Legal Landscape Employer Obligations Employer Next Steps Tax Considerations Employer Opportunities

1. THE SUPREME COURT HAS
SPOKEN:
NOW WHAT?
July, 2012
Karen R. McLeese, Esq.
Vice President, Regulatory Affairs - CBIZ Benefits & Insurance Services, Inc.
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William M. Smith, Esq.

2. Overview
Legal Landscape
Employer Obligations
Employer Next Steps
Tax Considerations
Employer Opportunities
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3. ACA: Legal Landscape
Supreme Court
Oral Arguments Heard March 26-28, 2012
 National Federation of Independent Business v.
Sebelius, Secretary of HHS, et al.
 Florida, et al v. Department of HHS, et al
 Department of HHS et al v. Florida, et al
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4. ACA: Legal Landscape
Supreme Court
Four Aspects of ACA Argued @ Hearings:
1. Anti-injunction issue i.e., whether harm need be
shown prior to reviewing the impact of the law
2. Constitutionality of the individual mandate
3. Severability: Whether the entire law should be
repealed, or sever only certain parts
4. State challenge to Medicaid expansion
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5. ACA: Legal Landscape
Supreme Court Ruled June 28, 2012
Decision:
 Individual Mandate upheld under Congress’
Taxing Authority
 The ACA law, as a whole, Stands
 Narrowly Construed Medicaid Expansion
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6. ACA: Legal Landscape
112 th Congress
Multiple Bills Introduced to
Modify or Repeal the ACA Law
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7. ACA: Legal Landscape
States
By 2014:
1. Establish Exchange; or
2. Federal-State Partnership; or
3. Federal Implementation of Exchange
 Expand Medicaid to population with
income <133% of federal poverty level vs.
Do Not Expand Medicaid 7

8. ACA: Employer Obligations
Confirm ACA Compliance to Date – All Plans:
 Extension of dependent coverage to adult child
up to age 26
 Ban on preexisting condition exclusions on
enrollees under 19
 Ban on plan rescissions, except for fraud or
intentional misrepresentation
 Ban on Annual and Lifetime Limits on Essential
Benefits
 Grandfathered Plans: Make certain Plan includes
Notice of Grandfathered Health Plan Status 8

9. ACA: Employer Obligations
Confirm ACA Compliance to Date
(Applies to Non-GF or Plans losing GF status)
 Coverage for Preventive Health Services
 Independent Claims and Appeals, and External
Review Process
 Patient Protections: Choice of Primary Care
Provider, Direct Access to OB/GYN Services
and Emergency Room Service Access
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10. ACA: Employer Next Steps
2012
 Medical Loss Ratio - Rebates
 Applies to Insured Plans Only
 1st rebate Aug 2012
 Share rebate with plan participants proportionately
 Premium holiday or benefit enhancement permissible
 Administratively feasible and tax-favored
 Women’s Preventative Care
 Applicable plan years beginning on or after 8/1/12
(January 1, 2013 for calendar year plans)
 Religious employer-sponsored plans: 1-year compliance
delay 10

11. ACA: Employer Next Steps
2012, con’t
 Summary of Benefits and Coverage
 Applicable for plan renewals and plan years beginning
on or after 9/23/12
 60-day Advanced Notice of Material Modification
of Benefits
 Effective 1st open enrollment period occurring on or
after 9/23/12
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12. ACA: Employer Next Steps
2012, con’t
 Form W-2 Reporting of Aggregate Cost of
Employer-sponsored Health Coverage
 Effective 2012 reporting year on W-2s issued Jan 2013
 Patient-Centered Outcome Research Fee
 Fee calculated based on average number of covered lives
under the plan
 Initial fee of $1 per covered life for policy/plan years
ending on or after 10/1/12
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13. ACA: Employer Next Steps
2013
 $2,500 cap on Flexible Medical Spending
Account Plans
 Applicable plan years beginning on or after
1/1/13
 Quality of Care Reporting Requirement
(awaiting guidance)
 Notice of Exchange Coverage
(awaiting guidance)
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14. ACA: Employer Next Steps
2014
Shared Responsibility
(awaiting guidance)
 Individual Minimum Coverage vs. Pay Tax
 Employer 50+ FTEEs: Minimum Coverage
at Affordable Rate vs. Excise Tax
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15. ACA: Employer Next Steps
Other Health Coverage-related Changes in
2014
(awaiting guidance)
 Employer Health Insurance Reporting Requirement
 Ban on Annual and Lifetime Limits on Essential
Benefits
 Ban on Preexisting Condition Exclusions applicable
to anyone
 Increased Reward for Participation in Wellness
Program
 Ban on Discriminatory Premium Rates 15

16. ACA: Employer Next Steps
Other Health Coverage-related Changes in 2014
(awaiting guidance), con’t
 Ban on Excessive Waiting Periods
 Ban on Discrimination Based on Health Status
 Coverage for Individuals Participating in Approved
Clinical Trials
 Ban on Discrimination against Health Care
Providers
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17. ACA: Employer Next Steps
2018
 Excise Tax on High Cost Employer-
Sponsored Health Coverage
(“Cadillac Tax”)
(awaiting guidance)
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18. ACA: Employer Next Steps
Provisions Delayed - Effective Date
TBD
 Salary-based Discrimination Rules
applicable to insured plans (were to
become effective on or after 9/23/10)
 Automatic Enrollment Provisions (were to
become effective in 2013)
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19. ACA: Tax Considerations
Confirm ACA Compliance to Date
 No reimbursement of OTC Medications
except for insulin or when prescribed
 Increased Penalty for Nonqualified HSA or
Archer MSA Distributions (20%)
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20. ACA: Tax Considerations
2013
 Additional Medicare tax withholding for certain
High Income Earners (1/1/13)
 Unearned Income Medicare Contribution (1/1/13)
 Modification of Itemized Deduction for Medical
Expenses (awaiting guidance)
 Retiree Prescription Drug Coverage – Modified
Deduction (1/1/13)
 2.3% Medical Device Tax (1/1/13)
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21. ACA: Tax Considerations
Additional 0.9% Medicare Tax on Earned
Income
Change in 2013:
 Additional 0.9% HI tax on wages and net self-employed’s
income exceeding thresholds below
 Additional tax applies to employee’s contribution only
(or ½ of self-employed individual’s contribution)
Filing Status Threshold
Married Filing Jointly $250,000
Single/Head of Household $200,000
Married Filing Separately $125,000
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22. ACA: Tax Considerations
Withholding Additional 0.9% Medicare Tax
on Earned Income
 Employers required to withhold the additional
0.9% tax on wages in excess of $200,000
 Employers disregard wages received by
employee’s spouse
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23. ACA: Tax Considerations
Withholding Additional 0.9% Medicare Tax on Earned
Income, con’t
Implications:
 If employee’s wages are <$200,000 but when combined
with the spouse’s wages they >$250,000, the couple
may be under-withheld
 If employee’s wages between $200,000 and $250,000
and spouse has no wages, the couple may be over-
withheld
 The 0.9% tax is a tax for purposes of the underpayment
of estimated tax penalty.
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24. ACA: Tax Considerations
3.8% Medicare Tax on Unearned
Income
 First time that FICA/Medicare taxes have been
assessed on unearned income
 Applies to Individuals, Trusts and Estates, and
Certain Trades or Businesses
 Considered a tax for purposes of the
underpayment of estimated tax penalty
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25. ACA: Tax Considerations
3.8% Medicare Tax – Individuals
 3.8% of the lesser of:
 Net investment income or
 Excess of Modified AGI over threshold amount
 Modified AGI – AGI + foreign earned income exclusion
Filing Status Threshold
Married Filing Jointly $250,000
Single/Head of Household $200,000
Married Filing Separately $125,000
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26. ACA: Tax Considerations
3.8% Medicare Tax – Net Investment
Income
 Net Investment Income includes investment income, less
otherwise allowable deductions properly allocable to such
income
 Includes:
 Gross income from interest, dividends, annuities, royalties and
rents
 Other gross income from any passive trade or business
 Net gains attributable to the disposition of property
 Excludes:
 Distributions from qualified retirement plans
 Investment income excludable from taxable income (e.g. 26
municipal bond interest)

27. ACA: Tax Considerations
3.8% Medicare Tax – Trade or Business
 The 3.8% Medicare tax only applies to the following types of
trades and businesses:
 Passive activities, and
 Traders in financial instruments or commodities
 The tax does not apply to active trade or business activities
conducted by a sole proprietor, partnership or S corporation
 The tax does not apply to any income subject to self-
employment tax
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28. ACA: Employer Opportunities
 Determine Shared Responsibility
Liability
 Consider FTEs 30+ hours
 Plan eligibility
 Employee cost as % of W-2 earnings
 Cost Containment Strategies
 Wellness Incentives
 Defined Contribution Approach
 Medical Home Model
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29. Questions?
Karen R. McLeese, Esq.
Vice President, Regulatory Affairs -
CBIZ Benefits & Insurance Services, Inc.
(913) 234-1760
kmcleese@cbiz.com
William M. Smith, Esq.
Managing Director –
CBIZ National Tax Office
(301) 951-3636
billsmith@cbiz.com
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