Health Care Reform for Dental Practices

Transcription

1 2013 CliftonLarsonAllen LLP Health Care Reform for Dental Practices cliftonlarsonallen.com Nicole O. Fallon Health Care Consultant Manager Sept. 27, 2013

2 Circular 230 To ensure compliance imposed by IRS Circular 230, any U. S. federal tax advice contained in this presentation is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed by governmental tax authorities. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

3 Housekeeping If you are experiencing technical difficulties, please dial: The PowerPoint presentation, as well as the webinar recording, will be sent to you within the next 10 business days. Please complete our online survey following the webinar.

4 About CliftonLarsonAllen A national CPA and consulting firm Service areas include audit, tax, consulting, and outsourcing 3,600 people Offices coast to coast 4800 health care clients

5 Speaker Introductions Nicole Fallon Health Care Consultant Manager with CLA Specializes in the 2010 Patient Protection and Affordable Care Act, including its impacts on providers, payors, and employers More than 20 years of extensive and diverse health care policy experience Terry O Reilly Partner in CLA s health care group Over 26 years of experience in tax and accounting Responsible for tax research, planning and compliance for all types of entities, including a focus in working with health care and nonprofit entities, including an emphasis with dental clients

6 Learning Objectives At the end of this session, you will be able to: Understand how health reform impacts small employers and health insurance benefits Learn how to compare your health benefits to those offered through the health insurance exchanges Recognize the role of the exchange, and how small employers can participate in them

7 The ACA Signed into law March 2010, is the law of the land today Applies to all businesses in the US, including governments Requires almost all individuals to obtain health insurance coverage or pay a penalty Establishes health insurance exchanges (state or federal) Employers with at least 50 full-time + FTE employees may have to pay a penalty, if they don t offer full-time employees affordable, minimum level health insurance after 1/1/2015 Implementation details continue to be outlined through the issuance of new regulations, guidance, and FAQ documents from IRS, HHS, DOL 7

8 While some ACA provisions have been delayed, many more will take effect in the months to come Individual mandate: In 2014, individuals will still need to obtain minimum essential coverage or pay a penalty Health Insurance Exchanges are still scheduled to open for enrollment October 1, 2013 with benefits beginning January 1, 2014 Exchange subsidies still available in 2014: Individuals who earn between % of FPL and do not have access to affordable coverage through an employer may still be eligible for tax credits and/or cost sharing assistance Guarantee issue and no pre-existing condition denials permitted In individual and small group market, insurers are prohibited from charging higher rates based upon gender or health status. Elimination of all annual limits on coverage 8

9 Employers still need to: Provide Exchange Notice to current employees and new hires Provide Benefit and Coverage Summaries when making certain changes to plans offered Ensure health plan waiting period to enroll is no more than 90 days Evaluate if plans will comply with new deductible and maximum out-of-pocket limits Comply with non-discrimination rules (pending final rules) Report health plan benefit costs on W-2s (currently just large employers) 9

10 Eligibility for Health Insurance Exchange Notice Employers to notify employees upon effective date and/or date of hire: Information about the existence of state/federal exchange, services offered and how to contact Employee may be eligible for assistance to purchase insurance via the Exchange Employee loses eligibility for employer contribution to health benefits if purchases insurance via the Exchange Effective: For current employees, must issue notices prior to October 1, For new hires after 10/1/2013, the notice must be provided within two weeks of start. Employers who are: Subject to Fair Standards Labor Act Hospitals Institutions who care for the sick, the aged, mentally ill, or disabled who reside on the premises Schools for children with mental or physical disabilities or gifted Preschools, elementary and secondary schools, and institutions of higher education Governments agencies. 10

11 Eligibility for Health Insurance Exchange Notice (cont) Notice of coverage options must be provided to each employee, regardless of plan enrollment status (if applicable) or of part-time/full-time status U.S. Dept of Labor FAQ indicates no penalties for non-compliance Department of Labor has model notice language available on its website, as do some state Exchanges Employers who offer a health plan: Employers who do not offer a health plan: 11

12 Summary of Benefits and Coverage Notice to Employees Effective for plan years after 9/23/12 Include with open enrollment materials Distribute to newly eligible employees, employees with special enrollment rights, and upon request A new SBC must be distributed at least 60 days prior to any mid-year plan changes affecting SBC. The Department of Labor six-page SBC template can be found at: 12

13 90-Day Waiting Period: Newly Hired, Full-Time Employees Beginning January 1, 2014, an employer s waiting period for insurance generally cannot exceed 90 calendar days IRS Notice provided guidance on 90-day waiting limitation (Public Health Service Act 2708) Newly Hired, Full-Time Employees: If employee is reasonably expected to be full-time, then must be eligible to enroll within 90 days of start date Not permitted to wait until the 1 st of the month after 90 days May require employers to allow mid-month enrollment or participate well before 90 days have passed 13

14 90-Day Waiting Period & Variable Hour Employees For variable hour employees: Employer can take a reasonable period of time to determine whether employee meets plan s eligibility requirements. Reasonable time can include: A measurement period of up to 12 months An administrative period up to 90 days Coverage must be effective no later than 13 months from employee s start date If employee s start date is not the first day of a calendar month, will include remaining time until the first day of the next calendar month 14

15 ACA Deductible & OOP Limits 2014 & Beyond Limits Individual Coverage Family Coverage Deductible (Small group) $2,000 $4,000 Maximum Out of Pocket (all) $6,350 (2014) $12,700 (2014) Deductible limits for small group market 2010 average deductible for small group = $2,814 (AHIP issue brief, August 2012) May result in higher premium costs Limits on out of pocket (OOP) maximums in 2014 tied to limits established for Health Savings Accounts/High Deductible Health Plans. Both limits will be indexed forward by the percentage increase in average per capita premiums. 15

16 Pending Implementation: Fully-insured plans can no longer discriminate Expands the nondiscrimination rules to cover fully-insured group health plans (IRS Code Section 105(h), which already applies to selfinsured) Also includes HRAs or stand-alone Medical Reimbursement Plans (MRPs) As of 12/27/2010, compliance has been delayed until guidance/ rules issued Affects non-grandfathered plans for plan years beginning on or after 9/23/10 Penalties An employer who sponsors a discriminatory insured group health plan will be subject to an excise tax liability of $100 per day per employee affected with a maximum penalty of $500,000 Additional comment period on proposed guidance closed 3/11/11 See IRS Notice

17 2012 : W-2 Disclosure of Health Coverage Cost ACA requires employers to disclose employerprovided health benefits costs on W-2s [IRC Sec. 6051(a)] Includes medical insurance, dental and vision plans(unless separate plans), and self-insured arrangements No reporting for employee salary-reduction FSAs or employer HSA or Archer MSA funding Include family coverage amount, if applicable 2011 implementation was delayed, reporting began for most employers for 2012 expenses 17

18 2012: W-2 Disclosure of Health Coverage Cost W-2 reporting of health care costs began for W-2s issued for 2012 benefits (January 2013 issuance). Small Employers fewer than 250 W-2s in 2011 Disclosure is optional for 2012 and until further guidance is issued, at least until January Additional Resources Interim implementation guidance: IRS Notices : ; updated Notice : W-2 form: 18

19 The Fees Add Up + Patient Centered Outcomes Research Institute (PCORI) + $1 per participant in 7/1/ Inflation adjusted annually through 9/30/2019, when ends Transitional Reinsurance Fees ( ) $63 per participant in 2014; Phases out: $42 in 2015; $26 in 2016 First quarterly payment due 1/15/14 Health Insurance Industry Tax (HIT) (2014) Fee assessed on fully-insured in individual and small group markets Fee based upon premium revenue Cadillac Plan Tax (2018) 40% Excise Tax if exceed threshold amounts 19

20 Evaluating your benefit strategy in a reforming environment 20

21 Drop, Private or Public Exchange, Offer What will employers do? 21

22 Defining small and large employers The definition of large employer varies depending upon the section of the law one is referring to: For Employer Penalties: 50 or more full-time employees plus full-time equivalents. FT employee: avg. 30 or more hours of service per week FT equivalents = Hours worked in a month by all PT employees divided by 120 Eligibility for Premium Tax Credits: 25 or fewer employees earning < an avg. of $50,000 Eligibility for the SHOP: Fewer than 50 OR Fewer than 100 Employer who must auto-enroll: 200+ employees 22

23 Tax Credit for Small Employer Health Premiums Eligible small employer: Full Credit Employer contributes >50% of employee premium Some Health Insurance Exchanges may have additional participation requirements such as 75% participation rate by employees This will only benefit the smallest employers Upper Limit # of FTEs <10 25 Avg. annual payroll per FTE* <$25,000 $50,000 *In 2014, increased based upon inflation. 23

24 Tax Credit for Small Employer Health Premiums Tax credit for % of employer-provided health insurance premiums (IRC Sec. 45R) Credit limited by average premiums for the rating area as established by the U.S. Department of Health and Human Services. (REG ) Tax Years Taxable Entity Credit Exempt 501(c) Credit % 25% % 35% Offset Income tax Payroll tax 24

25 Tax Credit for Small Employer Health Premiums: 2014 and beyond Eligible insurance product to qualify for credit In tax years: Any health insurance purchased from a licensed insurer (defined benefit) In tax years: Employer must purchase coverage via the SHOP channel of the Exchange. (defined contribution) Employer s health insurance purchase via the Exchange can coincide with its plan year vs. calendar year (proposed regulations REG , 8/26/2013) Credit limited: can only be claimed for the first two consecutive years. Transition rule for 2014: Employers who transition to the Exchange mid-year can still claim up to the full 2014 credit (50% or 35%) even for the non-exchange plan portion of the year. (proposed regulations REG , 8/26/2013) Use Form 8941 to calculate credit: Credit amount included either : 1) as part of the general business credit on your income tax return; or 2) if tax-exempt organization, on line 44f of the Form 990-T (must be filed to claim credit) 25

26 Tax Credit for Small Employer Health Premiums- For Profits Phase-out for Taxable Employer (2014 -) # of FTEs $25,000 $30,000 $40,000 $50,000 Avg. Wage/FTE <10 50% 40% 20% 0% % 23.33% 3.33% 0% % 6.67% 0% 0% 25 0% 0% 0% 0% 26

27 Small Employer Tax Credit Prior Year Credit Can Still be Claimed: Eligible small employers that forgot to claim the credit this year on their tax return, can still obtain the credit if they file an amended return. Credit can be applied to other years: Small employers who did not owe tax during the year, can carry the credit back or forward to other tax years. Can claim credit + business expense deduction: Small businesses can still claim a business expense deduction for the premiums in excess of the credit (because health insurance premium payments exceed the total credit). Sequestration: As of March 1, 2013, the refundable portion of the credit was reduced by 8.7 percent for tax exempt organizations. This reduction is in effect until Sept. 30, 2013 or intervening Congressional action, at which time the sequestration rate is subject to change. 27

28 2014: Individual Mandate Individual mandate to obtain health coverage: Beginning in 2014, most individuals must obtain a minimum-level of health insurance coverage or pay a penalty Minimum essential coverage includes: Medicare, Medicaid, TRICARE Insurance purchased through an Exchange, or the individual market Any employer-sponsored coverage Grandfathered plans (group plan in effect on 3/23/2010) Hardship exemption Premium cost for lowest cost plan > 8% of Household Income Penalties for failure to obtain coverage: In 2014: greater of $95 or 1.0% of income In 2015: greater of $325 or 2.0% of income In 2016: greater of $695 or 2.5% of income Penalty is capped at three times the per person amount for a family Assessed penalty for dependents is half the individual rate 28

29 2014: Government assistance to help some individuals obtain coverage Medicaid expansion: Expands eligibility to individuals and families up to 133% of the federal poverty level (FPL) or Modified Adjusted Gross Income (MAGI) of 138% of FPL If cost effective, states can opt to subsidize employer-sponsored premiums for this group Premium tax credit assistance: Individuals and families with household income of % FPL may be eligible for sliding-scale assistance to help pay premiums Cost sharing assistance: Those earning between % FPL are also eligible for outof-pocket reductions to help with cost sharing (e.g., maximum out-of-pocket, deductibles, copayments) 138% FPL Individual = $15,856 Family of 4 = $32, % FPL: Individual= $45,960 Family of 4= $94,200 29

30 Cost Sharing Subsidies Federal government will pay insurers to reduce the cost sharing for individuals: Enrolled in a silver-level plan through an Exchange and Whose household income is between % FPL Household income as % of FPL Cost sharing reduction % FPL Two-thirds % FPL 50% Reductions don t apply to benefits not included in the federal definition of essential health benefits 30

31 Key Exchange Dates Oct. 1, 2013 Exchange online web portals must be operational for open enrollment. Jan. 1, 2014 Exchange plan year begins Individual mandate in effect 31

32 2014: Health Insurance Exchanges What is an exchange? A marketplace for individuals and small businesses to shop for insurance. Offer a choice of health plans Standardize health plan options Consumers compare plans based upon price Intended to provide a more competitive market Provides consumers with a neutral party to assist with plan enrollment, information and eligibility determination for any subsidies 32

33 Health Insurance Exchanges Two Channels: Who can participate? Employers 2014: small employers (state choice: 50 or fewer, or 100 or fewer FTEs) can offer an Exchange plan as their employer health plan 2016: Available to all employers with 100 or fewer FTEs. 2017: states can opt to allow large employers to participate Individuals: Includes self-employed or unemployed individuals (2014) Each state was required to establish a health insurance exchange, submit to participate in a federal partnership exchange or a federal exchange will be made available to the state s residents. HHS Secretary has established the rules regarding exchanges 33

34 2014: Exchange Plans Types of exchange plans to be offered by insurers Bronze = 60% actuarial value Silver = 70% actuarial value Gold = 80% actuarial value Platinum = 90% actuarial value Catastrophic plan Only available to individuals < 30 years old, or those exempted from the individual mandate due to unaffordability or hardship. Plan must cover: minimum essential benefits a minimum of three primary care visits per year All exchange metal plans must cover essential health benefits, limit costsharing and have a specified actuarial value 34

35 Exchange Trends Who is participating in the Exchanges? Insurers already active in market are most likely to offer plans in marketplace Typically, more insurers participating in individual vs. SHOP channel Some state SHOPs have only one insurer offering plans and they don t always cover entire state geography Still unknown which plans may offer a national plan via the Federally Facilitated Exchange Plans offered appear to have narrower provider networks Preliminary and Approved Premium Rates State regulators are negotiating for lower rates Great variability in whether Exchange premiums are higher or lower than current 35

36 Small Business Health Options Program (SHOP) State-based exchanges must operate both the individual and SHOP exchange. Employers eligible to participate 2014: 50 or fewer full time-equivalent employees (FTEs) 2016: Up to 100 FTEs Self-employed with no employees eligible for individual channel not SHOP Employers participating in SHOP Must offer coverage to all FT employees (e.g. average 30 hours +per week) May be required to meet additional State-specific participation criteria Minimum employee participation requirement (e.g. 75%) 36

37 Unique SHOP functions Assist qualified employers and facilitate enrollment of eligible employees into a SHOP plan based upon employer selections Aggregate premiums: Provide participating employers with one monthly bill that accounts for premium payments for all enrolled employees Bill is paid to SHOP rather than each health plan SHOP direct payments to health plan Display employee s premium cost for eligible plans after subtracting the employer contribution Mitigates risk and adverse selection in SHOP exchange (risk adjustment programs and possible minimum employer contribution/employee participation requirements) 37

38 SHOP: Employer/Employee Choice Models Allows small employers a variety of approaches for selecting the coverage they offer to employees via the SHOP Full employee choice: may choose any plan at any tier level Partial employee choice: employer chooses tier level and employee may choose any plan available at selected tier level Single plan with varying coverage tiers: Employers select specific SHOP plan and employees select their preferred coverage tier (cost sharing levels) Employers select a reference tier level and employee may choose any available plan in that tier or adjacent tiers Full employer choice: employers select SHOP plan at specific coverage level ; employees only choose whether or not to enroll (only option in Federal Exchange in 2014) 38

39 MNSure Individual Premiums Area 1 25 year 40 year 60 year Family Catastrophic 126 N/A N/A N/A Bronze Silver Gold Platinum Dodge, Fillmore, Freeborn, Goodhue, Houston, Mower, Olmstead, Steele, Wabasha, Winona Area 8 25 year 40 year 60 year Family Catastrophic 77 N/A N/A N/A Bronze Silver Gold Platinum Anoka, Benton, Carver, Dakota, Hennepin, Ramsey, Scott, sherburne, Stearns, Washington, Wright 39

40 Health Reimbursement Arrangements (HRAs) HRAs + Group Health Plan = permissible in 2014 and beyond HRA + Individual market health plan = NOT compliant with prohibition on annual and lifetime dollar limits If individual has Minimum Essential Coverage, NOT eligible for Exchange subsidies such as premium tax credits Minimum essential coverage includes: medical coverage provided through Sec. 125 plans, employer payment plans, health Flexible Spending Accounts, and HRAs HRAs integrated with am employer-sponsored plan: Employer HRA contributions that can be used to pay premiums are counted in determining plan affordability HRA contributions limited to use for cost sharing for covered medical expenses are counted toward the minimum value determination Pre-2014 HRA contributions, can be used in 2014 and beyond if: Contribution made before January 1, 2013 Contributions credited in 2013 to an HRA in effect on 1/1/

41 Strategies for Small Employers Understand and comply with reporting and fee requirements and due dates Understand your options inside the SHOP Exchange Evaluate options both benefits and costs -- in all marketplaces Existing small group market coverage for 2014 vs. SHOP costs Employer premium tax credit vs. other discounts offered outside the Exchange. Defined contribution strategy SHOP, Private Exchange, HRA Consider what you can afford to offer vs. what is available to employees in the Exchange Identify at least one employee/consultant to track the rules and regulations rolling out as part of the ACA. 41

42 2013 CliftonLarsonAllen LLP Thank you! Nicole O. Fallon Health Care Consultant Manager Terry O'Reilly Partner For more information on health reform: CLA Health Insurance Penalty calculator: cliftonlarsonallen.com twitter.com/ CLA_CPAs facebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen 42