What employers need to know about The Patient Protection and Affordable Care Act (PPACA)

Transcription

1 What emplyers need t knw abut The Patient Prtectin and Affrdable Care Act (PPACA) 1. It is nw the law. Dept. f Health & Human Services (HHS) guidance is still needed n pen issues. 2. New state insurance Exchanges are t be set up t facilitate purchase f cverage and distributin f federal subsidies t qualified individuals. Exchanges are t be established fr Small Business and Individual insurance prgrams. 3. PPACA requires that all citizens have health insurance. Failure t have health insurance will result in a penalty which is the greater f: $95 in 2014, $325 in 2015 and $695 in 2016 (indexed by CPI), OR A percent f incme - 1% in 2014, 2% in 2015 and 2.5% in 2016 and thereafter 4. Individuals earning less than 150% f the Federal Pverty Limit (FPL) will be prvided health insurance thrugh Medicaid. 5. Individuals earning mre than 150% f FPL but less than 400% f FPL will get a federal subsidy if they purchase cverage frm the newly frmed state health insurance Exchange. 6. Small Emplyer tax credit will be available t emplyers with n mre than 25 full-time emplyees and average wages f less than $50,000 wh purchase health insurance fr their emplyees. Emplyer must cver at least 50% f the ttal premium cst. Maximum tax credit fr is up t 35% f emplyer s premium cst. Full credit is nly available t emplyers with 10 r fewer full-time emplyees and an average annual full-time-equivalent wage f less than $25,000. Credit is reduced as the number f emplyees and average wages increase. Owners and their family members are nt eligible fr tax credits. 7. Emplyers with fewer than 50 full-time equivalent emplyees are nt required t prvide cverage. 8. Emplyers with 50 r mre full-time equivalent emplyees will be required t prvide affrdable cverage t their emplyees. Failure t prvide cverage will result in a penalty. If an emplyer desn t prvide cverage and at least ne emplyee purchases cverage frm an Exchange with a subsidy, the emplyer is fined $2,000 fr each full-time wrker (first 30 wrkers are exempt frm penalty). Penalty is an excise tax and is nt tax deductible t emplyer. If an emplyer prvides cverage that is nt affrdable, the emplyer will pay a $3,000 penalty fr each emplyee wh purchases cverage frm an Exchange with a subsidy. Emplyer-spnsred cverage is cnsidered unaffrdable if the emplyee s share f the premium exceeds 9.5% f the emplyee s husehld incme.

2 An emplyer wh prvides cverage must prvide free chice vuchers t each qualified emplyee. Vuchers are used t purchase cverage frm an Exchange. The amunt f the vucher is equal t the largest prtin f what the emplyer wuld have paid t prvide cverage under the emplyer-spnsred plan. The vucher amunt paid by the emplyer is tax deductible as cmpensatin and is excluded frm incme fr the emplyee. A qualified emplyee is an emplyee wh des nt participate in the emplyer s health plan and whse share f premium cst wuld exceed 8% but is less than 9.8% f the emplyee s husehld incme and whse husehld incme is less than 400% f the FPL. 9. Insured grup health plans may nt discriminate in favr f highly cmpensated individuals with respect t eligibility t participate in, and benefits prvided under a grup health plan. Grandfathered plans are excepted A grandfathered plan is a grup health plan that was infrce n March 23, Regulatins are very restrictive and prvide little flexibility fr plan spnsrs t make changes r mdificatins t their plans and still retain grandfathered status. Highly cmpensated individuals defined: The 5 highest paid ffices; A 10% r mre sharehlder; and An individual wh is amng the highest paid 25% f all emplyees Excludable emplyees: Emplyees wh have nt cmpleted 3 years f service, part-time emplyees (less than 35 hrs/wk), seasnal emplyees, emplyees subject t a cllective bargaining agreement, emplyees under age 25 and nnresident aliens. Health plan must pass tw tests: Eligibility test A plan satisfies this test if it satisfies any ne f the fllwing: The plan benefits at least 70% r mre f all emplyees 70% f all emplyees are eligible t benefit under the plan, and at least 80% r mre f thse eligible in fact benefit, r The plan benefits a nndiscriminatry class f emplyees The eligibility tests apply based n wh is actually benefiting under the plan, nt n mere eligibility t participate. Therefre, t the extent that an emplyer requires an emplyee t pay a prtin f premiums and a substantial prtin f its ppulatin pts ut, the plan may have an eligibility prblem. Emplyees pting ut t btain cverage thrugh a health insurance exchange r cverage frm a spuses emplyer may present a substantial prblem. Benefits test All benefits prvided fr participants wh are highly cmpensated must be prvided fr all ther participants. This suggests that an emplyer may nt subsidize premiums fr highly cmpensated individuals while requiring that rank-and-file pay a prtin f the premiums. Penalties An emplyer that fails t satisfy the nndiscriminatin rules is subject t an excise tax f $100 per day during the nncmpliance perid with respect t each individual t whm the failure relates, nt t exceed the lesser f 10% f the grup health plan csts r $500,000.

3 10. High-cst plan tax f 40% fr plans with premium value abve $10,200/individual r $27,500/family. 11. Prhibits new emplyee waiting perids f mre than 90 days. 12. PPACA creates a new mandate fr the IRS t act as enfrcer f key emplyer prvisins ensuring that emplyers ffer health insurance and penalizing them fr nncmpliance. IRS will create a new series f reprting mechanisms t track emplyer cmpliance Emplyers prviding minimum essential cverage are required t reprt infrmatin abut emplyees cvered, the prtin f the premium paid by the emplyer and any additinal infrmatin if minimum essential cverage is ffered thrugh an Exchange. Emplyer must prvide this same infrmatin t each emplyee. Large emplyers are required t reprt infrmatin certifying whether the emplyer ffers full-time emplyees the ptin t enrll thrugh an eligible emplyerspnsred plan. Must include length f waiting perids, cst f premiums, ttal cst paid by emplyer, number f full-time emplyees and detail n each full-time emplyee cvered by the plan. Emplyers are required t reprt the cst f emplyer-prvided cverage n each emplyee s Frm W2 (nt taxable incme). 13. All health insurance plans must prvide minimum essential benefits N lifetime dllar limits. Guaranteed issue & renewability. N limitatins n pre-existing cnditins. Preventive services with n cst-sharing. Out-f-pcket spending limited t $6200/individual, $12,300/family. Cverage extended fr dependent children t age 26. Emergency services withut prir authrizatin treated as in-netwrk. Revised appeals prcess. Wellness prgram incentives. Limits premium underwriting. Permits variatins f premium nly by: Individual r Family status Gegraphic area Age (n mre than 3 t 1 variance) Tbacc use (1.5 t 1)

4 Imprtant dates & timelines 14. Changes fr plans years beginning n r after 9/23/2010: Cverage extended fr dependent children t age 26. Grup plans will be required t cver adult children until the age f 26. Eligible dependent children NOT currently enrlled will be permitted t enrll in their parent s plan n the plan s pen enrllment. Emplyers shuld ntify participants f their plan s new adult child eligibility definitin and special enrllment pprtunity. Carriers are permitting children currently enrlled wh age-ut between nw and the plan s pen enrllment after 9/23/2010 t remain cvered. First dllar cverage fr preventive care. N lifetime limits n essential benefits. Essential benefits have nt yet been defined by HHS. Nndiscriminatin rules Emplyers with mre than 200 emplyees must autmatically enrll all full-time emplyees as sn as they are eligible fr cverage. Emplyees may pt ut. Waiting fr HHS guidance n implementatin details. 15. Changes beginning 1/1/2011: OTC drugs n lnger eligible under Flexible Spending Arrangements unless prescribed. Emplyers shuld ntify participants f OTC change. Emplyers must reprt the value f benefits n Frm W2. Penalty increased fr nn-qualified HSA withdrawals frm 10% t 20%. 16. Changes beginning 3/23/2012: Emplyers must prvide a summary f benefits and a cverage explanatin t all participants at the time f enrllment and each year during pen enrllment. Must be n mre than 4 pages, a minimum f 12-pint fnt and shuld be written in a manner that is easy fr the average participant t understand. HHS will prvide mdel ntices in advance f requirement. 17. Changes beginning 1/1/2013: Medicare taxes increase fr high-earners..9% increase in Medicare taxes n wages in excess f $200,000 fr single individuals and $250,000 fr jint filers. 3.8% unearned incme Medicare tax impsed n same individuals. FSA plan cntributin maximum capped at $2,500 Emplyers must prvide new and existing emplyees with infrmatin abut the health Exchange, such as infrmatin n eligibility fr cverage under the Exchange, including free-chice vuchers and premium subsidies. Threshld fr claiming itemized medical expense deductins increases frm 7.5% f AGI t 10%. 18. Changes beginning 1/1/2014: State-based Exchanges begin. Penalties fr individuals with n cverage begin. Penalties fr emplyers begin. Emplyer free-chice vuchers. 90-day limit n emplyer waiting perids. Emplyer IRS reprting certificatin begins.

5 Penalty fr Emplyers NOT ffering cverage Beginning in 2014, large emplyers that emplyed an average f 50 full-time equivalent emplyees during the previus calendar year must ffer health cverage that meets minimum essential cverage requirements r pay a penalty. The penalty is $2,000 per full-time emplyee after exempting the first 30 full-time emplyees. A full-time emplyee is defined as smene wh is emplyed, n average, at least 30 hurs per week. Seasnal wrkers are nt cnsidered full-time and are nt cnsidered full-time equivalent wrkers if they wrk 120 r fewer days during the calendar year. Part-time emplyees are cunted as full-time equivalent t determine large emplyer status. N penalty is paid fr part-time emplyees T calculate full-time equivalent: Divide the ttal number f hurs wrked by the nn-full-time emplyees during the mnth by 120. Example: Yu emply: 48 full-time emplyees, and 13 part-time emplyees wh wrk 20 hurs a week, and 3 part-time emplyees wh wrk 10 hurs per week. In 2014: The 13 part-time, 20 hr/week emplyees wrk fr a ttal f 240 hurs/mnth. The 3 part-time, 10 hr/week emplyees wrk fr a ttal f 120 hurs/mnth. Therefre, the ttal aggregate hurs wrked by the nn-full-time emplyees is 360. The ttal aggregate hurs f nn-full-time emplyees, 360, is then divided by 120 t arrive at the number f full-time equivalent emplyees which is 3. Yu have 3 full-time equivalent emplyees plus 48 full-time emplyees fr a ttal f 51 fulltime equivalent emplyees which means yu are cnsidered a large emplyer and are subject t the law s mandate t prvide cverage. If yu d nt prvide cverage and at least 1 emplyee btains cverage thrugh an Exchange with a subsidy, yu pay an excise tax equal t the number f full-time emplyees ver a 30-emplyee threshld. Yur penalty wuld be $36,000 in this example: 48 full-time emplyees (part-time nt included in penalty) -30 first 30 are exempt frm penalty 18 x $2,000 = $36,000