Patient Protection and Affordable Care Act (PPACA) 2018 Financial Impact Analysis for Employers. Sample 1#

Transcription

1 Patient Protection and Affordable Care Act (PPACA) 2018 Financial Impact Analysis for Employers

2 Table of Contents Actuarial Certification 1 Key Provisions of PPACA 2 Executive Summary 3 Demographic and Plan Data 4 Plan Specific Excise Tax Summaries 5-8 Actuarial Assumptions 9

3 Actuarial Certification Page 1 This report contains the results of an analysis to estimate the "Cadillac" excise tax impact in Enrollment projections assess eligibility for Medicaid and Federal Subsidies, as well as costs related to in- and out-migration due to individual mandates, and auto enrollment or movement to State Health Exchanges. The calculations are based on data input by the user of the PPACAcalc actuarial model, including current employer specific census data and plan enrollment, key cost-sharing provisions of current plan options, and health care cost related information. As such, Verisight has not reviewed the data, and cannot attest to the accuracy of the user information input. Similarly, assumptions utilized in the model include a number of user selected variable inputs, beyond those encoded assumptions Verisight health actuaries have selected from our knowledge and expertise. The propriety of specific assumptions relates to their comparability to historical experience levels and reasonable future behaviors and trends in employee demographics, health care costs, and utilization and delivery of services. Results from this product can be extremely sensitive to the assumptions chosen. While we may not be able to attest to the user input assumptions, we do confirm that the model developed and the assumptions encoded are reasonable and consistent with our understanding of the current provisions of PPACA, and our relevant experience working in the employee health benefits and insurance fields. The results are estimates, based on current data, assumptions, and PPACA provisions. Because many of the assumptions and provisions are subject to external influences (demographic, economic, and regulatory) beyond our control or that of a PPACAcalc user, actual results may vary materially. Determinations for purposes other than estimating potential plan enrollment and employer plan sponsor costs in 2018 under current PPACA provisions may also be significantly different from the results reported herein. The Verisight health actuaries that developed PPACAcalc have done so using generally accepted accounting principles, including the Actuarial Standards Board Actuarial Standards of Practice (ASOPs) relating to health benefits. We have satisfied the basic education, experience, and continuing education requirements and are qualified to issue Statements of Actuarial Opinion in accordance with the Qualification Standards in the American Academy of Actuaries' Code of Professional Conduct. However, since this product was specifically developed as an online, easy-to-use, do-it-yourself product for health insurance brokers and consultants to use for clients, as well as for employer plan sponsors to use directly themselves, the results generated won't be considered an actuarial statement of opinion. Verisight is independent and unbiased, and has no political agenda for users of this product, or any of its officers or key personnel, that would impair our objectivity in the ongoing development and consulting activities related to PPACAcalc modeling. We are available to answer any questions on the material contained in the report, or to provide explanations or further details as may be appropriate. Verisight, Inc.

4 Page 2 Key Provisions of PPACA 2018 Excise Tax Provisions PPACA imposes a 40% excise tax on group health plans (including self insured plans) whose costs exceed certain thresholds for plan years beginning on or after 1/1/2018. Tax-advantaged health-related accounts such as flexible spending accounts (FSAs), health savings accounts (HSAs), and health reimbursement accounts (HRAs) are also specified as health insurance coverage and included in the excise tax calculation. Non-union threshold amounts in 2018 are $10,200 for single coverage and $27,500 for non-single coverage. These amounts will be indexed by growth in the CPI-U plus 1% in subsequent years. Different amounts apply to multi-employer plans. PPACAcalc does not currently model the 2018 excise tax exposure for multi-employer (union) plans. The cost includes employer and employee paid portions (based on a methodology similar to that used under COBRA). The tax is paid by the insurance company (if the plan is insured) or plan administrator (if the plan is self insured). Since the employer is typically the plan administrator for tax-advantaged accounts (FSAs, etc), the employer would have a liability for part of the excise tax even in the case where the health plan is fully insured. Employers are responsible for determining the amount of the excise tax and the allocation between the employer and insurer. Employers must report these amounts to the Internal Revenue Service. The amount of the excise tax is not deductible from federal income taxes.

5 Page 3 Executive Summary Projected 2018 Excise Taxes Plan Design Single Family Plan 1 $0 $0 Plan 2 $133,336 $75,710 Plan 3 $10,142 $0 Plan 4 0.0% 0.0% Total Projected 2018 Excise Taxes $143,478 $75,710

6 Demographic and Plan Data Page Enrollment Data EE EE & Spouse EE & Child EE & Family Total Plan Plan Plan Plan Total Employees Projected Enrollment EE EE & Spouse EE & Child EE & Family Total Plan Plan Plan Plan Total Employees Premium/Funding Rates EE EE & Spouse EE & Child EE & Family Total Plan 1 $ $0.00 $ $1, $ Plan 2 $ $0.00 $1, $1, $ Plan 3 $ $0.00 $ $1, $ Plan 4 $ $0.00 $ $1, $518.27

7 Page 5 PPACA Excise Tax Analysis - Plan 1 Single Family Projected 2018 Premium - Per Employee $7,980 $19,654 Projected Excise Tax Threshold $10,200 $27,500 Amount Subject to Taxation $0 $0 40% Excise Tax Applied 40.0% 40.0% Projected 2018 Per Employee Tax $0 $0 Projected 2018 Tax $0 $0 Total 2018 Tax $0 Health Carrier Allocation 1 $0 $0 Plan Administrator Allocation 1 $0 $0 1 For self insured plans, the employer will have 100% of the excise tax liability.

8 Page 6 PPACA Excise Tax Analysis - Plan 2 Single Family Projected 2018 Premium - Per Employee $13,709 $33,809 Projected Excise Tax Threshold $10,200 $27,500 Amount Subject to Taxation $3,509 $6,309 40% Excise Tax Applied 40.0% 40.0% Projected 2018 Per Employee Tax $1,404 $2,524 Projected 2018 Tax $133,336 $75,710 Total 2018 Tax $209,045 Health Carrier Allocation 1 $119,545 $69,360 Plan Administrator Allocation 1 $13,790 $6,350 1 For self insured plans, the employer will have 100% of the excise tax liability.

9 Page 7 PPACA Excise Tax Analysis - Plan 3 Single Family Projected 2018 Premium - Per Employee $10,525 $24,256 Projected Excise Tax Threshold $10,200 $27,500 Amount Subject to Taxation $325 $0 40% Excise Tax Applied 40.0% 40.0% Projected 2018 Per Employee Tax $130 $0 Projected 2018 Tax $10,142 $0 Total 2018 Tax $10,142 Health Carrier Allocation 1 $8,776 $0 Plan Administrator Allocation 1 $1,366 $0 1 For self insured plans, the employer will have 100% of the excise tax liability.

10 Page 8 PPACA Excise Tax Analysis - Plan 4 Single Family Projected 2018 Premium - Per Employee $7,748 $18,441 Projected Excise Tax Threshold $10,200 $27,500 Amount Subject to Taxation $0 $0 40% Excise Tax Applied 40.0% 40.0% Projected 2018 Per Employee Tax $0 $0 Projected 2018 Tax $0 $0 Total 2018 Tax $0 Health Carrier Allocation 1 $0 $0 Plan Administrator Allocation 1 $0 $0 1 For self insured plans, the employer will have 100% of the excise tax liability.

11 Page 9 Actuarial Assumptions Medical Trend Rate Federal Poverty Level (By Family Size) Marginal Tax Rates 2012/ % Corporate 35.0% 2013/ % 2011 $10,890 $14,710 $18,530 $22,350 Individual 20.0% 2014/ % 2012 $11,065 $14,947 $18,828 $22, / % 2013 $11,243 $15,187 $19,131 $23,075 Household Income 2016/ % 2014 $11,425 $15,432 $19,439 $23, Factor % 2017/ % 2018/ % Assumed Family Size (By Rating Tier) Wage Trend Rate 2019/ % 2 Tier 3 Tier 4 Tier 2012/ % 2020/ % Single / % 2021/ % EE Plus Spouse N/A / % 2022/ % EE Plus Child N/A N/A / % Family / % 2025/ % 2026/ % 1 The household income factor represents the ratio of household income to the employee's 2014 projected salary. It was assumed that 50% of eligible employees who are currently waiving, have household income of less than or equal to 400% of the federal poverty level, and have an employee contribution that is less than 9.5% of their household income will elect to join the employer's benefit plan in 2014 once the individual mandate is effective. We assume that 0% of employees who have household income less than or equal to 400% and an employee contribution greater than 9.5% of their household income will elect to join the employers plan in We assume that 0% of waiving employees who have household income greater than 400% of the federal poverty level will join the employer's benefit plan in It is assumed that these employees have access to another employee benefit plan and will not be impacted by the individual mandate. Waiving employees who join the employer plan are assumed to enroll in the plan with the lowest employee contribution. Waiving employees are assumed to enroll in the same tier mix as the employees currently enrolled in the plan. Employees who are not eligible for employee benefits pre-2014 are properly accounted for in the PPACA modeling. If an employee is ineligible pre-ppaca but works over 30 hours per week, the employee is assumed to be an eligible employee in If the employee is assumed to have a household income less than 400% of the federal poverty level with an employee contribution greater than 9.5% of household income, the employee is assumed to get coverage at the state exchange in Otherwise the employee is assumed to join the employer plan in Inflation (CPI-U) is assumed to be 3% per year.