Health Care Reform: The Franchise Operator's Guide 10-26-12


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Learn how the US Affordable Care Act will affect your franchise financially.

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Health Care Reform: The Franchise Operator's Guide 10-26-12

  1. 1. ©2012 CliftonLarsonAllen LLP Health Care Reform: The Franchise Operator’s Guide An Overview of the New Law October 1, 201211 ©2012 CliftonLarsonAllen LLP
  2. 2. Supreme Court Examines Constitutionality U.S. Supreme Court Ruling: June 28, 2012 Individual Mandate - Constitutional Entire Affordable Care Act - Stands Medicaid Expansion -State Option2 ©2012 CliftonLarsonAllen LLP
  3. 3. Understanding the Health Reform Law – Overview • Health Reform law seeks to expand access to health coverage by: 1) Expanding Medicaid eligibility 2) Developing a new marketplace for purchasing insurance (“Exchange”) 3) Mandating individuals enroll in health insurance 4) Imposing penalties on large employers who do not offer coverage, or offer coverage that is unaffordable 5) Subsidizing low and middle-income individuals in the Exchange • The objective is to report on the potential impact specific to the status quo compared to the health insurance exchange based off what we know today in the post reform world • The exchange simulation is based off most current information3 ©2012 CliftonLarsonAllen LLP
  4. 4. 2014: State Health Insurance ExchangesWhat is an exchange? Who can participate?A marketplace for individuals – In 2014, small employers canand small businesses to shop for offer an Exchange plan as their employer health planinsurance. – Offer a choice of health plans – Individuals: Includes self- employed or unemployed – Standardize health plan options individuals (2014) – Allow consumers to compare plans based upon price – In 2017, states can allow large employers to participate – Intended to provide a more competitive market • Each state must establish a health insurance exchange – Provides consumers with a neutral party to assist with plan • HHS Secretary to establish the rules enrollment, information and around exchanges eligibility determination for any subsidies4 ©2012 CliftonLarsonAllen LLP
  5. 5. 2014: Exchange Plans Types of exchange plans to be offered by insurers – Bronze = 60% actuarial value – Silver = 70% actuarial value – Gold = 80% actuarial value – Platinum = 90% actuarial value – Catastrophic plan ◊ Only available to individuals < 30 years old, or those exempted from the individual mandate due to unaffordability or hardship. ◊ Plan must cover: • “minimum essential benefits” • a minimum of three primary care visits per year – All exchange “metal” plans must cover essential health benefits, limit cost- sharing and have a specified actuarial value5 ©2012 CliftonLarsonAllen LLP
  6. 6. 2014: Individual Mandate • Individual mandate to obtain health coverage: Beginning in 2014, most individuals must obtain a minimum-level of health insurance coverage or pay a penalty • Minimum essential coverage includes: – Medicare, Medicaid, TRICARE – Insurance purchased through an Exchange, on the individual market – Employer-sponsored coverage that is affordable & provides minimum value – Grandfathered plans (group plan in effect on 3/23/2010) Hardship exemption • Penalties for failure to obtain coverage: Premium cost for – In 2014: greater of $95 or 1.0% of income lowest cost plan > 8% – In 2015: greater of $325 or 2.0% of income of Household Income – In 2016: greater of $695 or 2.5% of income – Penalty is capped at three times the per person amount for a family – Assessed penalty for dependents is half the individual rate6 ©2012 CliftonLarsonAllen LLP
  7. 7. 2014: Government assistance to help some individuals obtain coverage • Medicaid expansion: Expands eligibility to individuals and families up to 133 % 133% FPL of the federal poverty level (FPL) Individual = $14,856 – If cost effective, states can opt to subsidize employer- sponsored premiums for this group Family of 4 = $30,656 • Premium and cost share assistance: – Individuals and families with household income of 100 - 400 % FPL may 400% FPL: be eligible for sliding-scale assistance in the Individual= form of: $44,680 Family of 4= ◊ Tax credits to help pay premiums; and $92,200 ◊ Out-of-pocket reductions to help with cost sharing (e.g., co-payments and co-insurance)7 ©2012 CliftonLarsonAllen LLP
  8. 8. 2014: Potential Large Employer Penalties Law does NOT require employers to offer health insurance • Beginning in 2014, employers with FTE = FT employees 50+ FTEs must pay a “shared + FT equivalents responsibility” penalty if any FT FT employee = employee receives Exchange works avg. 30 or subsidies more hours per week – Different penalties whether or not FT equivalents = employer offers affordable, Hours worked in a “minimum value” to employees month by all PT employees divided – Minimum essential coverage = Plan by 120 with 60% actuarial value – Affordable = Employee premium cost For “minimum essential < 9.5% of household income coverage”, see IRS Notice 2012- 31 at: drop/n-12-31.pdf8 ©2012 CliftonLarsonAllen LLP
  9. 9. Employer “shared responsibility” penalty Penalty only assessed if a FT employee receives Exchange subsidies. • No or Inadequate Insurance Penalty Employees are not eligible for Exchange subsidies if – $2000 x each full-time worker their employer coverage is (after first 30 workers) deemed “affordable” • Unaffordable Employer Coverage Penalty – At least, $3000 x # of full-time employees who “Affordable” means the receive exchange subsidies employee premium – Maximum penalty = $2000 x each full-time contribution under the employee (except for first 30 full-time workers) employer plan is less than penalty 9.5% of their household income – No penalty for Medicaid eligible employees9 ©2012 CliftonLarsonAllen LLP
  10. 10. Key Provisions of Aug. 12 Proposed Rules • Affordability for Employee: If employee’s premium cost for self-only coverage is less than 9.5% of their W-2 wages for the employer, the health insurance is considered affordable even if they have a family and take family coverage – It appears that if coverage is affordable for employee but not their family, the employer will not pay a penalty. – Employer’s not subject to penalty if employee receives tax credit but later employer-sponsored insurance is determined to be affordable. – Affordability for related individuals: For premium tax credits eligibility =cost of self-only coverage related to household income; for the individual mandate penalty = family coverage premiums in proportion to household income. • Must file tax return: All individuals receiving an advanced premium assistance tax credit must file an income tax return, regardless if they are otherwise required to file.10 ©2012 CliftonLarsonAllen LLP
  11. 11. Nondiscrimination Rules • Health Care Reform expands the nondiscrimination rules of IRS Code Section 105(h) to cover fully insured group health plans – Also includes Health Reimbursement Arrangements (HSAs) or stand alone Medical Reimbursement Plans – Affects those plans that do not have grandfathered status for plan years beginning on or after September 23, 2010 – Effective date has been delayed until regulations are issued11 ©2012 CliftonLarsonAllen LLP
  12. 12. Nondiscrimination Rules (continued) • IRS Section 105(h) Requirements – A self-insured health plan must not discriminate in favor of highly- compensated employees with respect to eligibility to participate or benefits provided – Highly-compensated employees must include the value of the discriminatory benefits received in their taxable income for any tax year in which the self-insured plan fails to satisfy discrimination • Definition of highly-compensated employee – Among the 5 highest paid officers – A 10% or more shareholder of the company’s stock – Among the highest paid 25% of all employees12 ©2012 CliftonLarsonAllen LLP
  13. 13. Nondiscrimination Rules (continued) • Eligibility test - the plan must pass one of the following coverage tests: – 70% of all employees must benefit under the plan. – 80% of eligible employees benefit and 70% of all employees are eligible. – The plan benefits a nondiscriminatory classification of employees as determined by the employer based on facts and circumstances conducted on the basis of plan participation.13 ©2012 CliftonLarsonAllen LLP
  14. 14. Nondiscrimination Rules (continued) • Benefits test – the plan must meet these requirements: – Provide the same benefits to both highly-compensated and non-highly compensated employees, including benefits for dependents of highly- compensated employees provided on the same basis for dependents of all other employees. – The benefits subject to reimbursement are in proportion to compensation – Not discriminate in favor of highly compensated employees. – Optional benefits (e.g. dental) are available to all eligible employees to elect coverage with the same premium charged for all employees. Members of a control group or affiliated service group are considered a single employer for purposes of 105(h) rules14 ©2012 CliftonLarsonAllen LLP
  15. 15. Nondiscrimination Rules (continued) • Excludable Employees (if not participating) – Employees with less than 3 years of service – Employees that have not attained age 25 – Part-time or seasonal employees – Employees covered under a collective bargained agreement – Employees who are nonresident aliens or receive no U.S. earned income15 ©2012 CliftonLarsonAllen LLP
  16. 16. Nondiscrimination Rules (continued) • Penalties – An employer who sponsors a discriminatory insured group health plan will be subject to an excise tax liability of $100 per day per employee affected with a maximum penalty of $500,000 – The law does not address if a discriminatory non-grandfathered insured plan will result in an income tax liability for highly- compensated employees as it would for a discriminatory self-insured plan16 ©2012 CliftonLarsonAllen LLP
  17. 17. Health Insurance and Penalty (HIP) Calculator ©2012 CliftonLarsonAllen LLP
  18. 18. Questions? Anita F. Baker Bob Churchwell Managing Partner Franchise Workforce Consultant Employee Benefit Plans Employee Benefits Specialist CliftonLarsonAllen LLP Franchise Workforce 480-615-2410 240-423-8682 For more information on health reform, go to our Health Care Reform Center: ©2012 CliftonLarsonAllen LLP