Definitions:“PPACA” = Patient Protection and Affordable Care ActAn “Employee” is an employee “under the common-law standards.” The term does not include leased employees, partners in a partnership, or a 2% S corporation shareholder.An “Exchange” is a state-controlled marketplace where health insurance products can be compared and purchased.It is not clear that all states will establish Exchanges. Some commentators state that if an employer only has employees in a state with no Exchange, then such employees could not receive federal subsidies to participate on their Exchange (because it does not exist) and the employer could not be held liable for Play or Pay penalties. However, it is not yet clear whether there will be a federal Exchange. Potential Questions:“How would the company know is an employee receives federally-subsidized Exchange coverage?” The employer should receive a letter from the US Department of Health and Human Services stating so. “Can a self-insured dental or vision plan constitute ‘minimum value’?” Probably not; the full definition of “minimum essential coverage” excludes many such plans.“Are all employers who fall below the ‘50 or more FT/FTE employees’ test exempt from play or pay?” No, the following types of employers still fall under the rules, regardless of size:Employers part of a controlled group, where the controlled group has 50 or more FT/FTE employees.New employers who expect to employ 50 or more FT/FTE employees in the current year.Employers deemed “large” because their predecessor companies were large.Miscellaneous:“Offer Value”:A plan does not provide “minimum value” if the “plan’s share of the total allowed cost of benefits provided under the plan is less than 60% of such costs.” Under IRS Notice 2012-31, the rules may include a 2% variance grace, potentially lowering the value threshold to 58%. A US Department of Health and Human Services report found that 98% of individuals covered by employer-sponsored plans are enrolled in plans that offer value over 60% of actuarial value. IRS Notice 2012-31. HHS has issued an actuarial value calculator for this purpose.About a dozen types of transition relief apply, including relief for employers who aren’t on the calendar year, employers who have about 50 FT or FTE employees and need a shorter “measurement period” (to assess whether they are sufficiently large to fall under the PPACA rules), employers who contribute to a multiemployer plan that provides minimum value to FT employees and their dependents, and employers who “takes steps” in 2014 to provide coverage to dependents and spouses for 2015.
“How difficult is it for an employer who steer into this loophole?” Extremely. It would be very difficult for an employer to determine, in advance, whether each employee is eligible for subsidized Exchange coverage, due to the impact of employees’ family sizes, spouses, and children on this number.If applicable law permits, employers could ask employees for this information. It is doubtful whether employees would provide such information.Another loophole: If an applicable taxpayer is eligible for Medicaid coverage, he or she would not be eligible for a federal Exchange subsidy. Again, employees may be reticent about providing such information to an employer. Note that Medicaid eligibility varies state by state, including an PPACA Medicaid eligibility expansion for individuals aged 19-64 at or below 133% of the federal poverty line. If an employer’s state has adopted this expansion, it may be easier for the employer to discern whether its employees are eligible for Medicaid. Nevertheless, this task would still be administratively difficult.Finally, some states have a “no-Medicaid no-PPACA” gap, in which it is possible for an employee to fall below 100% of the federal poverty level (and thus be ineligible for federal Exchange subsidies) but not low enough to qualify for Medicaid. In such a case, unless the employer voluntarily offers the employee coverage, the employee will remain uninsured unless he or she can afford other coverage.
PPACA = Patient Protection and Affordable Care Act“Strengthen internal appeal” and “Provide for external independent review”: Internal appeal decision due within:Request receipt for urgent care: 72 hours (and possibly simultaneous internal appeal and external review)Denial of non-urgent care not yet received: 30 daysDenial of non-urgent care already received: 60 daysThe $2500/year FSA limit has several exceptions (e.g., dependent care assistance, adoption care assistance, employer nonelective contributions (“flex credits”), salary reduction contributions to certain cafeteria plans (“premium conversion” salary reduction contributions).
According to informal DOL statements, “annual visit” limits or “day” limits are generally acceptable, unless they transcend into dollar limits.Essential health benefits:Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care Wellness programs are allowed if they are designed to help employees improve their health; if they are primarily punitive they will not be allowed. Reward/penalty amounts allowed:30%: If there are multiple parts to the program (e.g., meeting certain BMI, blood pressure, exercise targets). 50%: Non-use of tobacco.50%: Both tobacco and non-tobacco requirements.
These thresholds include both the employer and the employee contributions, and are subject to variation based on local demographics.The Cadillac Tax reflects one of the PPACA’s goals—cost-sharing. It also helps pay for the PPACA.
Affordable care act power point june 12 2013 (00017443)
IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in thiscommunication, including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1)avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.Healthcare ReformRoger RoyseRoyse Law Firm, PC1717 Embarcadero RoadPalo Alto, CA firstname.lastname@example.orgSkype: roger.royse
Play or Pay• Large employers can either participate in the PPACA system or pay penalties.• Applies to employers with 50 or more FT or FTE (130 hours/month) employees.• Employers can determine FT status by looking back to a 3-12 month period.Effective Jan. 1, 2014, subject to transition rules, if any employee receives a federalsubsidy to participate in a health insurance “Exchange,” then…Mandate Play PayOfferCoverageProvide “minimum essential”health coverage to 95% of FTemployees and their dependents.$2000/year for each FTemployee, after the first 30 suchemployees.OfferValueMaintain a “minimum value” (>60% of actuarial value). Lesser of the above penalty or$3000/year per subsidized FTemployee.BeAffordableBe affordable (< 9.5% ofemployee’s compensation)
Federal Subsidies LoopholeEmployers only face Play or Pay penalties if at least one employee receives federalsubsidies to participate in an Exchange.To receive such federal subsidies, an employee’s household income for the taxableyear must be between 100% and 400% of the federal poverty level:(Alaska and Hawaii figures differ.)Family Size 100% Poverty Level 400% Poverty Level1 $11,490 $45,9602 $15,510 $62,0403 $19,530 $78,1204 $23,550 $94,200
What PPACA Plans Must Do• Dependent coverage for children up to age 26• Preventative care without “cost-sharing”• Strengthen internal appeals• Provide for external independent review• Provide a Summary of Benefits and Coverage uponapplication, enrollment, or re-enrollment• Provide a notice 60 days before any materialmodifications become effective• $2500/year FSA employee contribution “limit”Now2014• Automatically enroll full-time employees(employers with greater than 200 employees only)(delayed until regulations are issued)
What PPACA Plans May Do• Place annual dollar limits on essential healthbenefits at or above specified levels:• 9/23/12 - 1/1/14: $2 million• 1/1/14 - : Complete annual limitation prohibition• Wellness plan reward/penalty of as much as 30%-50%of the cost of coverageNow –2014
What PPACA Plans Cannot Do• Impose pre-existing condition exclusion onindividuals younger than 19• Place lifetime limits on essential health benefits• Discriminate in favor of highly compensatedemployees (delayed until regulations are issued)Now2014• Impose pre-existing condition exclusion on anyindividual• Have a waiting period greater than 90 days before entryinto a plan
The “Cadillac Tax”Begins in 2018.The theory: Prevent overuse of the healthcare system by employees withgenerous healthcare plans.The tax: 40% tax on the portion of annual health benefits provided toemployees and dependents that exceeds $10,200 for single coverage or$27,500 for family coverage.The result: Co-payments and deductibles are likely to increase as Cadillacplans move below these thresholds.
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