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Patient Protection And Affordable Care Act (2011 Update)
 

Patient Protection And Affordable Care Act (2011 Update)

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Presented to Community Memorial Foundation May 11th at Ruth Lake CC

Presented to Community Memorial Foundation May 11th at Ruth Lake CC

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    Patient Protection And Affordable Care Act (2011 Update) Patient Protection And Affordable Care Act (2011 Update) Presentation Transcript

    •  
      • Brian T. Whitlock CPA, JD, LLM
      How Federal Health Care Changes will Impact Your Organization
      • Mandates on Providers
      • Mandates on Insurance & Drug Co.
      • Mandates on Employers
      • Mandates on Individuals
      Coverage of Act
    • Tax Treatment of Non-Profit Hospitals
      • 501(c)(3) Hospitals must meet new 501(r)
        • Community Health Needs Assessment
        • Written Financial Assistance Policy
        • Bill Collection Practices
        • Limitation on Charges for patients that qualify for financial assistance
          • May not use chargemaster rates (gross charges)
          • Amounts billed must be based on average of best negotiated rates, or Medicare rates
    • Mandates on Health Care Providers
      • 2010 Medicare Reimbursement cuts
        • $455 Billion reduction in reimbursement rates to Medicare Providers over 10 years
          • 21% cut in Medicare Reimbursements to doctors
          • June Pension funding relief act postponed this until November 2010. December Tax act postponed again.
          • The Flinch Method
        • Impact on all health care providers accepting Medicare
        • Providers will shift costs resulting in higher charges to insurers and their participants
        • Likely result - higher insurance premiums
    • Mandates on Suppliers
      • 2010 - 10% Excise Tax on Tanning Salons
        • States looking to prohibit use under 18 years of age
      • 2013 - Medical Device Excise Tax of 2.3%
        • Direct pay by purchaser
        • Prosthetic devices (electric wheelchairs)
        • Excludes eyeglasses, hearing aids, retail items
        • Sales after December 31, 2012
        • Likely to include – MRI’s, CT, X-Ray, Dialysis Equipment, Diabetes and medical Testing kits (i.e., pregnancy tests, snake bite kits)
    • Mandates on Suppliers
      • Annual Health Insurance Provider Fee
        • $8 Billion in 2014 increasing to $14 Billion in 2018
        • Divided among insurers based on market share
        • Cost likely passed on via higher premiums
      • Annual Brand Name Drug Company Fee
        • $2.5 Billion in 2011 increasing to $4.1 Billion in 2018
        • Allocated by share of prescription drug sales under a specified government program
        • Cost likely passed on in higher prices
    • Mandates on Insurance Companies
      • 2018 - Excise Tax on High Cost “Cadillac” Plans
        • 40% tax assessed on Insurance Companies
        • Assessed on employer plan benefits in excess of
          • $10,200 a year of individuals
          • $27,500 a year for families
          • Effective for taxable years beginning after 12/31/2017
          • Would raise $2.5 Trillion over ten years
        • Cost likely passed on via higher premiums
    • Typical Health Insurance Plans Today
      • Preferred Provider Organization (PPO)
        • Individual $558.20 /mo ($6,700/yr) 82.8%($5,550/$1,150)
        • Family $1,800 /mo($21,600/yr) 60% ($12,960/$8,540)
      • Health Maintenance Organization (HMO)
        • Individual $366/mo($4,400/yr) 87.5% ($3,850/$550)
        • Family $1,100/mo ($13,200/yr) 59.7% ($7,880/$5,320)
      • High Deductible Health Care (HDHC)
        • Individual 355 /mo ($4,260/yr) 92.7% ($3,950/$310)
        • Family $1,137/mo($13,650/yr) 61.9% ($8,450 + 600/$5,200 +$4,500)
    • Health Related Excise Taxes and Fees
      • Elimination of Corporate deduction Medicare Part D Subsidy “donut hole”
        • Medicare will begin to close the hole on its own
      • $500,000 income tax deduction limit on executive compensation of health insurance executives
      • Beginning for tax years beginning after 12/31/2012
    • Standardized Benefit Provisions
      • Beginning September 2010 - Plans must provide standardized benefits
        • Minimum standardized benefits
          • Coverage for all dependents to age 26
          • All emergency care must be covered as “in Network”
          • No Cost Sharing on preventative services
          • Restrictions on annual limits
          • No lifetime limits
          • Insurance Company must cover pre-existing conditions on children under 19
        • Insurance Companies will only be able rescind policies for fraud of applicant
    • Mandates on Insurance Companies
      • Beginning in 2014
        • State Insurance Exchanges – “Orbitz for Insurance”
        • Insurance companies required to offer policies
        • Guaranteed issue, no limit on pre-existing condition
        • Premiums become community rated
          • Geography no longer allowed as variable
          • Family no longer allowed as variable
        • Age and Tobacco use are only variables
        • Age 3:1 ratio; Tobacco 1.5:1 ratio
        • Essential Plan Benefits required
          • Undefined currently
        • Result: Insurance Company margins squeezed
    • Employer Mandates
      • Plans as of March 23, 2010 – Grandfathered
        • Not currently required to meet employer mandates
        • In 2014 – “Essential Plan Benefits” will be required
      • Beginning September 2010 All other Plans
        • Section 105(h) discrimination rules apply to all plans; previously only self insured plans
          • 70% of employees must be eligible for coverage
          • Highly compensated taxed on “benefits” of self-insured plan
          • NEW FOR GROUP PLANS - $100 per day per individual discriminated against for group plans (Notice 2010-63)
        • Maintaining discriminatory plans may be costly
    • Employer Mandates
      • 2014 Employer “Coverage” for Employees
        • (“Individual” Coverage not “Family” Coverage)
        • FIRST TEST: Number of FTEs (Full-Time Equivalent)
          • # of FTEs = total employee hours / 2,080
        • Employers with >50 FTE’s
          • Must Cover “Full-Time” employee (avg. 30 hours/ week)
          • Must offer “affordable” coverage
          • Must contribute to cost of Insurance
          • Employer Penalties for non-compliance
        • Employers with <50 FTE’s
        • Employers with <25 FTE’s may be eligible for credits if they voluntarily choose to offer coverage
    • Essential Plan Benefits
      • Must offer Affordable Coverage
        • Individual coverage not family coverage
          • Definition to be developed in Regulations
          • Must meet actuarial guidelines
        • Individuals portion of Insurance Premium must meet % of Income tests
          • Generally, 8-10% of Household income
        • Base = 400% of FPL (Federal Poverty Level)
          • $43,320 for an individual in 2009
          • $88,200 for family of four in 2009
    • Employer Mandates
      • 2014 Employer - Penalties
        • If employer does not offer coverage when required
          • If one employee claims premium credit then employer subject to penalty of $2,000 per Full-time employees (30+ hours)
        • If employer offers unaffordable coverage
          • If one employee claims the credit, then employer will be subject to a penalty equal to lesser of $3,000 per employee claiming credit or $2,000 per all Full-time employees (30+ hours)
        • If employer offers affordable coverage
          • Employer must offer Free Choice Vouchers if employee contribution is 8-9.5% of income (Congress Flinched and removed by 2011 Appropriations Act – April 15 th )
    • Small Business Tax Credit [Code 45R(c)
        • Credit Available for 2010, 2011, 2012 and 2013
        • Full credit where 10 or fewer FTEs and avg. wages of $25,000
          • Credit = 35% of Premiums paid
          • Credit = 25% of Premiums for small tax exempts
          • Beginning in 2014 and 2015
            • Credit = 50% of Premiums paid
            • Credit = 35% of Premium for small exempts
            • Insurance Exchange option required
        • Reduced credit
          • Between 10 and 25 FTEs
          • Average wages between $25,000 and $50,000
        • Limitations
          • No credit available for premiums paid for self-employed or family members; >2% owner of S; >5% owner of C
          • Must pay 50% or more of Premium for single coverage
    • Employer Mandates
      • Employee average wage calculation
        • Excludes ineligible group
          • Self-employed and family members; >2% owner of S; >5% owner of C
        • Includes leased employee
        • Includes affiliated service groups – 415(m) and (o)
        • Excludes Seasonal Workers
          • Less than 120 days
    • Employer Mandates
      • 2011 – 4 page employer summary of benefits
      • 2012 – Form W-2 Information Reporting
        • Optional for 2011 (IRS Notice 2010-69, 10/13/10)
        • Cost of Coverage to be list (not taxed)
        • Verification of Insurance Coverage
      • 2012 – Expanded Form 1099 Reporting
        • PPA removed exception for Goods and Services
        • Small Business Act treated landlords as “Trade or Business” (Congress Flinched and removed both in 2011 HR4 on April 14 th )
    • Other Health Related Provisions in 2010
      • Section 1035 - Pension Protection Act of 2006
        • Expanded opportunity to exchange annuities and life policies for policies that contain Long-term Care Ins.
        • Effective for exchanges after 12/31/2009
          • Hancock – Life Care
          • United of Omaha – Living Care Benefits
    • Individual Mandates
      • Current Statistics - 310 MM in US
      • 179 MM covered by Private Insurance
          • 132 M in Large Group Plans
          • 29 M in Small Group Plans
          • 18 M in individual Plans
      • 100 MM covered by Government Programs
          • 44 M in Medicare
          • 44M in Medicaid
          • 12M in VA and Dept of Defense
      • 41 MM Uninsured
          • 12 MM estimated Illegal Aliens (no impact)
          • 29 MM people potential new insureds
    • Individual Mandates
      • 2014 Individuals Required to have Coverage
        • All US Citizens and legal residents must have qualifying coverage or pay a penalty
          • 1% of household income in 2014
          • 2% in 2015
          • 2.5% in 2016
        • Exemption for financial hardship, religious objections, or if lowest cost plan is greater than 8% of income.
        • Premium credits payable to exchange to reduce cost of coverage for low income beginning 2014
          • Tax Evasion(?) No, offset refunds and tax credits
          • Education Jobs Act eliminates advance refund of EIC (flinch?)
          • 2011 HR4 Requires credit repayment if income > 400% of FPL (Flinch)
    • Revenue Raisers – Check Please
      • 2011 - Expanded 1099 reporting
        • Small Business Jobs Act signed September 27, 2010 (Congress Flinched and removed first part in 2011)
          • Effective for years beginning after 12/31/2010
          • Expanded the “trade or business” definition
            • “ a person receiving rental income from real estate shall be considered to be engaged in a trade or business”
            • Exception rental of principal residence
          • Raised the Section 6721 Penalty from $50 to $100 for failure to file “correct information returns”
            • Reduced penalty if corrected in 30 days increased from $15 to $30
            • Reduced penalty if corrected by August 1st days increased from $30 to $60
            • Intentional disregard increased from $100 to $250
    • Revenue Raisers - Check Please
      • 2013 - 0.9% payroll tax on wages over $200,000
      • 2013 - Individuals, trusts and estates pay 3.8% tax
        • Net investment income (interest, dividends, capital gains, and rental income)
        • Modified AGI over $200,000 single/$250,000 MFJ
        • Top fiduciary bracket – trusts and estates >$11,200
        • No indexing of brackets
      • 2013 - Itemized deduction threshold increased from 7.5% of AGI to 10% of AGI
    • Revenue Raisers - Check Please
      • 2013 - $2,500 limit for contributions to FSA
      • 20% penalty on nonqualified distributions from HSA & MSA
      • Over the counter drugs prescribed by physician excluded from HSA, FSA, MSA reimbursements – Announcement issued September 2010
    • Revenue Raisers – Check Please
      • Closing the Tax Gap
          • US Tax System is Best among Developed Countries
          • Gap estimated at $465 Billion per year
            • Cash economy
            • Lack of Tax Withholding at the source
      • What will “Tax Reform” Look like
        • Some version of Expanded Form 1099 Reporting?
        • President Commission Report
          • Lower rates and broaden base
        • American Bar Association – Simplification
        • International Tax Reform
          • Value Added Tax (only US, Iran, Somalia(?) lack VAT)
          • Internet or National Sales Tax
    • Health Care 2014
      • Legislative Attacks
        • Small changes will continue to chip away
        • Massive “defunding” not likely
          • Majority of Effective dates not until 2014
          • Value of having a Political Issue
            • 2012 Presidential Election
            • 2014 Mid-Term Election
      • Executive - Presidential Veto
      • Judicial Challenges to Constitutionality of Mandates
        • Florida v US ( “unconstitutional” )
          • Appellate argument set for June 8 th in Florida
        • Virginia v Sebelius ( struck down parts of Act )
          • US Sup Ct denied request to bypass Ct of Appeals – April 25 th
          • Appellate argument set for May 10 th in Richmond, Virginia
    • Actions
      • Evaluate the effect of changes on current group health coverage
      • Address cost and compliance issues
      • Consider keeping grandfathered plans
    • Reasonable Questions to Consider
      • Is getting out of the employee insurance business a reasonable option for you?
        • Cheaper to get out completely(?)
        • Impact on current employees?
        • Ability to attract future employees?
      • Pay penalty allow employees to self insure?
      • Remember Section 105(h) discrimination rule
          • Not just White collar v. Blue collar (70%)
      • Look at employer self insuring a larger portion
    • Questions Brian T. Whitlock JD, CPA, LLM Blackman Kallick, LLP 10 S. Riverside Plaza, Chicago, IL 60606 Phone: (312) 980-2941 Website: www.blackmankallick.com Email: [email_address] Linked-in Blog www.untaxinglyyours.com