Health Care Reform: Taxes and Fees Timeline and Key Action Steps

Transcription

1 Health Care Reform: Taxes and Fees Timeline and Key Action Steps April 30, 2013 Presented by: Steve Ashe, Account Manager, CEBS Cheryl Mueller, Account Manager, CEBS The information contained in this presentation is informational only and is not intended as, nor should be construed as, legal or accounting advice. Neither HORAN nor its consultants provide legal, tax nor accounting advice of any kind. We make no legal representation nor do we take legal responsibility of any kind regarding regulatory compliance. Please consult your counsel for a definitive interpretation of current statue and regulation and their impact on you and your organization.

2 PPACA Overview Increase number of Americans with health coverage Inducements for employers to offer coverage and individuals to obtain coverage Expanded Medicaid eligibility Reform Insurance Industry Practices Proper premium calculation Underwriting practices that allow individuals to obtain coverage rather than deny the sick and cover the well Slow Health Care Cost Increases Provider payments based on quality rather than quantity Fund research on appropriate care Penalties for waste, fraud, and abuse 2

3 PPACA Funding Who is Paying for PPACA? Funding comes in the form of Revenue Provisions or Taxes and Fees and Penalties New Revenue Provisions will Impact Everyone Some are already in place Some are new and will take effect in

4 Funding Framework Who and How Employers WHAT: Fines & Penalties $$$ Insurers (ultimately employer) WHAT: Taxes & Fees Individuals WHAT: Taxes & Fees 4

5 Today s Focus Areas Employers WHAT: Fines & Penalties $$$ Insurers (ultimately employer) WHAT: Taxes & Fees Individuals WHAT: Taxes & Fees TODAY s TOPICS 5

6 Impact of 2014 Are you feeling a bit like this? 6

7 Presentation Goals Review new revenue provisions and their impact Discuss strategies to help manage costs Plan for next 6-8 months and develop priorities 7

8 Individual Penalties/Taxes Effecting Your Employees

9 Individual / Employee Taxes and Fines The following provisions require mostly employee education from the employer: Provisions Impacting the Employee: 1. Medicare Tax for Highly Compensated Employees 2. Individual Mandate Tax 9

10 Individual Medicare Tax WHY Designed to Supplement Medicare Part A funding WHO Employees classified as highly compensated with wages in excess of $200,000 or married couples filing jointly in excess of $250,000 WHAT Additional.9% on wages over $200,000 (from 1.45% to 2.35%) WHEN - Tax Effective Date January 1,

11 Individual Medicare Tax Employer Action Items: Verify payroll administrator is prepared to withhold additional tax Change tax from 1.45% to 2.35% after $200,000 in wages Consider communication with those impacted 11

12 Individual PPACA Fine WHY Ensure ALL have health insurance that meets essential coverage requirements WHO All non-exempt U.S. citizens and legal residents (each family member) WHAT - FINE FOR NOT PARTICIPATING 2014: The greater of 1% of taxable income or $ : The greater of 2% of taxable income or $ : The greater of 2.5% of taxable income or $695 (indexed thereafter) HOW - Administration Penalties self-reported on income tax returns (Reported in 2015 for 2014) Penalties are assessed monthly, but paid annually Coverage for one day in a month constitutes coverage for the entire month WHEN - Tax Effective Date January 1,

13 Individual PPACA Fine Employer Action Items: Consider communication of details with employees Fee Assessment and Payment: Penalties are self-reported on individual income tax returns Payable in 2015 when filing 2014 returns Penalties are assessed monthly, but paid annually Coverage for one day in a month constitutes coverage for the entire month 13

14 Revenue Provisions Taxes and Fees Effecting the Employer

15 Taxes and Fees Already in Effect Most group plans have already implemented or taken appropriate action for the following provisions: Provisions Impacting the Employer: 1. Comprehensive Primary Care Initiative Fee (CPCi) 2. Patient Centered Outcomes Research Institute Fee (PCORI) 15

16 Comprehensive Primary Care Initiative Fee WHY Program launched by CMS to help primary care practices deliver higher quality, better coordinated and more patient centered care. WHO All Employers who have members seeing a PCP at one of 75 participating practices in Greater Cincinnati/N. Kentucky/Dayton WHAT - FEE Approximately $4-$5 per member per month HOW - Administration Insured plans built into your premium by insurer Self-funded plans fees included on administrative or claims invoice WHEN - Tax Effective Date Launched in November of

17 CPCi Example Let us introduce I.E. Company Annual medical cost per employee is $10, employees enrolled in medical coverage and are covering 650 members CPCi Fee Calculation Of the 650 members, 106 are utilizing a provider that participates in the Primary Care Initiative. 106 x $4.00 x 12 = $5,088 annually Participants at CPCI providers Rate per participant Annualized Estimated Budget 17

18 Comprehensive Primary Care Initiative Fee Employer Action Items: Determine how many members are utilizing a participating provider Determine the cost your medical carrier is charging per participant or loading the fullyinsured premiums Include in annual health cost budget 18

19 Patient Centered Outcomes Research Fee WHY Funds a government agency that will research, evaluate and compare health outcomes, clinical effectiveness, & risk and benefits of various medical treatments WHO Assessed per covered life and includes employees, spouses, and dependents Plan Years Ending after September 30, 2012 WHAT FEE (expires in 2016) $1 Per Member Per Year the First Year $2 Per Member Per Year the Second Year and indexed thereafter HOW - Administration Insured plans calculated, collected through premium, and paid by insurer Self-funded plans must choose a calculation method, report, and pay WHEN - Tax Effective Date Insurers and Self-funded plans report on tax Form 720 due by July 30 th each year 19

20 PCORI Fee Calculation Methods Calculation methods for self-funded plans Must choose one 1. Actual Count The total number of covered lives on each day of the plan year divided by the number of days in a year 2. Snapshot Method The total number of covered lives on a consistent single day (or days) in each quarter divided by the number of dates on which a count was made a) Snapshot Method allows use of employee count rather than member count. If using employee count, employees enrolled in non-single coverage must be multiplied by Method For employers reporting a Form 5500, the average number of total lives is the addition of the total number of lives at the beginning and end of the plan year 20

21 PCORI Fee Example Back to I.E. Company Annual medical cost per employee is $10, employees enrolled in medical coverage and are covering 650 members Self Funded PCORI Fee Calculation Picked 5500 Counting Methodology = 650 members 650 x $2.00 = $1,300 annually Members per 5500 Counting Fee rate (2 nd year) Estimated Budget 21

22 Patient Centered Outcomes Research Fee Employer Action Items: Determine your calculation method if self-funded. Choose the method that limits your exposure Determine your average membership to get a general idea of the fees you will pay Include in annual health cost budget If self funded, file Tax Form 720 (7/30) 22

23 New Revenue Provisions Taxes and Fees Coming in 2014

24 Taxes and Fees Taking Effect in 2014 TAXES COMING IN The following will affect employers in 2014 and may require action NOW! Impacting the Employer: 3. Transitional Reinsurance Plan fees (TRP) 4. Health Insurance Plan Tax (HIP) 24

25 Transitional Reinsurance Plan Fee WHY Program established to help stabilize premium increases in the individual market due to guaranteed availability WHO Assessed per covered life and includes employees, spouses, and dependents WHAT FEE Estimated at $63 per member per year in the first year funding of $12B Fees are intended to reduce each year based on $ needed-$8b (Year II), $5B (Year III) 25

26 Transitional Reinsurance Plan Fee HOW Administration Insured plans Insurer pays and will be built into premiums Self-funded plans Plan reports and pays though a claims administrator may transfer the contributions on the plan s behalf Member counts are required to be reported to HHS by November 15 th HHS will confirm the total amount (12/15) to be paid no later than January 15 th WHEN - Tax Effective Date Beginning in 2014 and extending through

27 Transitional Reinsurance Plan Fee Example Back to I.E. Company Annual medical cost per employee is $10, employees enrolled in medical coverage and are covering 650 members Self Funded Transitional Reinsurance Plan Fee Calculation Picked 5500 Counting Methodology = 650 members 650 x $63.00 = $40,950 annually Members per 5500 Counting Estimated Fee Year I Estimated Budget 27

28 TRP Fee Cost Illustration $10,250 $10,000 $9,750 $9,500 $9,250 $9,000 $8,750 $8,500 $8,250 $8,000 Current Cost with HCR Fees TRP PCORI CPCi Annual Cost Per EE Please note: Costs are based on average Employee costs, even though several fees are based on membership. 28

29 Transitional Reinsurance Plan Fee Employer Action Items: Determine your calculation method if self-funded. Choose the method that limits your exposure Can choose different method than used for PCORI Determine your average membership to get a general idea of the fees you will pay Include in annual health cost budget If self funded, confirm payment process Direct or through TPA 29

30 Health Insurance Provider Tax WHY Tax levied on insurers with annual net premiums written in excess of $25 million Assessed to insurers based on their proportionate market share WHO Insurance companies - Cost is expected to be passed on through premiums Medical, Dental and Vision WHAT - FEE $8B across the industry in the first year and increased to $14.3B by 2018 Estimated between 1.9% 2.3% in 2014 Estimated between 2.8% - 3.7% in 2018 HOW - Administration Built into fully insured premiums Self-funded plans exempt WHEN - Tax Effective Date Beginning in 2014 and ongoing 30

31 Health Insurance Provider Tax Example Back to I.E. Company Annual medical cost per employee is $10, employees enrolled in medical coverage and are covering 650 members Fully Insured Health Insurer Provider Tax Calculation $10,000 x 2.0% x 275 = $55,000 annually Annual Medical Cost Est. increase on premium # of Employees Estimated Budget 31

32 HIP Cost Illustration $10,500 $10,250 $10,000 $9,750 $9,500 $9,250 $9,000 $8,750 $8,500 $8,250 $8,000 Current Cost with HCR Fees HIP TRP PCORI CPCi Annual Cost Per EE Please note: Costs are based on average Employee costs, even though several fees are based on membership. 32

33 Health Insurance Provider Tax Employer Action Items (Fully Insured Only): Determine the annual cost of your medical plan and apply the expected percentage increase Include in annual health cost budget Evaluate funding alternatives to mitigate or avoid the tax 33

34 One More Tax Coming in 2018

35 Cadillac Tax WHY Revenue provision levied on high cost health insurance plans with aggregate values in excess of $10,200 single and $27,500 non-single coverage WHO Insurance companies and Self-insured health plans WHAT - FEE 40% excise tax applied to aggregate value of health insurance Includes premium or premium equivalents, reimbursements through FSAs and HRAs, and employer contributions to HSAs or MSAs Administrator pays taxes on self-insured plans HOW Administration Insurer pays fees on insured plans Employer pays fees on plans like FSA, HRA, or HSA WHEN - Tax Effective Date Beginning in

36 Still feeling like this? 36

37 Key Happenings and Action Items

38 Timeline of Major Provisions 38

39 Top Priorities for Employers 1. Planning for Pay or Play Impacts 2. Budget Impact of Taxes and Fees Determine Counting Methods if Self-funded 3. Evaluate Self-funding if Fully-Insured 4. Explore Options for Dealing with Increases 39

40 Step #1 Decide to Pay or Play Determine what you want to do for 2014 and the impact to your company and employees If playing ensure your plans are affordable and meet minimum actuarial value Strategize to avoid unnecessary penalties Defined contributions and benefit plans Reduce or increase premiums within the 9.5% affordability threshold 40

41 Step #2 Budget Determine the financial impact of health care reform s taxes and fees on your plan Tax Fee Action Step Fully-insured CPCI Approximately $4-$5 per participating member PCORI $1 pepm; increased to $2 pepm Budget (Included in premiums) Budget (Included in premiums) TRP $63 pepm (expected) Budget (Included in premiums) HIP 1.9% - 2.3% tax Carrier will pass through increase Action Step Self-funded Determine carrier costs and # of participating members Determine calculation method & Budget Determine Calculation method & budget Not applicable 41

42 STEP #2 If Self-funded Choose the Appropriate Counting Method: Choose the method that reflects the least amount of membership for both the PCORI and Transitional Research Fee (if applicable) Actual Count Snapshot Form 5500 Method does not have to be the same method for each fee 42

43 STEP #3 Evaluate Self-funding: WHY? Self funded groups will pay approximately 4-5% less in health care reform fees and state premium taxes than fully-insured groups. 1.9% - 2.3% HIP in % OH State Premium tax Self-funded groups gain more control over their plan design which can limit plan exposure Limiting dependent age to 26 instead of OH law age 28 Ability to implement Spousal Parity 43

44 Saving through Self-funding $10,500 $10,250 $10,000 HIP $9,750 TRP $9,500 $9,250 PCORI $9,000 $8,750 CPCi $8,500 $8,250 $8,000 Current FI Cost with HCR Fees SF Costs with HCR Fees Annual Cost Per EE Please note: Costs are based on average Employee costs, even though several fees are based on membership. 44

45 STEP #4 Consider passing taxes and fees onto employees: Increase employee contributions to offset the cost of the taxes 9.5% affordability provision only pertains to single coverage Include language in your contracts that addresses the pass through of the taxes 45

46 Not to Be Forgotten Employee Communication Plans SBC good faith effort will expire moving into second year New exchange notice upcoming Review of Benefit Designs for Compliance Waiting periods limited to no more than 90 days Removal of pre-existing conditions provisions Cost-sharing limits on out of pocket maximums Removal of annual limits on essential benefits 46

47 How HORAN Can Help

48 How HORAN Can Help Health Care Reform Impact Analysis Action Plan with Key Objectives and Checkpoints Evaluation of Funding and Alternate Benefit Strategies Affordability and Minimum Value Evaluation of Potential Penalties Additional Exposure through Enrollment Complete Timeline with Action Items Custom Next Steps Specific to Clients Evaluation of Self-Funding Review of Defined Contribution Investigation of Exchange Strategy Budget Assistance with Taxes and Fees Counting Method Review Evaluation of Potential Plan Cost Impact 48

49 Disclaimer The information contained in this presentation is informational only and is not intended as, nor should be construed as, legal or accounting advice. Neither HORAN nor its consultants provide legal, tax nor accounting advice of any kind. We make no legal representation nor do we take legal responsibility of any kind regarding regulatory compliance. Please consult your counsel for a definitive interpretation of current statue and regulation and their impact on you and your organization. 49

50 Questions? Contact your HORAN Account Manager or Account Executive