ELECTION UPDATE AFFORDABLE CARE ACT 11/18/2014 WS+B CLIENT CPE

Transcription

1 AFFORDABLE CARE ACT Anthony Panico, CPA Partner, Healthcare Services Group Team Leader, Healthcare Reform Advisory Team ELECTION UPDATE 1

2 AFFORDABLE CARE ACT Timeline 2010 Early retiree reinsurance program Temporary high-risk health insurance pool Extension of dependent coverage to age 26 No lifetime limits Free preventive care No pre-existing condition exclusion for those under age 19 No rescissions Small business health insurance tax credits Grandfathered plan status Emergency care w/o referral or out-ofnetwork penalty 2012 Cap on certain insurers' tax deductions for compensation Mandatory Form W-2 reporting SBC disclosures MLR rebates Preventive health services for women Patient-Centered Outcomes Research Fee 2014 Medicaid expansion Auto enrollment No pre-existing condition exclusion for all Transitional reinsurance fee Nondiscrimination requirements Premium tax credits (subsidies) Employer Pay or Play and reporting requirements (delayed to 2015) Individual mandate Exchanges begin No annual limits 90-day maximum waiting period Small business tax credit (second phase) HSA, FSA and HRA restriction on OTC drugs Increase to 20% penalty for HSA non-qualified distributions Bringing down healthcare premiums Addressing overpayments to big insurance companies SIMPLE cafeteria plans L-T care insurance (CLASS) FSA contribution limits Administrative simplification Elimination of deduction for Medicare Part D drug subsidy Medical expense deduction floor increases to 10%.9% additional Medicare tax 3.8% net investment income tax Employer provided health insurance exchange notice Employee notice on exchange options State may permit large employers to purchase through exchange Cadillac tax Agenda Revenue Generators Employer Shared Responsibility Employer Reporting Premium Tax Credit Marketplaces New Forms!!! 2

3 REVENUE GENERATORS Additional Medicare Tax Levied on earned income (wages and selfemployment income) in excess of: $250,000 for MFJ $200,000 for single $125,000 for MFS Example: A, a single taxpayer, earns wages of $300,000 in 2013 On $100,000 of wages, A will pay an extra 0.9% Medicare tax, or $ Frequently Asked Questions 3

4 Net Investment Income Tax Starting in 2013, high-income individuals will pay an extra 3.8% tax on the lesser of: Net investment income, or Modified adjusted gross income the applicable threshold: $250,000 for MFJ $200,000 for single $125,000 for MFS Medical Device Excise Tax 2.3% excise tax imposed on sales of all taxable medical devices Imposed on manufacturers, producers or importers Defined in Section 201(h) of Federal Food, Drug and Cosmetic Act Retail Exception Tax passed down 4

5 Medical Device Excise Tax Offshore jobs, research and innovation. AdvaMed repeal is a top priority in AdvaMed report - polled AdvaMed member organizations. MDET has led to reduction of 14,000 industry workers and foregoing hiring of 19, % have reduced research and development. Approximately 10% have relocated manufacturing outside U.S. or expanded manufacturing abroad. Medical Device Excise Tax PLR Chemance Medical Products v. Medline Industries, Inc. PLR Tax not imposed on leased medical devices up from; ratably over lease payments. 5

6 Patient-Centered Outcomes Research Fee Issuers of specified health insurance policies and plan sponsors of selfinsured health plans. Plan years ending after 9/30/2012 and before 10/1/2019, initial fees due 7/31/2013. Year #1 - $1 per average # of covered lives. Year #2 and #3 - $2 per average # of covered lives. Reportable on Q2 Form 720. Patient-Centered Outcomes Research Fee IRS Notice For policy/plan years ending on or after 10/1/2014 and before 9/30/2015. Fee is $2.08 per covered life. 6

7 Patient-Centered Outcomes Research Fee PCORI seeks to fund sensible/realistic clinical trials, large simple trials or large scale observational studies Winter 2015 Cycle. Letters of intent were due by 10/1/2014. Those selected were notified by 10/31/2014 for full application. Transitional Reinsurance Fee Funds reinsurance program for high-cost claimants in the nongrandfathered individual market. Impacts both fully insured and self-funded plans. Temporary fee collected annually from 2014 to $5.25 per covered life per month ($63 for 2014). 7

8 Transitional Reinsurance Fee # of covered lives submitted to DHHS by November 15, 2014; DHHS will issue amount to be paid by December 15, Delay to report to December 5, Initial payment due January 15, Fee is $12 billion in 2014, $8 billion in 2015 and $5 billion in Transitional Reinsurance Fee HHS proposed changes: Exclusion from fee for 2015 and 2016 for self-insured and selfadministered plans that do not utilize a third party administrator. Fee will be collected in two installments; first ($52.50) to fund the transitional reinsurance program and the second ($10.50) to reimburse U.S. Treasury. Second portion due in 4 th quarter of following year. Change in definition or major medical coverage. 8

9 Health Insurance Providers Fee Covered entities - net premiums written after December 31, $8 billion for 2014; $11.3 billion for 2015 and 2016; $13.9 billion for 2017 and $14.3 billion for 2018; indexed for inflation 2019 and later. Threshold - $25 million in the calendar year immediately preceding the year. Calculation and payment. Penalty for failure to report. Health Insurance Providers Fee Form 8963 filed by 4/15/2014. Letter with amount due sent by IRS on or about 8/28/2014. Payment was due by 9/30/2014. Insurance premiums determined by all Forms 8963 filed in 2014: $543,550,487,

10 Compensation Deduction Limit Internal Revenue Code 162(m). Effective for taxable years beginning after 12/31/2012. Prohibits a deduction for compensation in excess of $1 million paid to CEO or top four other highest compensated officers of a public corporation. Institute for Policy Studies $72M additional tax revenue. Excise Tax On High-Cost Health Plans Cadillac Tax Effective for tax years beginning after December 31, % excise tax on insurers if aggregate value of employer sponsored health insurance coverage > threshold amount $10,200 individual/$27,500 family. 10

11 Excise Tax On High-Cost Health Plans Since post-2018 threshold adjustments are not tied to medical inflation, almost all employers will eventually become subject to this excise tax which will raise their cost of providing health coverage. Example 10,000 covered lives. Patient-Centered Outcomes Research Fee - $20,000 Transitional Reinsurance Fee - $630,000 Total - $650,000 11

12 IRS Fact Sheet Key ACA provisions affecting individuals. Individual shared responsibility. Premium tax credit. Coverage exemptions. IRS Fact Sheet Key ACA provisions affecting employers. Employer shared responsibility. Determining workforce size. Employer reporting under IRC 6055 and

13 EMPLOYER SHARED RESPONSIBILITY Employer Shared Responsibility PREMIUM IN EXCESS OF 9.5% OF HOUSEHOLD INCOME If the employee share of the premium is in excess of 9.5% of their household income, coverage is not affordable. If health plan doesn t cover at least 60% of total allowed costs of benefits provided under the plan, it is not providing minimum value. 13

14 Employer Shared Responsibility Large and mid-sized employers that DO NOT offer coverage to at least 70% of full-time employees must: pay a penalty if any full-time employee receives premium assistance through a marketplace. Penalty is equal to: $2,000 x Total Full-Time Employees in excess of 30 Employer Shared Responsibility Large and mid-sized employers that DO offer coverage to at least 70% of full-time employees that: IS NOT affordable or DOES NOT meet minimum value requirements must pay a penalty. Penalty is equal to: lesser of $3,000 for each full-time employee receiving premium assistance or cost sharing reduction through a marketplace or $2,000 per full-time employee in excess of

15 Employer Shared Responsibility Full-time employee Averages, for a calendar month, at least 30 hours of service per week or has worked at least 130 hours of service during the month. Full-time equivalent Total number of hours of service for all non full-time employees for the month divided by 120. Employer Penalties For those with 50+ Full-Time Do you offer coverage? Yes No $2,000 per FT (minus first 30) Does the plan provide minimum value? Plan pays 60% of claims Yes Is the coverage affordable? No No $3,000 per FT Receiving tax credit/subsidy $3,000 per FT Receiving tax credit/subsidy Yes No Penalty Employer Safe Harbor Coverage would be considered affordable if the premium contribution for single coverage does not exceed 9.5% of an employee s W-2, box 1 wages. 15

16 Employer Shared Responsibility CONTROLLED GROUPS Large employer status is determined on basis of entire controlled group Penalties are determined on a separate basis Only one 30 employee exclusion allowed per controlled group EMPLOYER REPORTING 16

17 6055 AND 6056 Reporting Forms 1094-B and 1095-B. Forms 1094-C and 1095-C. DRAFT forms first released by IRS 7/24/2014. DRAFT instructions released by IRS 8/28/2014. Information return with IRS and furnish statement to individuals. Electronic filing requirement. IRS FAQs Four Categories: Basics of Provider Reporting (Q s 1-4). Who is Required to Report (Q s 5-15). What Information Must Providers Report (Q s 16-19). How and When to Report the Required Information (Q s 20-19). 17

18 Purposes of Reporting Forms 1094-C and 1095-C: For applicable large employers ( ALE ) to report offers of health coverage. Assist IRS in administering 4980H. Assist IRS in determining eligibility for premium tax credit. Purposes of Reporting Forms 1094-B and 1095-B: To assist IRS in administering the individual shared responsibility. 18

19 Due Dates Furnish to employees by January 31 st. Filed with IRS by February 28 th if filing on paper; March 31 st if filing electronically. CALENDAR YEAR February 1 st, February 29 th and March 31 st ; respectively. Penalties Failure to File Correct Information Returns or Failure to Furnish Correct Payee Statements: Internal Revenue Code 6721 and $100 per return; max $1,500,000. Corrections within 30 days - penalty is $30; max $250,000. Corrections on or before August 1 st penalty is $60; max $500,000. If meet gross receipts test, penalty maximums are reduced to $500,000; $75,000 and $200,000; respectively. 19

20 Look-Back Measurement Periods Ongoing Employees (employed for at least one full Standard Measurement Period): Standard Measurement Period (SMP) Admin Period Standard Stability Period 3-12 months up to 90 days Newly Hired Part-time/Variable Hour/Seasonal Employees (hired during a Standard Measurement Period): Generally equals SMP (must be at least 6 months) Initial Measurement Period (IMP) Admin Period Initial Stability Period 3-12 months up to 90 days Must equal standard stability period Must be < 13 months + fraction (from start date, including any portion of Admin Period used prior to start of IMP) Information Reporting Obligations Employer Size Filing Scenario Forms (or Parts of Forms) To Be Filed Reporting Entity ALE Each employee who is full-time for any month during 1095-C, Parts I & II (informational to Employer (6056 reporting) calendar year, whether or not offered coverage under employee and IRS) the employer-sponsored plan 1094-C (transmittal to IRS) Filing Deadlines* To employee: January 31 st To IRS: February 28th (March 31 st if filing electronically) ALE (6055 reporting) Each individual (full-time or not, family member, others) enrolled in self-insured plan 1095-C, Parts I, II & III (informational to employee and IRS) 1094-C (transmittal to IRS) Employer To employee: January 31 st To IRS: February 28 th (March 31 st if filing electronically) ALE (6055 reporting) Each individual (full-time or not, family members, others) enrolled in insured plan 1095-B, Parts I, II, III & IV (informational to employee and IRS) 1094-B (transmittal to IRS) Generally carrier or HMO To employee: January 31 st To IRS: February 28 th (March 31 st if filing electronically) Non-ALE (6055 reporting) Each responsible individual enrolled in self-insured plan 1095-B, Parts I, III & IV (informational to employee and IRS) 1094-B (transmittal to IRS) Employer To employee: January 31 st To IRS: February 28 th (March 31 st if filing electronically) Non-ALE (6055 reporting) Each responsible individual enrolled in insured plan 1095-B, Parts I, II, III & IV (informational to employee and IRS) 1094-B (transmittal to IRS) Generally carrier or HMO To employee: January 31 st To IRS: February 28 th (March 31 st if filing electronically) * Specific filing deadlines may be delayed if they fall on a Saturday, Sunday, or legal holiday. This will be the case with respect to the filings due in early 2016 for the 2015 calendar year. 20

21 PREMIUM TAX CREDIT Premium Tax Credit Potentially eligible with household income between 100% and 400% of FPL. Receiving a credit on state v. federal exchange. IRC 36B(c)(2) enrollment through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act. Only 14 states and Washington, DC have established their own state run exchanges. 21

22 Premium Tax Credit Legislative Activity (Federal v. State exchange applicability): Halbig v. Burwell (Court of Appeals for DC Circuit Court). King v. Burwell (4 th Circuit Court). Result could be state-by-state decision. Premium Tax Credit IRS can recoup up to $2,500 of overpaid PTCs through its established methods of debt collection. Draft Form 1040 released. Use Form 1095-A received from exchange to calculate appropriate PTC. Advanced PTC and Form

23 Premium Tax Credit Draft Form 8962, Premium Tax Credit (PTC) released July 24, 2014; instructions released September 18 th. Used to figure amount of PTC and reconcile it with and advanced payments of PTC paid. Filed by individuals if: You are taking the PTC, An advanced PTC was paid to you or any member of your tax family, or An advanced PTC was paid for an individual for whom you told the Exchange you would claim a personal exemption (if no one else claims that individual as a personal exemption). MARKETPLACES 23

24 Marketplaces Open enrollment to begin Kaiser Family Foundation Analysis of 2015 Premium Changes in ACA Marketplaces. Early evidence shows competition is working. Premiums in major cities. 2 nd Lowest Cost Silver Plan (B/F Credit) Newark, NJ (1.9%) New York City 1.8% Philadelphia, PA (10.7%) 24

25 2 nd Lowest Cost Silver Plan (After Credit) Newark, NJ (.8%) New York City (.8%) Philadelphia, PA (.8%) NEW TAX FORMS 25

26 Form 8962 Premium Tax Credit (PTC). To reconcile premium tax credit received with actual household income. Form 8965 Health Coverage Exemptions. To claim exemption for not having minimum essential health coverage. 26

27 Form 1095-A Health Insurance marketplace Statement. To explain coverage held in marketplace. Questions 27

28 THANK YOU! Anthony J. Panico, CPA WithumSmith+Brown, PC Partner, Healthcare Services Group Team Leader, Healthcare Reform Advisory Team (973)