PPACA: What You Need to Know (June 2013)


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  • Also in 2016: threshold for itemized medical deductions increases from 7.5% to 10% for seniors
  • PPACA: What You Need to Know (June 2013)

    1. 1. Patient Protection andAffordable Care Act:What You Need To KnowTravis A. Sinquefield, PHR, MBAJune 3, 2013www.hscompanies.com/PPACA
    2. 2. WHAT IS THE PPACA?• Patient Protection and Affordable Care Act of 2010• Single largest health care reform in U.S. history• Implements shared responsibility provisions foremployers• Implements individual insurance mandates• Changes how the overall health care system operatesfor insurerswww.hscompanies.com/PPACA
    3. 3. TIMELINE OF KEY EVENTS2013• Health flexible spending account limit of $2,500.• Restricted annual limit on essential benefits at $2million.• Exchange notices to all employees due in Fall 2013 –exchanges set to open for purchase October 1• Elimination of Medicare Part D subsidy tax advantage(any Medicare subsidies received must be reported astaxable income)www.hscompanies.com/PPACA
    4. 4. TIMELINE OF KEY EVENTS2013 (continued)• Medicare tax on unearned income of 3.8% (MAGI of$200k for individuals, $250k for joint filers)• Medicare tax increase of 0.9% for wage earners over$200k ($250k for joint filers)• Change in deductible limits and minimums for highdeductible health planswww.hscompanies.com/PPACA
    5. 5. TIMELINE OF KEY EVENTS2014• Individual and employer mandates• Health insurance premium tax credit (refundable)• Exchange coverage• Waiting periods limited to 90 days• No annual dollar limit on essential health benefits• Cost-sharing limits of $6,250 for individualcoverage/$12,500 for in-network family coveragewww.hscompanies.com/PPACA
    6. 6. 2014 (continued)• Deductible limit of $2,000 for individualcoverage/$4,000 for family coverage (smallbusiness plans only)• Section 6055 IRS reporting for plans that provideminimum essential coverage (IRS Notice 2012-32)• Section 6056 IRS reporting for large employers(at least 50 full-time employees), presumably toverify individual mandate and pay-or-playinformation. (IRS Notice 2012-33)TIMELINE OF KEY EVENTSwww.hscompanies.com/PPACA
    7. 7. HOW DOES IT AFFECT MY BUSINESS?• What applies to me, regardless of the size of mybusiness?• Am I a large employer?• What happens if I am a large employer?• Are there tax credits available?www.hscompanies.com/PPACA
    8. 8. HOW DOES IT AFFECT MY BUSINESS?What applies regardless of the size of my business?• Exchange notices to your employees in the Fall of 2013• Provide revised Summary of Benefits and Coverage• Non-discrimination testing for fully insured plans –implementation date TBD• Benefits offered – contraceptive, pre-existingconditions• Increase Medicare Taxes - 0.9% increase for incomesover $200k www.hscompanies.com/PPACA
    9. 9. HOW DOES IT AFFECT MY BUSINESS?What applies regardless of the size of my business?(cont.)• New limits & minimums for high-deductible healthplans (plan year starting in 2013)• $3250/$6450 maximum annual contribution limit –total• $1250/$2500 minimum deductible• Max out of pocket (deductibles and copays) of$6250/$12,500www.hscompanies.com/PPACA
    10. 10. AM I CONSIDERED A LARGE EMPLOYER?What exactly is a large employer?• Definition: organizations with 50 or more full-time andfull-time equivalents• Need to consider number of part-time employees andtheir hours worked• New full-time definition: 30 or more hours per week or130 hours per month• Done on a controlled-group basis, not individualcompanywww.hscompanies.com/PPACA
    11. 11. AM I CONSIDERED A LARGE EMPLOYER?What exactly is a large employer? (cont.)• Seasonal employees are included in the FTE equationfor hours they worked during that month• Calculated on a monthly basis• Average over entire year OR a consecutive 6 monthperiod• Use employee count numbers from 2013 to calculatewhether large employer for 2014www.hscompanies.com/PPACA
    12. 12. WHAT HAPPENS IF LARGE EMPLOYEROk, so I am a large employer. Now what?• Must offer insurance to full-time employees that isboth affordable and provides minimum value• Do not have to offer to part-time employees, eventhough they are included in large employer calculation• Proposed 95% rule – must offer the insurance to atleast 95% of eligible full-time employeeswww.hscompanies.com/PPACA
    13. 13. WHAT HAPPENS IF LARGE EMPLOYERWhat do you mean by affordable?• Insurance is considered affordable if the premiumcost for self-only coverage is less than 9.5% of W-2wages• Safe harbor provisions for affordability:• W-2 Wage Safe Harbor• Rate of Pay Safe Harbor• Federal Poverty Line Safe Harborwww.hscompanies.com/PPACA
    14. 14. WHAT HAPPENS IF LARGE EMPLOYERWhat do you mean by minimum value?• Plan must pass an actuarial test with a 60% score – i.e.the plan covers 60% of health care costs• IRS to provide online calculator to help with thisdetermination• Work with insurance agent to make sure your planmeets this standard• Some current high deductible health plans do notmeet this test!www.hscompanies.com/PPACA
    15. 15. WHAT HAPPENS IF LARGE EMPLOYERWhat happens if my plan is not affordable or does notprovide minimum value?• You pay a fine!What is the fine?• Pay either $3,000 per subsidized employee OR $2,000per full-time employee (minus first 30 FT), whicheveris lesswww.hscompanies.com/PPACA
    16. 16. WHAT HAPPENS IF LARGE EMPLOYERWhat do you mean by “subsidized employee”?• It is an FT employee who receives the premium taxcredit (subsidy) to purchase insurance on theexchange• Will only qualify if meet certain conditions, such asplan not affordable or not providing minimum valueand buying insurance through the exchangeHow do I avoid paying the fine?• Make sure to offer at least 95% of your full-timeemployees insurance that is BOTH affordable ANDprovides minimum value (minimum essentialcoverage) www.hscompanies.com/PPACA
    17. 17. WHAT HAPPENS IF LARGE EMPLOYERWhat if I decide not to offer insurance?• You may pay a fine!Can I not offer insurance and avoid paying a fine?• Yes!How?• Paying the fine is dependent on an employeequalifying for credit and purchasing from exchange• If no one applies and qualifies for the tax credit, thenyou will not pay the fine, regardless of whether youoffered insurance or notwww.hscompanies.com/PPACA
    18. 18. WHAT HAPPENS IF LARGE EMPLOYERwww.hscompanies.com/PPACA
    19. 19. WHAT HAPPENS IF LARGE EMPLOYERHow often are the penalties paid?• On a monthly basis – employers will need to runcalculations on FTEs monthlyA couple wrinkles in the penalties:• Seasonal employees ARE included in the penaltycalculation if they are full-time during that month• You don’t have to offer them insurance, but arecounted in the calculation• If you have less than 30 full-time employees (undernew rules), not subject to fineswww.hscompanies.com/PPACA
    20. 20. WHAT HAPPENS IF LARGE EMPLOYEREmployee Category How Category is used todetermine “LargeEmployer”Subject to penalty if“Large Employer” andemployee receivescreditFull-Time Counted as oneemployee, based on 30hour work weekYesPart-Time Prorated (total PT hoursworked per monthdivided by 120)NoSeasonal Prorated for month theywork; can’t be cause forexceeding 50 FTEsYes, for month in whicha seasonal worker is full-timeTemp Agency Yes, for the temp agency Yes, for the temp agencywww.hscompanies.com/PPACA
    21. 21. WHAT HAPPENS IF LARGE EMPLOYERSafe Harbor Provisions• Employers can utilize a safe harbor provision forcurrent and new employees if they are unsure if theyare going to be working 30+ hours/week• Utilizes measurement, stability and optionaladministrative periods• Can be very complicate to figure out and track!• Can possibly work against you!www.hscompanies.com/PPACA
    22. 22. What about these state insurance exchanges?• Developed as a gateway for individuals to have accessto various insurance plans• Established by the states, but can pass and use thefederal exchangeHow to they work?• Supposed to be open starting October 1, 2013• Access and purchase insurance online• National & local help linesSTATE AND FEDERAL EXCHANGESwww.hscompanies.com/PPACA
    23. 23. Can employer purchase coverage through the exchange?Possibly…• Depends on number of FTEs and state statutoryguidelines• Per the law:• Have average of greater than 1 employee• No more than 100 employees during any businessduring previous year• Employee at least one employee at beginning ofplan year• Before 1/1/2016, states may lower requirement to 50employeesSTATE AND FEDERAL EXCHANGESwww.hscompanies.com/PPACA
    24. 24. How are these exchanges funded?• PCORI Fee: $1 to $2 per covered life – due by 7/31/13 forfirst payment on plan years ending 12/31/12; paid byinsurance company unless self-insured• New fee of $63 per person charged to all group healthinsurance plans – fee will be passed on to employees• Insurers who sell policies on the exchange will becharged a 3.5% fee – will be passed on to individualsbuying on the exchange• Health Insurance Tax: $8 bln in 2014, $11.3 bln in 2015-2016; spread across all insurersSTATE AND FEDERAL EXCHANGESwww.hscompanies.com/PPACA
    25. 25. STATE AND FEDERAL EXCHANGESwww.hscompanies.com/PPACA
    26. 26. NEW TAXES PER THE ACAwww.hscompanies.com/PPACAHealth Insurance Tax• Spread across all health insurers• $8 billion flat fee in 2014• $11.3 billion in 2015-2016• $13.9 billion in 2017• $14.3 billion 2018• Indexed for inflation after 2018• Largest tax included in the ACA
    27. 27. SMALL BUSINESS TAX CREDITSo tell me about this small business tax credit foroffering health insurance…• Employs less than 25 FTE employees during a taxyear• Pays average annual wages less than $50k perFTE employee• Has qualified plan that requires the employer tomake a non-elective contribution equal touniform percentage not less than 50%• In 2014, will only be eligible if purchasing throughthe SHOP program (on the Exchanges)www.hscompanies.com/PPACA
    28. 28. SMALL BUSINESS TAX CREDIT (2013)Number ofEmployeesAverage WagesUp to $25,000 $30,000 $35,000 $40,000 $45,000 $50,000Up to 10 35% 28% 21% 14% 7% 0%11 33% 26% 19% 12% 5%12 30% 23% 16% 9% 2%13 28% 21% 14% 7%14 26% 19% 12% 5%15 23% 16% 9% 2%16 21% 14% 7%17 19% 12% 5%18 16% 9% 2%19 14% 7%20 12% 5%21 9% 2%22 7%23 5%24 2%25 0%
    29. 29. SMALL BUSINESS TAX CREDIT (2014)Number ofEmployeesAverage WagesUp to $25,000 $30,000 $35,000 $40,000 $45,000 $50,000Up to 10 50% 40% 30% 20% 10% 0%11 47% 37% 27% 17% 7%12 43% 33% 23% 13% 3%13 40% 30% 20% 10% 0%14 37% 27% 17% 7%15 33% 23% 13% 3%16 30% 20% 10% 0%17 27% 17% 7%18 23% 13% 3%19 20% 10% 0%20 17% 7%21 13% 3%22 10% 0%23 7%24 3%25 0%
    30. 30. W-2 REPORTINGWho has to report the cost of insurance on theirW-2?• Employers with 250 or more employees mustreport cost of the insurance benefits on W-2’sissued for 2012• Based on individual employer, not controlledgroup• Must report “aggregate reportable cost” itprovided - total cost of all applicable insurancecoverage,• Do not have to issue a W-2 for the sole purposeof reporting insurance cost (i.e. to a retiree)www.hscompanies.com/PPACA
    31. 31. SUMMARY OF BENEFITS & COVERAGE• Issued to all participants of the health insurance plan• Is issued by the insurance company and uses astandard template provided by the government• Self insured plans must create with the help of theTPA• Is in addition to the SPD and must be issued by allplans, even if exempt from ERISA• Also provided at other times (initial enrollment, etc.)• Not required for stand-alone benefits (vision, dental,etc.)• Must be linguistically and culturally appropriate• $1,000 fine per individual who didn’t receive properlyfor non-compliancewww.hscompanies.com/PPACA
    32. 32. NON-DISCRIMINATION TESTING• Non-grandfathered insured plans must undergodiscrimination testing; details TBD per the IRS• Expected to follow same current rules as self-insured plans• Essentially: if you have multiple plans, one plancannot substantially benefit one group versusanotherwww.hscompanies.com/PPACA
    33. 33. SIMPLE CAFETERIA PLANS• Available to small employers – average 100 or lessemployees• Meet certain eligibility requirements foremployees• Meet certain contribution requirements foremployers• Must be uniform for all employeeswww.hscompanies.com/PPACA
    34. 34. AUTOMATIC ENROLLMENTWho has to participate?• Employers with 200 or more employees mustautomatically enroll their employees in the plan• Employees can opt-out• Originally scheduled for 2014 but is now delayedwww.hscompanies.com/PPACA
    35. 35. CADILLAC PLANS• Effective in 2018• 40% excise tax charged to the plan sponsor• Excise tax is based on difference between theactual plan value and the plan limits below, and isper participant in the plan• Based on aggregate annual value amounts• Individual coverage: $10,200• Family: $27,500• Based on total cost of benefits• Ex: If plan value is $1,000 over the individuallimit, pay $400 per participant in excise taxwww.hscompanies.com/PPACA
    36. 36. QUESTIONSFor more information visit:http://www.hscompanies.com/PPACA