Healthcare brief

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Understanding the impact of Health Care Reform on your business in 2013.

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  • 3
  • Exceptions:Household income is below threshold requiring filing of a tax returnCost of any available coverage exceeds 8% of income (after taking into account any employer contributions or tax credits)Undocumented immigrantsIncarcerated personsMembers of Indian tribesMembers of various religions
  • Healthcare brief

    1. 1. 1
    2. 2. IntroductionGeneral Overview of Health Care Reform (HCR)Critical Decisions and Considerations for 2013• Individual Mandate• Employer Shared Responsibility (Play or Pay)• Reporting• Costs, Taxes & Fees• State Exchange2
    3. 3. Provisions 2010 – 2018• Mandates & Statutes• Access To Affordable, Quality Coverage• Taxes, Penalties, Fees & Credits• Reporting & AdministrationImpact to Business Owners• More complexity in purchasing decisions• Increased compliance requirements• Rising costs for small businesses3
    4. 4. Individual MandateEmployer Shared Responsibility (Play or Pay)ReportingCosts, Taxes & FeesState Exchanges4
    5. 5. • Effective January 2014, all individuals must purchasequalifying health coverage• Limited exceptions apply• Penalties for failure to comply collected throughindividual’s federal income tax returnPenalty is lesser of above amount or the national average cost of bronze level coverage in the state exchanges5
    6. 6. • Are you prepared to answer employees’ questions?• Will the penalty change your employees’ behavior?• Will more employees enroll in your health insuranceoffering?• What is the impact to your plan design and total healthcare cost?6
    7. 7. • 40 FTEs*• Offers Coverage• 75% Participation• 10 FTEs currentlynot enrolled• $5,000 contributionper employeeA. 10 FTEs (currently not enrolled) enrollbecause of individual mandateB. Employer’s costs of offering coverageincreasesC. 10 x $5,000 = $50,0007*Full-Time Employees
    8. 8. Individual MandateEmployer Shared Responsibility (Play or Pay)ReportingCosts, Taxes & FeesState Exchanges8
    9. 9. • Employers with 50 or more FTEs (including FTEQs*) aresubject to Play or Pay penalties if certain minimumrequirements are not met (coverage, value and affordability)• One or more FTEs obtains coverage through a state exchangeand receives a premium tax credit or cost sharing subsidy9*Full-Time Equivalents: individual(s), not treated as full-time employees, who in combination are counted as a full-timeemployee based on number of hours worked during a fixed time period
    10. 10. • Consider controlled group status• FTE calculation is performed onmonth-by-month basis andrequires following data:– Employment Status (full-time,part-time or seasonal)– Hire Date– Hours Worked• Ongoing Data Tracking:– Hours and status for allemployees to determinecoverage eligibility– FTEs for purposes ofdetermining eligibility forcoverage10
    11. 11. 60% of minimumessential benefits costscovered by the plan*Not to exceed 9.5% ofhousehold income*Actuarial plan value11
    12. 12. • Do you offer health insurance?• Does your health insurance offering meet the minimumvalue and affordability requirements?• How many full-time employees do you have under thenew health care reform calculation?• Do you think any of your full-time employees will receivea subsidy for state exchange coverage?• What is your exposure to play or pay penalties?12
    13. 13. • 50 FTEs (including FTEQs)• ≠ MECA. 1 FTE goes to exchangeB. 1 FTE gets subsidyC. Penalty on employer is triggeredD. (50 – 30) x $2,000 = $40,00013*Minimum Essential Coverage: defined under HCR as (i) an employer-sponsored grouphealth plan, (ii) certain government programs such as Medicare, Medicaid, CHIP andTRICARE, (iii) an individual policy
    14. 14. • 50 FTEs (including FTEQs)• Offers Coverage• ≠ Minimum Value• ≠ AffordableA. 10 FTEs go to exchangeB. 5 FTEs get subsidiesC. Penalty on employer is triggeredD. 5 x $3,000 = $15,00014
    15. 15. Individual MandateEmployer Shared Responsibility (Play or Pay)ReportingCosts, Taxes & FeesState Exchanges15
    16. 16. • Number of full-time employees (FTEs) employed each month• Name, address and Taxpayer Identification Number of each FTEduring calendar year and months (if any) when employee (anddependents) were covered under health plans• Length of any waiting periods• Certify coverage offered to FTEs and dependents• Months employer sponsored plan was available• Monthly premium for the lowest cost options• Employer’s share of the total allowed costs of benefits16
    17. 17. • State/Local Reporting• State Exchange Reporting• Employment and Plan Offering Verifications• Penalty Appeals17
    18. 18. • Are you prepared to comply with existing or futurereporting requirements?• Are your payroll processing, benefits administration andHR services managed by multiple systems and/orvendors?• How will you coordinate the tracking of necessaryinformation and submit the appropriate reports on atimely basis?18
    19. 19. Individual MandateEmployer Shared Responsibility (Play or Pay)ReportingCosts, Taxes & FeesState Exchanges19
    20. 20. 20The Congressional Joint Committee on Taxation recentlyidentified more than 20 new or increased taxes, totalingalmost $1.1 trillion over the next ten years.• Nearly double the original 2010 projection• $25 billion in taxes affecting health insurance costs in 2014
    21. 21. Taxes and fees on insurers/health care industry willincrease costs for businesses by 3.5-4% or $400 PEPY*21*Per Employee Per Year
    22. 22. 22• Individual and small market reforms:- States will heavily regulate small group and individual premiums- Adjusted community rating will limit pricing variables to age, familysize, geography and tobacco use (some states may further limitvariations or eliminate altogether)- Other rating factors will be prohibited (e.g., prior claims experience,health status, gender, industry and duration of coverage)- Pricing of identical medical plans offered inside & outside of stateexchanges must be the same• Other requirements affecting costs include:- Guaranteed issue and renewability- Maximum deductible levels- Minimum plan values
    23. 23. 23• How will new small group pricing regulations impact yourcost structure?• How will taxes and fees impact your cost structure?• How can you modify your plan designs to offset expectedcost increases?• Should you adjust employee contributions to offsetexpected cost increases?• Can you adjust your product or service prices to cover yourexpected cost increases?
    24. 24. Individual MandateEmployer Shared Responsibility (Play or Pay)ReportingCosts, Taxes & FeesState Exchanges24
    25. 25. 25• State exchanges will be marketplaces for individuals andsmall businesses to view, compare and purchase healthinsurance• Creation mandated by HCR- Open Enrollment - October 1, 2013- Fully-Operational - January 1, 2014• Some regulations have yet to be finalized• Processes, products and pricing still in development
    26. 26. 26• Will include 4 levels of medical plans with varying coverage levels (“metal plans”)• Some state exchanges are expected to initially offer only medical andRx coverage• Full scope of products and pricing for exchanges is not known in all statesat this time*% of minimumessential benefitscosts covered bythe plan
    27. 27. 27• Subsidies will be available through state exchanges for thoseearning up to 400% of federal poverty level (FPL)- $45,960 for individual, $94,200 for family of 4 (2013 FPL)- Available only for coverage obtained though exchanges- Unavailable if employer offers qualified coverage• Subsidy calculations are complex- Amounts based on a sliding scale using householdincome/age/plan value and phased-out as incomeapproaches 400% FPL
    28. 28. 28• There are two forms of subsidies: Premium Tax Credits &Cost-Sharing Subsidies, both:- lower overall cost of health insurance coverage for anindividual/family- are based on a sliding income scale (those at bottomreceive most assistance, those at top receive least)- are pegged to Silver Plans in the State Exchanges
    29. 29. 29FederallyFacilitatedExchanges (26)State BasedExchanges (18)PartnershipExchanges (7)
    30. 30. 30• Employers relying on state exchanges for employee medicalcoverage may be disadvantaged against competitors who attract andretain top talent through a comprehensive benefits strategy• State exchange medical plans may be viewed as a lower qualitysolution because many believe the exchanges were developed toserve the uninsured and underinsured• State exchanges may not provide a consistent health insurancesolution for employees across multiple states• State exchange products may initially be limited to medical and Rxonly, requiring you to seek other solutions for ancillary insuranceproducts (e.g., dental, vision, life, etc.)
    31. 31. 31COMPLEXITY: Reduce administrative burdens through a dedicatedservice team & best-in-class IT infrastructureCOMPLIANCE: Minimize risk of fines & penalties through continuousmonitoring of changing federal & state regulationsCOSTS: Stabilize health care costs through our fully-insured health planand its low cost structure
    32. 32. 32The information provided in this communication is for educational and informational purposes only, and is not legal advice.IRS Circular 230 Disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federaltax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot beused, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending toanother party any transaction or matter addressed herein. You should seek advice based on your particular circumstances froman independent tax advisor with respect to any federal tax transaction or matter addressed herein.

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