

Allows for a shortened measurement period

Consider taking advantage of this rule and start tracking hours now!


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Small Business Tax Credit

Small employers are eligible for a tax credit if they cover the cost of 50% of single health care coverage for each employee.

A small employer: Has no more than 25 full time equivalents for

the tax year, and Pays average annual wages to employees that

do not exceed $50,000.


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Small Business Tax Credit

The amount of the credit is based on a sliding scale calculation. 2013- Maximum credit is 35% 2014- Maximum credit may be 50%

The amount paid in excess of the credit can be deducted as a business expense.

The credit can be carried back or forward to other tax years.


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Fees

Patient Centered Outcomes Research Institute (PCORI): $1-$2 per covered life

Transitional Reinsurance: $63 per participant


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Summary of Benefits and Coverage Document

Department of Labor template: www.dol.gov/ebsa/healthreform/

Distribute to participants no later than the first day of the first open enrollment period that takes place on or after September 23, 2012.

Anti-duplication rule: If you have an insured plan, the insurance company should do this work for you.


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Waiting Periods

Effective January 1, 2014, employers cannot require a waiting period in excess of 90 days before health coverage becomes effective.

* Note: You may need to update your Employee Handbook or Plan documents to incorporate this requirement.


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Limitation on Health Flexible Spending Accounts

Effective for Plan Years beginning after December 31, 2012, the limit on annual salary reduction contributions to health flexible spending accounts offered under cafeteria plans is $2,500.

* Note: You may need to update your Plan to reflect this new limit.


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Automatic Enrollment

Certain large employers with more than 200 full-time employees must automatically enroll employees in a health benefit plan.

Must provide notice and opportunity to opt-out.

Enforcement date is not yet established.


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Form W-2

Certain employers must begin including the aggregate cost of employer-sponsored health coverage on employees’ W-2s. Employers that issued fewer than 250 Form W-

2s in the preceding calendar year are currently exempt from this reporting requirement.

This is for informational purposes only and will not make the benefits taxable to employees.

Effective: 2012 tax year (or, by January 31, 2013).


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Nondiscrimination Rules for Fully-Insured Plans

Fully-insured plans must comply with non-discrimination rules related to eligibility and benefits that are similar to those non-discrimination rules currently effective for self-insured plans.

This requirement will not become effective until some time after regulations are issued to assist with compliance.


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Action Items for 2013

Meet with advisors Review current Plans Evaluate budgets Make educated decisions concerning

benefits Track hours and count employees Stay informed about changing rules


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Contact:

Mindi M. Johnson

Foster Swift Collins & Smith, PC

1700 E. Beltline NE, Suite 200

Grand Rapids, MI 49525

(616) 726-2252

Email: [email protected]

obamacare, ppaca, health care reform: it’s coming, are you ready? april 17, 2013

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