MACPA PPACA Health Care Act - 2014 Business impact - Town Hall


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Rebroadcast scheduled for 9/14/13 1:00 - 4:00 pm EST

70% of Businesses will turn to their CPA for advice on the Patient Protection and Affordable Care Act of 2010. MACPA created this special FREE townhall sponsored by our Exclusive Preferred Provider RJ Princinsky & Associates to help our members learn about what they need to know to advice their clients and employers about this new massive piece of legislation impacting businesses large and small.

Are you being asked by your clients and employers to figure out what they need to know and do, now and later, to stay complaint with all the provisions of PPACA? It is complex and changing but as the trusted advisor, you need to stay ahead of the questions they are asking. It isn't easy but this Special Town Hall, sponsored by MACPA's preferred provider of health care, employee benefit, HR and wellness services, will bring you up to date and answer the questions you have. Right now alll employer business managers and employee benefits managers should be taking steps to be sure they are prepared for the PPACA requirements that take effect later this year in 2014 and beyond. While some requirements vary based on employer size, business entity or type of health plan offered, other requirements apply to all individuals and employer groups regardless of employee size or type of business entity. This special edition Town Hall will provide participants with the information and resources that will help you make informed business decisions and advise clients related to this evolving legislation.

You will learn about Health Exchanges, the individual and employer mandates, DOL requirements, impacts on your benefits plans, penalties and taxes, ratings and premiums and lots more.

Published in: Business, Health & Medicine
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MACPA PPACA Health Care Act - 2014 Business impact - Town Hall

  1. 111 The Affordable Care Act: 2014 Business Impact A special town hall for members Presented by: Tom Hood, CPA, CITP, CGMA CEO Maryland Association of CPAs Business Learning institute
  2. Thanks to our sponsors:
  3. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 THE AFFORDABLE CARE ACT BUSINESS IMPACT – 2014
  4. Join the conversation!! ! Respond to a Poll! Ask a Question!
  5. ! Partnership •  MACPA’s Exclusive Preferred Provider for employee benefits, 20+ years  •  Supports the MACPA in multiple capacities •  Leading resource for Health Care Reform education, planning, benefits regulatory compliance, corporate wellness •  Webcasts •  Speaker – chapter meetings, conferences •  Event sponsor •  Print and online resources sponsor •  Networking •  Always available to our members and clients for employee benefits and HR support
  6. ! Integrated Client Services •  Strategic Benefits Planning •  Account Management & Customer Service •  Claims Management •  Custom Benefits Communications •  Group Benefit Enrollment and Billing Services •  HR and Benefits Technology Solutions •  Client Risk Management – HR Services and Compliance •  HR Outsource Services •  Health Care Reform Education •  Corporate Wellness Solutions •  Retirement Services One-Source Solution for Employee Benefits and HR Services
  7. Client Risk Management & Human Resources Services !  Support employer groups in managing regulatory compliance responsibilities: "  Federal laws (ERISA, PPACA) "  State laws "  IRC regulations and Section 125/Cafeteria Plan !  Provide consultation and support for HR/employment practice responsibilities, examples include: "  FMLA administration "  Sexual Harassment training "  Employee Handbook audit !  Health Care Reform consultation and education !  Compliance Resources - monthly webinars , newsletters, PPACA Advisor, alerts !  Director serves as speaker on Health Care Reform and HR related topics !  HR Outsource Services
  8. Health Care Reform ! Education, consultation, guidance ! Analysis for your company – cost and compliance ! Prepare for changes – avoid penalties, contain costs, meet reporting requirements
  9. HR and Benefits Technology ! Integrated HR administration, online enrollment, and payroll solutions ! Comprehensive HR technology audit and extensive vendor/ software comparison to determine the best solution to specifically meet the client’s needs and budget  •  Assist in the implementation, training and back-end functions of selected systems
  10. Corporate Wellness Solutions ! Partner with employers to implement affordable, realistic, sustainable wellness programs •  Build programs that fit specific employee populations, company culture, and financial guidelines ! Nationally certified Corporate Wellness Program Director & Certified Workplace Wellness Specialist
  11. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Discussion Topic Affordable Care Act Provisions – Current, Ongoing, and Delayed
  12. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 ACA Provisions applicable to Employers Many of the provisions required to be implemented by 2014 already in effect or remain scheduled for implementation, including: Exchange Notices Individual Mandate Implementation of Insurance Exchanges Employees’ access to premium subsidies Reporting minimum waiting period and essential coverage (including minimum value and affordability on SBC) Insurance Mandates (e.g., no pre-existing condition exclusion, premium rating, minimum essential benefits, medical loss ratio) Payment of reinsurance and PCORI fees
  13. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 2014 ACA Provisions - Delayed IRS Notice 2013-45 issued July 9, ,2013 provided a one-year enforcement delay for: The information reporting requirements applicable to insurers and self-insured plans who provide minimum essential coverage under IRC § 6055 The information reporting requirements for large employers under IRC § 6056 The Employer Shared Responsibilities under IRS § 4980H (“Play or Pay”)
  14. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Certain enforcement provisions previously delayed pending further guidance continue to be delayed, including: W-2 reporting of employer-provided health coverage cost for small employers (<250 W-2s) issued in prior calendar year Automatic enrollment of employees in employer-provided health coverage – 200+ FTE Employers Application of Code § 105(h) nondiscrimination rules to non- grandfathered fully insured health plans
  15. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Insurance Exchanges
  16. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 State Exchanges: California, Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington State Partnership Exchanges: Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire and West Virginia Remaining states to default to Federally Facilitated Exchanges More info at FAQs/state-marketplaces.html
  17. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Maryland Health Benefit Exchange and SHOP Discussion Michele Eberle Executive Director Maryland Health Insurance Plan
  18. A service of Maryland Health Benefit Exchange Maryland Health Benefit Exchange The Affordable Care Act: 2014 Business Impact Michele Eberle Executive Director, MHIP August 27, 2013
  19. The Patient Protection and Affordable Care Act of 2010 (ACA)
  20. Why  It’s  Important  to  Maryland Expands access to health insurance for 730,000 Marylanders (13% of Maryland) currently without health insurance – Gives individuals access to primary care physicians, preventive services Lowers uncompensated care costs in the healthcare system – lower insurance premiums across the state Provides federal subsidies for individuals up to 400% of FPL to pay for health insurance premiums – Infuses $600 million in federal subsidies into the State of Maryland by 2015  NEW funds in health care system Requires  each  state  to  establish  a  “health  insurance  exchange”  by  2014
  21. A marketplace where individuals and small businesses explore, compare and enroll in private health insurance and public assistance programs, as well as access federal tax credits and cost-sharing subsidies States had a choice to establish a state-based exchange, join a partnership or the federally-facilitated exchange; Maryland opted to establish a state-based health insurance exchange What it is NOT: The state-based health insurance exchange is NOT an insurer or issuer of health insurance plans. What is a State-Based Health Insurance Exchange? 4
  22. Maryland ACA Related Legislation
  23. Establishment  of  Maryland’s  State-Based Health Insurance Exchange Health Benefit Exchange Act of 2011 – April 12, 2011: Establish Maryland’s  state-based exchange as a public corporate and independent unit of state government – June 3, 2011: Nine-member Board of Trustees held its first meeting – September 2011: Exchange appointed Executive Director (first Executive Director appointment in the U.S.)
  24. Stakeholder Engagement Policy decisions were made through an open, public and transparent process with  over  60  stakeholders  representing  Maryland’s  diversity  from   across the state (Fall 2011) Four Advisory Committees studied six topics: – Navigator and Consumer Assistance / Advertising – Market Rules and Risk Selection / Operating Model – SHOP Exchange – Financing the Exchange Executive Director and Board Liaisons attended all 22 meetings Stakeholder representation included: health insurance industry, providers and associations, community members, advocates, community-based organizations, academia, business owners and leaders, local chamber officials, consumers, consultants Continued through 2012 – Tenet of the Exchange
  25. Health Benefit Exchange Act of 2012 Options laid out in the stakeholder advisory committee process provided recommendations from the Exchange Board to the General Assembly “Recommendations  for  a  Successful  Maryland  Health  Benefit   Exchange”  Legislation  Report  (December  23,  2011)  provided   recommendations for SB238/HB443 Maryland Health Benefit Exchange Act of 2012 signed by Governor  O’Malley  (May  2,  2012)  outlines  the  implementation   policies for operating the state-based exchange
  26. Guiding Principles of Policy Decisions Informed by public input seven principles guide the policy decisions of MHBE to ensure that the state-based health insurance exchange serves the health care needs of Maryland individuals, families, employers and employees: Accessibility: reduce the number of Marylanders without health insurance and improve access for all Marylanders. Affordability: the affordability of coverage, within the Exchange and within the state,  is  essential  to  improving  Maryland’s  health  care  system  and  economy. Sustainability: The Exchange will need to be sustainable in order to succeed in the long run. Stability: promote solutions  that  respect  existing  strengths  of  our  state’s   health care system and promote stability Health Equity: The Exchange should work to address longstanding, unjust disparities in health access and health outcomes in Maryland. Flexibility: be nimble and flexible in responding to the quickly changing insurance market, health care delivery system, and general economic conditions in Maryland, while being sensitive and responsive to consumer demands. Transparency: MHBE is accountable to the public, and its activities should be transparent, its services easily available, and its information easily understandable by the populations it assists 9
  27. Maryland Health Progress Act of 2013 Dedicated funding stream to finance the MHBE Gradual transition of MHIP enrollees into Exchange Flexibility for State reinsurance wrap-around program SHOP Exchange rules for employer premium contributions Continuity of care for Marylanders Consolidated Services Center employee function Plan certification appeals process MCO/carriers permitted to offer plans in Exchange only Creation of application counselors and captive producers Medicaid expansion 10
  28. Small Business Health Insurance Options Program (SHOP)
  29. The Small Business Health Options Program (SHOP) is a competitive private health insurance marketplace where small businesses and their employees will have access to affordable coverage and a choice of insurance plans Employer Benefits – Employers can offer employees choice of insurer and qualified health plan – Employers can continue to use their brokers – Online tools available to employers and their brokers will help employers predict costs – Many small employers will qualify for tax credits – Simple, online administration • Online Adds & Drops • Online Billing & Payment • Phone & Online Support Employee Benefits – Employees have a choice of plans that suit their individual needs – Standardized plans and online tools help employers make meaningful comparisons between health plans – Employees can enroll online – Employees can manage their accounts online – Other benefits due to small group market reforms SHOP Overview
  30. Maryland Health Connection will have a Small Business Health Options Program (SHOP) dedicated portal for small businesses and their employees Small businesses (including non-profits) with up to 50 employees may participate In 2016, the ACA modifies the definition of small group to 100 employees SHOP supports the existing market (does not replace it), small employers will still be able to purchase insurance outside of the SHOP Carriers above a minimum threshold must offer products in the SHOP; all catastrophic plans be offered in the SHOP 13 SHOP in Maryland
  31. Meets the requirements of the Affordable Care Act (ACA) as it pertains to SHOP set-up and management; Encourages small business to purchase coverage on the SHOP Exchange; Provides minimum disruption to the existing small group health insurance market in Maryland while promoting innovation; Leverages the knowledge and expertise of current market players (e.g. carriers, benefit administrators, etc.) for key technical and business functions; Minimizes duplicative development effort among Maryland stakeholder through the development of common service components that can be leveraged equitably by the broadest number of market players; Provides a SHOP solution that satisfies the needs of employers, employees, and health plans in an efficient and consumer-friendly manner; Ensures that operations are transparent and managed with effective oversight whereby the Exchange and the State of Maryland meet all their management oversight  and  fiduciary  responsibilities  to  the  state’s  small  employer  community. SHOP Guiding Principles
  32. SHOP Plan Set-Up & Enrollment Employer Plan Set-up Estimated Quote Employee Enrollment Eligibility Determination Validate Group Notify Carriers Employer is evaluated for eligibility to purchase QHP based on demographic information Employer selects a metal level (Employee Choice) or a carrier (Employer Choice) and sets defined contribution amount SHOP provides an estimated quote based on employer choices and employee census (age, income, etc.) Employees make plan selections with information on employer contribution and their expected cost Validate that all requirements for the employer (e.g. minimum participation) have been met Notify carriers to contract with employer and start coverage for employees SHOP Administration • Premium aggregation and billing • Carrier payment • On-going eligibility / enrollment management (employee adds, deletes, life changes, etc.) • Enrollment and funds flow reconciliation
  33. 16 Two Options for Small Employers: Employer v Employee Choice Gold Bronze Platinum Carrier A Carrier C Carrier D Carrier E Carrier F Employee Choice EmployerChoice Carrier B Silver
  34. 17 Employee Counting Methodology The employee counting methodology impacts whether a group will be eligible to purchase on the SHOP – Maryland Exchange Board approved the FTE aggregation method consistent with federal rules for tax subsidies Employers can decide whether to offer coverage to full time employees or all employees Seasonal employees can be excluded from the employer count under certain conditions (e.g. the employer only exceeded the 50 employee count for four or less months in the year).
  35. Tax Credits for Health Insurance will only be available through beginning October 1, 2013 The SHOP will provide employers: – Innovative plan options that are easy to administer – Access to tax credits to cover employee premiums – Employee choice model Streamlined application, and customer service through statewide Call Center Ability to continue to work with brokers and third party administrators 18 Why Consider the SHOP?
  36. Employee Choice Features: – Employer selects a metal level with multiple carriers offering different plans – Employees are free to choose between plans that best meet individual needs – Broader selection – Ability to stay with carrier and providers as jobs change  portability – Allows employers to recruit and retain in competitive environment In 2014, small employers will have the same purchasing power with health insurance as large employers Small employers can continue to work with their brokers in the SHOP Aggregated billing (single list bill) will be available Employee Choice Model 19
  37. 2010-2013: Maximum tax credit for small employers is 35% of the qualified premium for health insurance for employees – Maximum tax credit for small tax-exempt employers (charities) is 25% January 1, 2014, rate increases to: – 50% tax credit for small employers – 35% for small tax-exempt employers (charities) Can be carried back and forward to other tax years Tax Credit Eligibility 20
  38. Fewer than 25 full-time equivalents, with average wages of less than $50,000 per year Provide 50% of single (not family) coverage for each employee Calculations are made on a sliding scale Tool available on IRS website Tax Credit Eligibility Examples 21 * Source: Internal Revenue Service
  39. Small Business Tax Scenarios Example*: Auto Repair Shop with 10 Full-Time Employees – Wages: $250,000 total, or $25,000 per worker – Employee Health Care Costs: $70,000 – 2010 Tax Credit: $24,500 (35% credit) – 2014 Tax Credit: $35,000 (50% credit) Scenario #2: Restaurant with 40 Part-Time Employees (the equivalent of 20 full-time workers) – Wages: $500,000 total, or $25,000 per full-time equivalent worker – Employee Health Care Costs: $240,000 – 2010 Tax Credit: $28,000 (35% credit with phase-out) – 2014 Tax Credit: $40,000 (50% credit with phase-out) 22
  40. Online Resources 23 Sign Up for Email Updates Sign Up for Text Updates: Text “Connected”  to  69302 Get information on resources available to help now Link to details on meetings and reports
  41. Questions?
  42. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 2014 Small Group and Individual Insurance Premium Rate Setting Richard J. Princinsky President Richard J. Princinsky & Associates, Inc.
  43. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Current Rating Structure for Small Groups (2 – 50 Employees) Based on average age of all employees enrolled in the health insurance plan Rates are established for each tier level of coverage (individual, individual plus spouse, family ) All employees pay the same tier rate, regardless of their age Get ready This is about to change
  44. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 New Member Level Rating Structure effective January 1, 2014 (PHSA § 2701) New rating structure will be based on the state-specified geographic rating area and on the age of each individual employee and dependents being enrolled. Every employee and their dependents with different ages will have a unique rate Employee + Spouse = sum of the two individual rates based on their ages Family plan = sum of each member’s rate based on their age - Age of the employee, the spouse and the oldest three children under the age of 21 and all adult children between the ages of 21 and 26
  45. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Rate Structure Ratios Will move from 5:1 to 3:1 5:1 implies if individual group rate was $100/month for the lowest average age group in the state, then the group with the highest average age could not be charged more than $500/month for the individual rate The compression of a 3:1 ratio creates less of a gap in cost between the younger person and older person – The change from the current rates may be greater for the younger person than the older
  46. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Individual Mandate
  47. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Individual Shared Responsibility Annual penalty assessment against any individual that does not have monthly minimum essential health coverage – specific exceptions apply. Individual is taxpayer (or spouse/dependent). Minimum Essential Coverage is health coverage under a: – Government plan; e.g., Medicare Part A, Medicaid, CHIP, Tri-Care – Eligible employer-sponsored plan – Individual market plan – HHS recognized plan; i.e., State health benefits risk pool Exceptions: - Cannot afford coverage (premium share >8% of household income) - No federal income tax return filing requirement based on income threshold - Hardship exemption deemed by HHS - Members of certain Indian tribes - Gap in coverage for less than a continuous three-month period – one time per year
  48. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Annual Penalty Amount is the greater of: – Flat dollar amount per individual • 2014 - $95/individual; $47.50 for individual 18 years or younger • 2015 - $325/individual; $162.50 for • 2016 - $695/individual; $327.50 for Annual cap amount = 3 x individual rate – Percentage of income amount • 2014 – 1% of combined household income (after exemptions and standard deductions) • 2015 – 2% of combined household income • 2016 – 2.5% of combined household income Penalty capped at the national average of the annual cost of a bronze level health insurance plan, for the applicable family size, offered through the state health care exchanges.
  49. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Individual Tax Credit/Premium Subsidy Available to individuals and families who do not qualify for Medicare or Medicaid and are not offered health insurance through an employer. Taxpayers with household income between 100% and 400% of federal poverty line (FPL) who purchase insurance through an Exchange – Based on modified adjusted gross household income – includes social security benefits that are not included in taxable year gross income – Some individual may additionally qualify for cost-sharing reduction subsidy to help with deductibles and co-payments – Exchanges to determine eligibility for premium tax credit and cost-sharing reductions
  50. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Premium Cost Share Assistance Illustration % of Fed Poverty Level (FPL) Annual Income1 (Individual) Premium (% of Income) Monthly Premium Share Reduction in Max OOP Limit Reduced Cost- Sharing Limit Required Actuarial Value of Plan 138% $15,856 Financial eligibility for Medicaid enrollment in Maryland 150% $17,430 4.0% $58 66.7% $2,250 87% 200% $23,240 6.3% $122 20% $5,200 73% 250% $29,050 8.05% $195 N/A $6,400 70% 300% $34,860 9.5% $276 N/A $6,400 70% 400% $46,480 9.5% $368 N/A $6.400 70% 1Based on 2012 individual FPL ($11,170) trended two years at 2% annual trend (rounded).
  51. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Required Employee Disclosure
  52. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Notice of Exchange Availability Employers must provide written notice to employees of availability of health coverage through the 2014 Exchange Notice deadline October 1, 2013 Provide to all W-2 employees of the Employer – FT, PT, seasonal, on-call – Regardless of eligibility for Employer’s health plan – Provided free of charge New hires must receive notice within 14 days of hire DOL model notice template available at:
  53. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Employer offering Health Coverage Notice PDF fillable template to customize notice Part B (2nd page) – employer and group health plan info Part B (3rd page) – optional info Distribution to all current W-2 employees by October 1st; new employees at time of hire (October 1st and forward)
  54. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600
  55. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Notice Template – Employer does not offer Health Coverage
  56. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Non-calendar year plan Section 125 Plan nonqualified mid- year status change event – transition rule – 2014 Exchange open enrollment is not a qualified status change event or special enrollment right for Section 125 Plans – Employer is permitted to amend Plan to allow either one or both of the following salary reduction elections: – Employees currently participating (and enrolled in Health plan option) to change current election to opt out – Employees not currently enrolled in health plan through the Plan to elect to participate (and enroll in Employer health plan)
  57. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 – Important Note: insurance carrier must also agree to allow health plan election change for this reason – Plan amendment only applies to 2013 Plan year renewing on or after February 2014 – Transition rule allows retroactive Plan amendment until December 31, 2014 Recommendation: inform employees of ability/inability to change current election or newly enroll in employer plan
  58. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Revised COBRA notice released – DOL Technical Release 2013-02 ( ) – Revised model notice advises of alternative health coverage availability through the Exchange HIPAA Certificate of Creditable Coverage – notice requirement eliminated effective 12/31/2014 Summary of Benefits and Coverage (SBC) Grandfathered Plan assertion or Patient Protections notice W-2 reporting cost of employer provided health coverage – large employer (250 or more W-2s issued in prior year) – Small employer transition rule still applicable
  59. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Rebate for failure to meet MLR standards Insurers must meet medical loss ratio standards each year, report to HHS, and issue premium rebates to policy holder reflecting portion that did not meet applicable ratio. – Large Group Market = 85% – Small Group/Individual Market = 80% – Not applicable to self-insured health plans – Rebate issued in form of premium credit or lump sum payment to policy holder – employer for group plan – Insurer must provide notice of rebate to employer and enrollees – Employer responsibility to distribute any insurance rebate received according to pro-rata share of premiums paid by employer and plan participants
  60. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Group plans subject to Title I of ERISA must follow those requirements for distribution of the rebate; Non-ERISA plans (e.g., non-Federal government plans and Church plans) must follow CMS guidance. ERISA covered plans distribution guidelines – DOL guidance issued (Technical Release 2011-04) • No requirement under ERISA to include or exclude prior plan participants • “Ordinary notions of property rights” application to pro-rata distribution • ERISA trust requirements for plan assets avoided if rebate distributed within 3 months • May apply “de minimus” amount rebate to plan enhancement that benefits all plan participants
  61. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 – ERISA group plan participant rebate distribution: • Lump sum cash • Premium holiday/reduction • Plan enhancement benefiting all participants – Participant rebate distribution may be made to: • Participants of plan that rebate applies • Current plan participants that were also plan participants in prior year • Current plan participants only, regardless of prior year participation
  62. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Non-Federal Government group plan (e.g., state/local government) participant rebate distribution may be made only to current plan participants. (HHS/CMS guidance – 76 Fed Reg. 76596 Dec. 7, 2011) – Policy holder may apply participant rebate: • Reduce future premium contribution to all current plan participants (covered under any option of the policy) • Reduce future premium contribution to only current plan participants who were covered in prior plan year (year rebate applies) • Cash rebate to current participants of plan that were covered under the plan option/policy rebate applies
  63. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 – Policy holder may distribute rebate: • Divide participant rebate equally among all participants • Divide it based on each participant’s actual contribution • Apportion as reasonable reflection of participant’s contribution Non-ERISA Plan, e.g., Church – Entire rebate returned to participants of plan rebate applies, unless policy holder provides written assurance that rebate will be apportioned according to rules for non-Federal Gov’t plans. – Without written assurance, insurer required to divide entire rebate equally among participants of plan rebate applies and distribute
  64. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Tax consequences for participant rebates (lump sum or premium reduction) – IRS guidance – Pre-tax insurance premium contributions – rebate is taxable, subject to Federal /state income tax and employment taxes – After-tax premium contribution – rebate not taxable – Distribution to COBRA participants – rebate treated as after-tax contribution IRS Medical Loss Ratio (MLR) FAQs:
  65. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Disclosure Requirements - Delayed Reporting of Health Insurance Coverage (Insurers and Employers that Self-insure) [Code § 6055(c)] – One-year implementation delay to January 1, 2015; first report due by January 31, 2016 – Report to IRS showing any individual with “minimum essential coverage during prior calendar year; reporting form and additional guidance required of IRS – Written notice to covered individual with same information provided to IRS – Possible coordination of reporting with large employer reporting requirement – awaiting additional guidance
  66. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Reporting of Health Insurance Coverage (Large Employers and “Offering Employers”) [Code § 6056(c)] – Large employers (50+ FTEs) to report to the IRS whether they offer their full-time employees and their employees' dependents the opportunity to enroll in “minimum essential coverage and certain other information – Reporting employers must also provide a related written statement to their full-time employees – Purpose is to enable IRS to verify needed information related to Employer Shared Responsibility provisions (“Play or Pay” penalty assessment) – Same reporting time as Insurer Reporting requirement – January 31st for prior calendar year, effective January 1, 2015 (first reporting by January 2016)
  67. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Employer Mandate
  68. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Employer Shared Responsibility Small Employer – fewer than 50 (average) full-time equivalent employees (FTE’s) in preceding calendar year* - If offering group health coverage, must meet essential health benefits package requirements (Grandfathered Plan exception) - No Employer Shared Responsibility Payment assessment liability Large Employer – 50+ (average) FTE’s in preceding calendar year* - Employer Shared Responsibility Payment liability starting 2015 - Penalty liability effective plan renewal month in 2015 for non- calendar year health plans – Transition Rules application *Preceding Calendar Year = any consecutive 6-month period
  69. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Proposed Rules issued January 2, 2013 – Transition Rule for non-calendar year plans/large employer provisions • Controlled Group and Affiliated Service Group application – Code § 414 (b), (c), (m) and (o) – Full-time Equivalent Employee (FTE) – • Common-law employee (W-2 wages) • Average of 30 service hours/week (130 hours/month) • Service Hours = all paid hours + unpaid hours for reason of vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence (e.g., FMLA) • Seasonal worker exception – meets statutory definition application and works no more than 120 business days
  70. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Employer Size Determination Example: 65 employees: 7 FT; 58 PT and seasonal employees 6-month calculation period : July 1 – Dec 31 1. FT ee’s (7 x 6) ÷ 6 = 7 2. Total service hours of all other ee’s: Jul: 7540 Aug: 7600 Sep: 7580 Oct: 7000 Nov: 5800 Dec: 5500 Total: 41020 ÷ 6 ÷ 130 = 52.59 FTE’s 3. 7 + 52.59 = 59.59 = 59 FTE’s Large Employer in 2014 1. Total number of full time employees (employees classified as FT by employer) employed on any business day during each month of 6-month calculation period / 6 = average FT employees If average number of FT employees is at least 50 no need for further calculation – Large Employer 2. Total all service hours for all other employees employed on any business day during 6-month calculation period (PT, seasonal, temporary)/ 6 / 130 = average number of FTE’s 3. Add FT number to FTE number = total average FTE; if 50 or greater (disregard any fraction) – Large Employer Note: if 50+ total is solely attributable to seasonal workers – not a Large Employer
  71. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 “Play or Pay” Penalty Assessment Beginning in 2015, certain large employers may be subject to a penalty assessment for either of the following: 1) Failing to offer health care coverage to substantially all full-time employees. $2,000/year ($166.67/month) for every FT employee (minus the first 30) 2) Offering less than “minimal value” plan – the plan's share of the total allowed benefits is less than 60%, or Offering minimum essential coverage that is deemed unaffordable. (>9.5% of W-2 wages for cost of individual coverage). $3,000/year ($250/month) for each FT employee enrolled in Exchange plan and receiving premium assistance
  72. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Additional ACA Provisions and Fees/Taxes 90-Day Maximum Waiting Period - Effective plan year beginning on or after January 1, 2014 - Applies to small/large employer, fully-insured/self- insured; no Grandfathered Plan exclusion – all health plans - Offer of coverage (enrollment) must occur by 91st day of eligibility for coverage - From date of hire for FT employees - From first day of FTE eligibility determination for all others
  73. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Patient-Centered Outcomes Research Institute (PCORI) Fee – The fee applies from 2012 to 2019, based on plan/policy years ending on or after Oct. 1, 2012, and before Oct. 1, 2019 – The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended – The first fee was due July 31, 2013, for November, December 2012 and January 2013 plans – The first fee is not due until July 31, 2014, for plan years that start February through December 2013 – The fee will be calculated and paid by: • Insurer for fully-insured plan (probably passed thru to plan sponsor) • Plan sponsor (generally employer) for self-funded plans, including HRA’s. Health FSA’s generally excepted. Not applicable to HSA’s (not a health plan) – Fee reported on IRS Form 720. Revised form and instructions just released. Download form and instructions: Provisions – $1 per covered life (plans ending before Oct. 1, 2013); $2 per covered life (subsequent years, adjusted for medical inflation)
  74. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Transitional Reinsurance Fee – Purpose is to stabilize premiums in the individual market during the initial phase of Exchange operation (2014 – 2016) – Applicable to fully insured and self-insured health plans that are “major medical coverage” • Does not apply to HRA’s integrated with group health plan, HSA’s or Health FSA’s • Medicare Secondary Payer rules apply; e.g. retiree plans – Fee is $63/year per covered life ($5.25/month); COBRA (or other continuation) participants included in count – Fee calculated and paid to HHS by: • Insurer for fully-insured plans • Plan Sponsor (or TPA) for self-funded health plans – Info provided to HHS by Nov. 15th (plan data from Jan – Sep); HHS will notify entity within 30 days (or Dec. 15th ) of amount due within 30 days – Per IRS, Plan Sponsors and Insurers may deduct cost of fee as ordinary and necessary business expenses – (considered an expense of the Plan)
  75. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Health Insurer Fee – Effective starting each calendar year after 2013; first fee due September, 2014 – Applicable only to insurers (fully-insured health plans) • Does not apply to self-funded health plans • Governmental entities and certain nonprofit entities are also excluded – IRS to calculate each covered entity's portion of the aggregate fees for each fee year – Controlled group application – regs apply 50% ownership standard – IRS proposed regulations, that information would be provided on Form 8963 (Report of Health Insurance Provider Information)
  76. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 DOMA Decision Impact
  77. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Marriage (spouse) Definition Impact on Employee Welfare Benefit Plans ERISA – state insurance and benefits regulations override ERISA preemption; e.g., Maryland’s Civil Marriage Protection Act – Insured health plans – state insurance regulations apply – Self-insured health plans – plan document defines spouse/dependent – caution Other Federal laws impacted: – Family and Medical Leave Act (FMLA) – COBRA continuation
  78. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Tax Issues – Federal tax – depends on spousal status and dependent status under federal law • Questions still exist on whether non-DOMA definition of spouse will be applied retroactively for federal tax purposes – DOMA Section 2 – residency provision still intact – states can define spouse • Awaiting guidance regarding whether states and employers will be required to recognize same sex spouses who are legally married in one state move to another that does not recognize same sex marriage – Section 125 Plan – pre-tax contributions for spouse – “Gross up” policy review
  79. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 There are currently 13 jurisdictions that recognize same-sex marriage (plus the District of Columbia), and 9 states recognize some form of same-sex union recognition (being either civil unions or domestic partnerships): Same-sex Marriage: Connecticut, District of Columbia, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Washington (legal Domestic Partnerships will convert automatically 1/1/2014) Civil Union Recognition: Colorado, Hawaii, Illinois, Oregon Domestic Partnership legal status: California (carries same rights as other states Civil Union laws), Maine (same-sex and opposite sex), Nevada, New Jersey, Wisconsin
  80. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600 Today’s Presenter Richard J. Princinsky & Associates, Inc. RJP & Associates, Inc. was founded in 1976 to help employers develop, understand and manage their group insurance and employee benefits. RJP continues to partner with companies to deliver effective group benefit programs, helps to control insurance costs, and provides strategic insight for health care legislation. Our client groups are comprised of a variety of industries and multi-state locations. RJP has developed a specialty focus in non-profit and social service agencies, being recognized as the preferred employee benefits provider for many association groups, such as the MACS, MARFY, as well as professional organizations including the MACPA. Sandra C. Krauer, Director, Client Risk Management Services Sandy brings 27 years multi-state human resources management and employee welfare benefit plan regulatory compliance expertise to the RJP management team. Sandy’s professional career has included oversight of the HR function for Maryland- based employers encompassing strategic planning, company reorganization and acquisition integration; company policy and procedure design and implementation; employee welfare benefit plan regulatory compliance under ERISA, COBRA, HIPAA, IRC §125 and the Affordable Care Act. In addition to providing ongoing technical expertise and compliance tools to our staff and client groups, the CRM Services team provides employee welfare benefit and HR education through the development and presentation of in-person and web-based seminars focusing on Health Care Reform, Cafeteria Plans, Sexual and Other Workplace Harassment and other topics relevant to employer groups. Sandy graduated (summa cum laude) from the University of Baltimore, Robert G. Merrick School of Business, and is a longtime member of the national Society for Human Resource Management (SHRM). / 410-773-4300 ext. 4337
  81. 335 Clubhouse Road • Hunt Valley, MD 800.618.2600