The Patient Protection and Affordable Care Act June 4, 2013 Lisa Curry, CPA Amber Moore, CPA 2013 KSM Business Services, Inc.
PPACA What Is It? Signed into law on March 23, 2010 Most significant regulatory overhaul of the U.S. healthcare system since Medicare and Medicaid in 1965 Main purpose is to decrease the number of uninsured and reduce costs of health care Implemented over the next several years 2 ksmcpa.com
PPACA Components Effective in 2010-2012 2010 Extended coverage for young adult Health insurance reform Improved health plan administration Rebate checks for Medicare Part D ($250/enrollee) 1 st phase of small business credit 3 ksmcpa.com
PPACA Components Effective in 2010-2012 2011 Community Living Assistance Services and Supports Program (CLASS Act) Additional health plan administration improvements Increased tax on HSA and MSA withdrawals 4 ksmcpa.com
PPACA Components Effective in 2010-2012 2012 Improvements to health insurance reform and health plan administration continue Issuers must provide summary of health plans effective September 23, 2012 Medical Loss Ratio Rebates were issued for plans that qualified Reporting value of health care benefits on Form W-2 (first due by 1/31/2013) PCORI fee (first due July 31 st of calendar year following plan year ending on or after 10/1/12) 5 ksmcpa.com
PPACA Components effective in 2013 2013 Limit Flexible Savings Accounts Contributions to $2,500 Higher Medicare tax on earned income (.9%) Medicare taxes on unearned income (3.8%) Excise tax on medical device manufacturers (2.3%) Fair Labor Standards Act notices to employees (delayed) $500,000 compensation deduction limitation for health insurance issuers 6 ksmcpa.com
PPACA Components effective in 2014-2018 2014 New fee obligations Individual mandate Employer mandate Small/Large Employer Health insurance exchange Premium tax subsidy Employer Wellness Programs 2018 Cadillac Tax 7 ksmcpa.com
2014 Coverage Expansion What we knew in January 2013: Individual mandate: all Americans, with some exceptions, must maintain a minimum level of health coverage or face a tax Health Care Insurance Exchanges and Premium Tax Credits (PTCs): creates health care insurance Exchanges and provides PTCs to assist eligible individuals with the purchase of coverage (open enrollment to begin October 2013) Medicaid expansion: allows states to expand Medicaid for all individuals up to 138% of federal poverty level Employer mandate: requires employers with 50 or more full-time equivalents to offer coverage to full-time employees (and their dependents) or pay an excise tax if any full-time employee obtains Exchange coverage and a PTC 8 ksmcpa.com
2014 Coverage Expansion What we know in June 2013: No Change to the Unknown Since January 2013, no new guidance has been issued. 9 ksmcpa.com
New Fee Obligations (Regardless of Number of Employees) PCORI Per capita fee that funds the Patient-Centered Research Outcome Institute Issuers and plan sponsors are responsible for paying the fee on IRS Form 720 Charged on plan years ending after September 30, 2012 $1 per covered life during fiscal year 2013 and $2 thereafter through 2019 Due on July 31 st of calendar year following end of plan year 10 ksmcpa.com
New Fee Obligations (Regardless of Number of Employees) Reinsurance Proceeds go to commercial insurers to stabilize premiums in the individual market during the first three years that the state-based exchanges are in effect Fee is assessed on a per capita basis for both fully insured and selffunded members Temporary fee (2014-2016) First payment is due January, 2015 Per capita fee between $60 and $80 on an annual basis for 2014 through 2016 11 ksmcpa.com
Notice of Coverage Options- Delayed The Act requires employers to provide each employee a written notice: Informing the employee of the existence of state health insurance exchanges including how to contact the Exchanges for assistance. Stating that the employee may be eligible for a premium tax credit to purchase coverage through an Exchange if the employer s group health plan does not provide a certain minimum level of coverage. Stating that if the employee purchases coverage through an Exchange, then the employee may lose the employer contribution to the employer s group health plan, which may be excludable from income. Notice was supposed to be provided no later than March 1, 2013, however that has been delayed by the DOL. 12 ksmcpa.com
Individual Mandate Individuals are required to maintain minimum essential coverage each month or pay a penalty. (Exceptions apply) Insurers and employers are required to report certain information to the Secretary of Treasury Individuals are responsible for ensuring that they, and any dependent, are covered under minimum essential coverage. Penalty for not having coverage is greater of flat dollar amount or percentage of taxable income Flat dollar - $95 (2014); $325 (2015); $695 (2016); penalty is half of these amounts for any dependents under age 18 Percentage of taxable income 1% (2014), 2% (2015) and 2.5% (2016) of household s income that is in excess of the tax filing threshold 13 ksmcpa.com
Employer Mandate Qualified Small Employer Qualified small employers Fewer than 50 full-time employees during the previous calendar year May offer employees the opportunity to enroll in a health exchangeparticipating qualified health plan through the employer s cafeteria plan Small business tax credit available No more than 25 FTEs Average wage less than or equal to $50,000 Contribution to coverage must be a uniform percentage equal to at least 50% of premium cost Credit is 35%(2013)/50%(2014) of employer contribution Full Credit available for employers with 10 or fewer FTEs 14 ksmcpa.com
Employer Mandate Large Employer Applicable large employers must offer 95% of full-time employees (and their dependents) opportunity to enroll in health coverage that is affordable and provides the minimum value At least 50 full-time employees during the previous calendar year Affordable Coverage employee s share of the self-only premium for the employer s lowest-cost plan that provides minimum value cannot exceed 9.5% of household income Safe Harbor W-2 Rate of Pay Federal Poverty Line 15 ksmcpa.com
Employer Mandate Large Employer (Continued) Minimum Value a plan fails to provide minimum value if the plan s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs. Proposed regulations on the calculation of minimum value Actuarial value calculator Checklist based on array of designed based safe harbors Certified actuary 16 ksmcpa.com
Employee Categories Employee Category Full-time Part-time Seasonal Temporary Agency How is the category of employee used to determine large employer? Counted as one employee, based on a 30-hour or more work week Prorated (calculated by taking the hours worked by part-time employees in a month divided by 120) Not counted, for those working less than 120 days in a year Generally, counted as working for the temporary agency (except for those workers who are independent contractors) Once an employer is determined to be a large employer, could the employer be subject to a penalty if this type of employee received a premium credit? Yes No Yes, for the month in which a seasonal worker is full time Yes, for those counted as working for the temporary agency 17 ksmcpa.com
Steps to Calculating # of Employees 1. Count number of full-time employees for each month 50 employees that worked over 130 hours=50 FTEs 2. Determine number of FTEs for non full-time employees: Add hours of all employees who are not full-time (do not use any hours over 120) and divide total by 120 for each month. 25 employees that each worked 100 hours=(25*100)/120=20.83 FTEs 3. Add #1 and #2 to calculate number of FTEs for that month (50+20.83=70.83 FTEs) 4. Take average for time period in look back measurement period 18 ksmcpa.com
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Decision to Pay or Play? 20 ksmcpa.com
Notes on Exchange Employee eligibility for premium subsidy through an exchange is a function of: Household income (three tiers) Employee premium contributions as a percentage of income (generally > 9.5% trigger) One employee receiving a premium tax credit or cost sharing subsidy from an exchange triggers penalty Reporting requirements begin in 2014 for all offering employers (contribution for self only coverage exceeds 8% of wages) Resources www.healthcare.gov www.dol.gov/ebsa/healthreform 21 ksmcpa.com
Premium Subsidy Eligibility Household Income* Single: > $46,121 Family of four: > $95,174 Employer Sponsored-Plan: Employee Premium Contribution as a Percent of Income FPL 0.0% - 9.5% 9.5%+ Tier III 400%+ Not Eligible for Premium Tax Subsidy Single: $15,912 - $46,121 Family of four: $32,835 - $95,174 Tier II 138% - 400% Not Eligible for Premium Tax Subsidy due to employee contribution not exceeding >9.5% Eligible for Premium Tax Subsidy Single: < $15,912 Family of four: < $32,835 Tier I 0% - 138% Medicaid Eligible If a state elects not to implement Medicaid expansion, the population from 100% - 138% of FPL is potentially eligible for premium subsidies. 22 ksmcpa.com
State Health Insurance Exchange Indiana As of April 12, 2013, the state has submitted a waiver to CMS requesting permission to expand coverage to expansion-eligible residents through the Healthy Indiana Plan 23 ksmcpa.com
Employer Wellness Programs PPACA creates new incentive and builds on existing wellness programs Programs are designed to improve overall health Health screenings Fitness center reimbursement Immunizations Smoking cessations programs Reward to employee increased from 20% to 30% Resources www.ofr.gov www.dol.gov 24 ksmcpa.com
Frequently Asked Questions We are under 50 FTE s and currently offer health insurance-is this a good policy or should we have them buy it on the exchange? If so, how do you keep your employees whole? Will small business be able to join the exchange for better rates? What is the cost of insurance on the exchange going to be? 25 ksmcpa.com
Top Considerations in This Time of Uncertainty Has your company developed a strategy and prepared a project plan to implement the ACA? Does your health care plan comply with the ACA market reform provisions? Is it affordable? Does meet minimum value? Has your company estimated the cost of implementation/financial impact? Necessary changes in health care plan Mandatory fees (approximately 3.8% increase on premiums) Additional administration expense Has your company estimated the number of employees who may be eligible for the premium tax credit? 26 ksmcpa.com
Top Considerations in This Time of Uncertainty (continued) Has your company developed an employee education and communication strategy? Are the human resource and payroll systems and processes capable of determining who is a full-time employee based on hours worked? Can these systems collect and retain all relevant data for reporting purposes? Have vendor relationships been reviewed? Was consideration given to how your company will handle notifications from the health care exchange? Is your company prepared to defend an IRS assessment of the excise tax or an IRS audit of the health care plan offerings? 27 ksmcpa.com
Contact Information Lisa Curry Director Healthcare Resources Group 317.580.2033 lcurry@ksmcpa.com Amber Moore Manager Healthcare Resources Group 317.844.4870 amoore@ksmcpa.com 28 ksmcpa.com