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Presentation of Health Care Reform
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Health Care Reform
Strategies & Expectations
Presented by Manny Manso, RHU, ChHC, CDHC
All Rights Reserved 2013
Health Care Reform
All Rights Reserved 2013
All Rights Reserved 2013
THE HEALTHCARE REFORM LAW
• Patient Protection and Affordable Care Act
• Health Care and Education Reconciliation Act
Affordable Care Act
All Rights Reserved 2013
THE INDERLYING GOAL OF HEALTHCARE REFORM CAN BE
SUMMARIZED INTO 4 KEY CATEGORIES
Expand affordable access to healthcare coverage to all citizens and get everyone paying into the system
Improve the quality of care that consumers receive
Increase science and transparency technology
Promote preventive care and wellness
Overview
• Provisions Applying to Employer Plans
• Employer Mandates
• Employee mandates
• Miscellaneous Items
All Rights Reserved 2013
Tax credits of up to 35% available to smallemployers (up to 25 employees), 25% for non‐profits and increasing proportionately to 50%and 35% in 2014.
Small Business Tax Credit is Established
DISCUSSED LATER
2010
All Rights Reserved 2013
06/01/2010
Reinsurance Program for Early Retirees (55‐64) and Dependents
$5B to subsidize 80% of costs between $15K and$90K (indexed)
Terminates December 31, 2013 or when fundsexhausted (12/9/2011)
All Rights Reserved 2013
07/01/2010
Putting Information Online
Creation of .gov Website for Consumers
www.healthcare.gov / www.cuidadodesalud.gov
www.dol.gov/ebsawww.naic.orgwww.cciio.cms.govwww.smallbusinessmajority.orgwww.irs.gov
Additional Websites for Consumerswww.healthreform.kff.orgwww.chrt.orgwww.healthreform.govwww.chrt.orgwww.hhs.gov
All Rights Reserved 2013
09/23/2010Grandfathered Status
Plan must be in existence on March 23, 2010To keep grandfathered status CANNOT:eliminate benefitsincrease participant cost sharing (co‐pay, deductible, out‐of‐pocket) outside of permitted range (15% or, for copays, the greater of $5 or 15%) all plus inflation merge plans or transfer employees to other plans decrease employer contribution outside permitted range (5% with no indexing)
CANNOT CHANGE CARRIERS
All Rights Reserved 2013
09/23/2010
Lifetime Dollar LimitsProhibits in and out‐of‐network lifetime limits ondollar value of essential health benefits and noticerequired to eligible individuals who previouslyexceeded the limit
Annual Dollar LimitsAnnual limits on dollar value of essential benefitspermitted thru 2013 09/23/2012 ‐ $2 million 01/01/2014 ‐ Limits will be completely banned
All Rights Reserved 2013
09/23/2010
Extension of Child Coverage to Age 26
Up to age 26 for medical regardless of marital orstudent status, residence or support
Does not apply to stand‐alone dental and vision
Cannot charge more than for other similarlysituated individuals
NOT TO BE CONFUSED WITH FLORIDA’S AGE 30 LIMITATION FOR UNMARRIED DEPENDENTS
All Rights Reserved 2013
09/23/2010
Pre‐existing Conditions for Enrollees Under 19
Pre‐existing conditions exclusion prohibited for employees/children under age 19
All Rights Reserved 2013
09/23/2010
Preventative ServicesAll new plans must cover certain preventive servicessuch as mammograms and colonoscopies withoutcharging a deductible, co‐pay or coinsurance
Preventive Care/ImmunizationsPreventive care service must be covered at 100%
OB/GYN, Pediatrician, ER ServicePreauthorization or referral requirements prohibited
in‐networkAll Rights Reserved 2013
09/23/2010
Non‐discrimination RequirementsA group health plan cannot discriminate in favor ofhighly compensated individuals with respect toeither eligibility to participate or to benefits
Prohibition of RescissionsCan’t rescind policies unless for fraud or intentionalmisrepresentation
Prohibits eligibility rules discriminating in favor of higher wage employees
Pending IRS final ruling
All Rights Reserved 2013
09/23/2010
Appeals Process
Mandatory internal and external appealsprocess including conformity with Stateexternal review process or the Federalexternal review process
Urgent claims – 72 hours / 30 days non urgent / denial 60 days / 10% linguistic
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2011
Treatment of OTC Drugs as Medical Expense
Prohibits reimbursement of over‐the‐counter drugspurchased after December 31, 2010 from FSAs, HRAsand HSAs, unless prescribed by a physician
HSA Nonqualified Withdrawals
Penalty increased from 10% to 20%
All Rights Reserved 2013
2012
Incentives for physicians to join together tobetter coordinate patient care and improve thequality, help prevent disease and illness, andreduce unnecessary hospital admissions andreadmissions
Accountable Care Organizations
All Rights Reserved 2013
2012
Reporting Plan Value on W‐2
Beginning in January 2013 employers with 250 or morenumber of issued W‐2’s (not employees) must report onan employee’s Form W‐2 for the year 2012 , in Box 12,Code DD, the cost of coverage under a group health planthat the employer makes available to the employee thatis non‐taxable to the employee including major medicalinsurance, mini‐med plans, on‐site clinics, wellnessprograms and executive reimbursement plansThe provision is currently optional for businesses thatfiled fewer than 250 Forms W‐2 in the previous tax yearAll Rights Reserved 2013
08/01/2012
Women’s Preventive ServiceEight new services without a copay or any cost sharing
Well‐woman visitsGestational diabetes screeningHPV DNA testingSTI counselingHIV screening and counselingContraception and contraceptive counselingBreast‐feeding support, supplies and counseling Interpersonal and domestic violence screening and counseling
All Rights Reserved 2013
08/01/2012
Rebates made to enrollees in insured plans in largegroup market (more than 50 employees) where lossratio (ratio of claims to premium) is less than 85%
Rebates made to enrollees in insured individual plansand small employers (less than 50 employees where lossratio (ratio of claims to premiums) is less than 80%
Cost Reporting and Rebate
Rebates issued August 1, 2012, must be sent to eligiblemembers within 90 days
Ex‐employees may be excludedAll Rights Reserved 2013
09/23/2012
Four page double‐sided (8) summary of benefits with aprescribed format and with culturally linguisticallyappropriate content in counties in which at least 10percent of the population residing in the county isliterate only in the same non‐English language
County Spanish Percent Chinese Percent Tagalog Percent Navajo PercentCollier County 13 ‐ ‐ ‐DeSoto County 18 ‐ ‐ ‐Glades County 13 ‐ ‐ ‐Hardee County 22 ‐ ‐ ‐Hendry County 24 ‐ ‐ ‐
Miami‐Dade County 32 ‐ ‐ ‐Okeechobee County 10 ‐ ‐ ‐
Osceola County 16 ‐ ‐ ‐
2012 List of South Florida Counties Requiring Culturally and Linguistically Appropriate Services
Uniform Summary of Benefits and Coverages (SBC)
All Rights Reserved 2013
09/23/2012
Some group health plans, including grandfatheredplans, may be required to furnish SBCs as early asSeptember 23, 2012, depending on when their planyear and open enrollment period fallIf a plan’s open enrollment period begins beforeSeptember 23, 2012, the SBC would not be requireduntil the 2013 open enrollment for the 2014 plan year
Uniform Summary of Benefits and Coverages (SBC)
The SBC must be provided along with open enrollmentmaterials
All Rights Reserved 2013
09/23/2012
Provided to all applicants including COBRA‐qualifiedbeneficiaries
Uniform Summary of Benefits and Coverages (SBC)
One SBC if COBRA enrollees live at the same addressor a separate SBCs is required to be provided to thebeneficiary at the beneficiary’s last known address
Must provide 60 days advance notice of materialmodifications that affect the content of the currentSBC (enhancements, reductions, changes that increasecost‐sharing, impose new referral requirements, etc.)
All Rights Reserved 2013
09/23/2012
Upon request, the SBC must be sent within sevenbusiness days following the request as soon aspracticable, to a participant or beneficiary
Uniform Summary of Benefits and Coverages (SBC)
Self‐funded plans are subject to same SBC rules (plansponsor or plan administrator must provide the SBC)
Failure to provide SBC is subject to a fine of not morethan $1,000 for each such failure and each participantor beneficiary constitutes a separate offense.
All Rights Reserved 2013
2013
Health FSA CapSalary reductions capped at $2,500, indexed after 2013
The limit applies at the end of the plan year (not 1/1/2013)
Exchange NoticeNotice to employees concerning availability
of exchanges by 1/1/2013 04/1/2013 (no model notice yet)
GET READY FOR 2014All Rights Reserved 2013
THE BIG YEAR
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01/01/2014
Pre‐existing Condition ExclusionsPre‐existing condition exclusions prohibited for allenrollees
Auto EnrollmentAuto enrollment required with employee having abilityto opt out of coverage, although regulations will not beissued before 2014
Annual Dollar LimitsAnnual limits on the dollar value of essential benefitsprohibited (exclude FSAs, HSAs and integrated HRAs)
All Rights Reserved 2013
01/01/2014
Clinical TrailsInsurers will be prohibited from dropping or limitingcoverage because an individual chooses to participate ina clinical trial including clinical trials that treat cancer orother life‐threatening diseases.
Maximum Deductibles and OOP LimitsDeductibles generally limited to $2,000/$4,000(indexed); OOP maximum same as for HSA compatibleHDHP (2013 ‐ Single: $6,250 / Family: $12,500)
Applies to all clinical trials that treat cancer or other life‐threatening diseases
All Rights Reserved 2013
01/01/2014
Waiting PeriodsWaiting periods over 90 days prohibited
The 90‐Day Rule appears to be counted on a day‐by‐day basis anddoes not appear to be equivalent to "three months" or "threecalendar months." The 3‐Month Rule could result in employeesbecoming enrolled well before 90 days have passed. Because theIRS is using the phrase "calendar month" (rather than "month"), itappears that any partial month is treated as a full month.
2 MONTH 3 MONTH IN PLAN
HIRED EFFECTIVE
6/1/2014 7/1/2014 8/1/2014 9/1/2014
5/14/2014 8/1/2014
1 MONTH
All Rights Reserved 2013
01/01/2014
ExchangesState‐based exchanges for individuals and small employers under101 employees (in 2017 states can make available to largeemployers)
Minimum Benefit Package Bronze, Silver, Gold and Platinum plans covering cover essentialbenefits with actuarial values of 60%, 70%, 80% & 90% andcatastrophic plan for individuals under 30
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
LEVE
L
Four Levels of Coverage
Silver
Bronze
Gold
Platinum
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01/01/2014
Individual Mandate: Penalty for Failure to Have Coverage
Greater of 1.0% of AGI or $95/person in 2014, 2.0% or $325/person in 2015, 2.5% or $695/person in 2016; indexed. Family dollar amount capped at 300% of individual penalty
Ind. $95.00 $95.00Spouse $95.00 $190.00
1 $47.50 $237.502 $47.50 $285.00
ANNUAL INCOME WHICH APPLY
$20,000$30,000$40,000$50,000
YEAR 2014
PENALTY
AD
UL
T
UP
TO
MA
XIM
UM
OF
$285
CH
ILD
THE GREATER OF PENALTY OR 1% OF INCOME
1% $200.00
PEN
ALT
Y
1% $300.001% $400.001% $500.00
Ind. $695.00 $695.00Spouse $695.00 $1,390.00
1 $347.50 $1,737.502 $347.50 $2,085.00
ANNUAL INCOME WHICH APPLY
$20,000$30,000$40,000$50,000 2.5% $1,250.00
YEAR 2016
PENALTY
AD
UL
T
UP
TO
MA
XIM
UM
OF
$2,0
85
CH
ILD
THE GREATER OF PENALTY OR 2.5% OF INCOME
2.5% $500.00
PEN
ALT
Y
2.5% $750.002.5% $1,000.00
All Rights Reserved 2013
01/01/2014
Low Income Premium Subsidy in the Exchange
20 30 40 50 60 20 30 40 50 60 60 30 40 50100% Medicaid Medicaid Medicaid Medicaid Medicaid 100% Medicaid Medicaid Medicaid Medicaid Medicaid 100% Medicaid Medicaid Medicaid Medicaid125% Medicaid Medicaid Medicaid Medicaid Medicaid 125% Medicaid Medicaid Medicaid Medicaid Medicaid 125% Medicaid Medicaid Medicaid Medicaid150% $690 $690 $690 $690 $690 150% $2,700 $275 $3,810 $6,288 $9,481 150% 20% 20% 15% 10%175% $1,037 $1,037 $1,037 $1,037 $1,037 175% $2,354 $2,403 $3,463 $5,941 $9,135 175% 31% 30% 23% 15%200% $1,450 $1,450 $1,450 $1,450 $1,450 200% $1,941 $1,991 $3,050 $5,529 $8,722 200% 43% 42% 32% 21%225% $1,857 $1,857 $1,857 $1,857 $1,857 225% $1,533 $1,583 $2,643 $5,121 $8,314 225% 55% 54% 41% 27%250% $2,315 $2,315 $2,315 $2,315 $2,315 250% $1,075 $1,125 $2,185 $4,663 $7,856 250% 68% 67% 51% 33%275% $2,776 $2,776 $2,776 $2,776 $2,776 275% $614 $664 $1,724 $4,202 $7,395 275% 82% 81% 62% 40%300% $3,279 $3,279 $3,279 $3,279 $3,279 300% $112 $161 $1,221 $3,699 $1,893 300% 97% 95% 73% 47%325% $3,391 $3,440 $3,552 $3,552 $3,391 325% $0 $0 $948 $3,426 $6,619 325% 100% 100% 79% 51%350% $3,391 $3,440 $3,826 $3,826 $3,826 350% $0 $0 $674 $3,153 $6,346 350% 100% 100% 85% 55%375% $3,391 $3,440 $4,099 $4,099 $4,099 375% $0 $0 $401 $2,879 $6,073 375% 100% 100% 91% 59%400% $3,391 $3,440 $4,372 $4,372 $4,372 400% $0 $0 $128 $2,606 $5,800 400% 100% 100% 97% 63%425% $3,391 $3,440 $4,500 $6,978 $10,172 425% $0 $0 $0 $0 $0 425% 100% 100% 100% 100%450% $3,391 $3,440 $4,500 $6,978 $10,172 450% $0 $0 $0 $0 $0 450% 100% 100% 100% 100%475% $3,391 $3,440 $4,500 $6,978 $10,172 475% $0 $0 $0 $0 $0 475% 100% 100% 100% 100%500% $3,391 $3,440 $4,500 $6,978 $10,172 500% $0 $0 $0 $0 $0 500% 100% 100% 100% 100%525% $3,391 $3,440 $4,500 $6,978 $10,172 525% $0 $0 $0 $0 $0 525% 100% 100% 100% 100%
Tables by Income as Percent of the Poverty Level and Age, 2014
Subsidy Amounts Percent of Premium Paid by Person/FamWhat the Person/Family Pays
Medicaid eligibility available between 133% (138%) and400% of FPL (employer coverage is below minimum valueor contributions are unaffordable.
All Rights Reserved 2013
01/01/2014
Play or Pay
The decision to pay the penalty and drop benefitsmay or may not be the right choice
There are several consequences that many haveoverlooked where the temptation to take the easy wayout and pay the penalty may have much deeperfinancial consequences to your organization
Yes or No?
All Rights Reserved 2013
01/01/2014
Play or Pay
And if you decide to continue to provide benefits,there could still be loopholes you can avoid bypreventing individuals from qualifying for an“Affordability Waiver” through one of the exchanges
Yes or No?
Do you fully understand the consequences and ways to craft the right model and avoid
paying any type of penalty?
All Rights Reserved 2013
01/01/2014
All Rights Reserved 2013
Health Care Reform's
Shared Responsibility Provision
Guidance on “Play or Pay”
All Rights Reserved 2013
HOW DOES IT WORK?
“SLEDGE HAMMER PENALTY”
Play or Pay Penalty for not Offering Coverage
$2,000 times the number of full time employees(excludes first 30 FTEs)
FTE defined as 30 or more hours per week
No part‐time employee coverage requirement
No minimum employer subsidy required.
All Rights Reserved 2013
All Rights Reserved 2013
SHOULD COMPANY DROP BENEFITS?
REPORTS WITH AND WITHOUT TURNOVER COSTS
SHOULD COMPANY DROP BENEFITS?
All Rights Reserved 2013
01/01/2014
Play or Pay Penalty for not Offering Coverage if at Least One Employee Gets Subsidy in Exchange
“TACKHAMMER PENALTY”
Play and Pay penalty for opt‐outs electing coveragethrough exchange will be $3,000 (indexed) for each FTEwho enrolls in exchange and receives subsidy ifemployee’s contribution for single coverage underemployer plan exceeds 9.5% of his or her W‐2 income
All Rights Reserved 2013
DETERMINING WHETHER
COVERAGE IS “AFFORDABLE”
Are employee contributions over 9.5%?
OPTIONS TO ADDRESS
AFFORDABILITY PROBLEMS
Is increasing premiums the right strategy?
Is raising wages the right strategy?
HOW TO AVOID FURTHER PENALTIES
All Rights Reserved 2013
GROSS UP WAGES?
IMPACT OF OTHER ALTERNATIVES
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All Rights Reserved 2013
IMPACT OF OTHER ALTERNATIVES
CONSIDERING DEFINED
CONTRIBUIONS?
So What Do I Do?
SIMPLE DATA COLLECTION
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01/01/2011
01/01/2012
01/01/2013
01/01/2010
Small Business Tax Credit
25 FTE OR LESS, AVG. INCOME $50,000 OR LESS & PAY50% OF PREMIUM & WORK AT LEAST 30 HOURS A WEEK
All Rights Reserved 2013
01/01/2014
01/01/2010 AND BEYOND
Small Business Tax CreditMaximum Tax Credits
Small for-profit employerhave a 35% credit from2010 through 2013. Thecredit increases to 50% in2014.
Tax-exempt employerhave a 25% credit from2010 through 2013. Thecredit increases to 35% in2014.
All Rights Reserved 2013
Small Business Tax CreditA recent GAO study found that only 170,300small employers from a pool estimated atbetween 1.4 million and 4 million eligible firmsclaimed the tax creditThe cost of the credit, pegged by theCongressional Budget Office at $2 billion infiscal 2010, was only $480 millionThese are unclaimed tax credits
01/01/2010
Why?All Rights Reserved 2013
01/01/2014 AND BEYOND
Small Business Tax Credit
Why? ComplicatedWe have more than 25 employees Our average annual salary is over $25,000 Did not hear about it Told it was not worth it
Why?All Rights Reserved 2013
01/01/2010 01/01/2013
Small Business Tax Credit2010/2011/2012/2013
The credit is 35% of the employer’s contribution to providehealth insurance for employees and up to a 25% credit forsmall non‐profit organizations
Firm size Up to $25,000 $30,000 $35,000 $40,000 $45,000 $50,000
Up to 10 35% 28% 21% 14% 7% 0%11 33% 26% 19% 12% 5% 0%12 30% 23% 16% 9% 2% 0%13 28% 21% 14% 7% 0% 0%14 26% 19% 12% 5% 0% 0%15 23% 16% 9% 2% 0% 0%16 21% 14% 7% 0% 0% 0%17 19% 12% 5% 0% 0% 0%18 16% 9% 2% 0% 0% 0%19 14% 7% 0% 0% 0% 0%20 12% 5% 0% 0% 0% 0%21 9% 2% 0% 0% 0% 0%22 7% 0% 0% 0% 0% 0%23 2% 0% 0% 0% 0% 0%24 0% 0% 0% 0% 0% 0%25 0% 0% 0% 0% 0% 0%
Average Wage
All Rights Reserved 2013
01/01/2014 AND BEYOND
Small Business Tax Credit
The credit is 50% of the employer’s contribution to providehealth insurance for employees and up to a 35% credit forsmall non‐profit organizations
# of Employees Up to $25,000 $30,000 $35,000 $40,000 $45,000 $50,000
up to 10 50% 40% 30% 20% 10% 0%11 47% 37% 27% 17% 7% 0%12 43% 33% 23% 13% 3% 0%13 40% 30% 20% 10% 0% 0%14 37% 27% 17% 7% 0% 0%15 33% 23% 13% 3% 0% 0%16 30% 20% 10% 0% 0% 0%17 27% 17% 7% 0% 0% 0%18 23% 13% 3% 0% 0% 0%19 20% 10% 0% 0% 0% 0%20 17% 7% 0% 0% 0% 0%21 13% 3% 0% 0% 0% 0%22 10% 0% 0% 0% 0% 0%23 7% 0% 0% 0% 0% 0%24 3% 0% 0% 0% 0% 0%25 0% 0% 0% 0% 0% 0%
Average Wage
IT GE
TS BE
TTER
All Rights Reserved 2013
Small Business Tax Credit
• The owner of a sole proprietorship• A partner in a partnership• A shareholder who owns more than 2% of anS corporation
• A person who owns more than 5% of the capital or profits interest in any other business that is not a corporation
• Family members
SINCE 01/01/2010
Who Does Not Count?
All Rights Reserved 2013
Small Business Tax Credit
• A shareholder who owns more than 5% of theoutstanding stock or stock possessing morethan 5% of the total combined voting powerof all stock of a corporation that is not an SCorp
• Seasonal employee who worked 120 or fewerdays during the tax year
• Leased employees
Who Does Not Count?
SINCE 01/01/2010
All Rights Reserved 2013
01/01/2010 AND BEYOND
Small Business Tax Credit
EXCLUDED EMPLOYES
The owner of a sole proprietorship
A partner in a partnership
A shareholder who owns (after applying the section 318 constructiveownership rules) more than 2% of an S corporation
A shareholder who owns (after applying the section 318 constructiveownership rules) more than 5% of the outstanding stock or stockpossessing more than 5% of the total combined voting power of all stockof a corporation that is not an S corporation
A person who owns more than 5% of the capital or profits interest in anyother business that is not a corporation
All Rights Reserved 2013
01/01/2010 AND BEYOND
Small Business Tax Credit
EXCLUDED EMPLOYESFamily members or a member of the household who is not a familymember but qualifies as a dependent on the individual income tax return ofa person listed above. Family members include a child (or descendant of achild), a sibling or step sibling, a parent (or ancestor of a parent), a step-parent, a niece or nephew, an aunt or uncle, or a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. A spouseis also considered a family member for this purpose
Do not include hours of service of any seasonal employee who worked 120or fewer days during the tax year
Leased employees are counted in the FTE and wage calculation. However,premiums for health insurance coverage paid by a leasing organization arenot taken into account in computing the service-recipient’s credit.
All Rights Reserved 2013
01/01/2010 AND BEYOND
Small Business Tax Credit
EMPLOYEE HOURS OF SERVICE
Actual hours worked method — determine actual hours of service fromrecords of hours worked and hours for which payment is made or due(payment is made or due for vacation, holiday, illness, incapacity etc.)
Days-worked equivalency method — use days-worked equivalencywhereby the employee is credited with 8 hours of service for each day forwhich the employee would be required to be credited with at least one hourof service
Weeks-worked equivalency method — use a weeks-worked equivalencywhereby the employee is credited with 40 hours of service for each week forwhich the employee would be required to be credited with at least one hourof service
All Rights Reserved 2013
• Limited scope dental or vision plans• Home health care plans• Hospital indemnity or other fixed indemnityinsurance
• Long‐term care plans• Coverage only for a specified disease orillness
• Certain other supplemental coverage
Health Insurance Plans Include
01/01/2010 AND BEYOND
Small Business Tax Credit
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01/01/2010 AND BEYOND
Small Business Tax Credit
STEP 1:
Calculating Full-Time Equivalent Employees
To satisfy the first step of eligibility, the employermust have employed 25 or fewer full-timeequivalent employees (FTE) in the tax year forwhich they are trying to receive the tax credit.
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01/01/2010 AND BEYOND
STEP 1: Calculate FTE (actual worked hours)125240
2,08012
24,960
Weeks WorkedHours per Week Total Hours (can not exceed 40 X 52 = 2080 hours)
FTE
FT EmployeesTotal Hours for All in Year
1020
200
5210,400
35,3602,080
17.0017.00round to next lowest whole number
FT Annual Hours (can not exceed 2,080 a year) (3)
Equivalent Employees
PTE Hours Worked per Week
Weeks Worked Total Hours for All in Year
Total Aggregate Hours (number from worksheet)(FTE) 24,960 + (PTE) 10,400 = 35,360
PTE & OTHER QUALIFIED FTEHours Worked per Week
Less than 25 FTE
Small Business Tax Credit
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01/01/2010 AND BEYOND
Small Business Tax Credit
STEP 2:
Calculating Average Annual Wages
To be eligible, the employer’s full-time equivalentemployees must have average annual wages thatdo not exceed $50,000
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01/01/2010 AND BEYOND
Small Business Tax CreditSTEP 2: Calculating Average Annual Wages
FTE 12Avg. Salary $30,000.00FTE Annual Salary Paid $360,000.00
PTE & OTHER QUALIFIED FTE 10Hours Worked per Week 20
PTE Hours Worked per Week 200
Weeks Worked 52Total Hours for All in Year 10,400Wage per Hour $10.00PET Annual Salary Paid $104,000.00Combined Salaries (number from worksheet) $464,000.00Equivalent Employees 17
Equivalent Salary $27,294.12round to next lowest multiple of $1,000 $27,000.00
Less than $50,000
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01/01/2010 AND BEYOND
Small Business Tax Credit
STEP 3:
Contribution Arrangement Requirements
Employer’s non-elective contribution on behalf ofeach employee equals a uniform percentage (notless than 50%) of the premium cost of healthinsurance and other qualified coverages offered toemployees
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01/01/2010 AND BEYOND
Small Business Tax CreditSTEP 3: Calculating Contributions
$425.00$5,100.00
$6.00$72.00
$5,172.0012
$62,064.00$31,032.00
50.00%
Annual Premium Billed (number from worksheet)Annual Premium Paid (number from worksheet)Employer Percentage Contribution
EE Medical Monthly Premium EE Medical Annual PremiumEE Vision Monthly PremiumEE Vision Annual PremiumTotal EE Annual PremiumNumber of Covered Insured EEs
Meets 50%
Insured premiums cannot exceed the stateaverage premium for the small group market(Florida is $5,218 single and $12,550 Family)
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01/01/2010 AND BEYOND
Small Business Tax CreditSTEP 3: Calculating Contributions
o
o
o
o
o
o
o
o
o Certain other supplemental coverage.o Similar supplemental coverage provided to coverage under a
Health insurance includes coverage under the following plans:Limited scope dental or vision plans.Long-term care plans.Nursing home care plans. Home health care plans.
Hospital indemnity or other fixed indemnity insurance.Coverage only for a specified disease or illness.Community-based care plans.
Medicare supplemental health insurance.
group health plan.
o
o Coverage issued as a supplement to liability insurance.o Liability insurance, including general liability insurance and
o Workers’ compensation or similar insurance.o Automobile medical payment insurance.o Credit-only insurance.o
o
other insurance benefits.
Coverage only for accident, or disability income insurance, or
which benefits for medical care are secondary or incidental to Other similar insurance coverage, specified in regulations, under Coverage for on-site medical clinics.
Health insurance does not include the following benefits:
any combination thereof.
automoblie liability insurance.
o
o
oFlexible spending arrangements (health FSAs).Health savings accounts (HSAs).
insurance provider as discussed above, health insurance coverage does not include benefits provided by the following:
Also, because the coverage must be offered by a health
Health reimbursement arrangements (HRAs).
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01/01/2010 AND BEYOND
Small Business Tax Credit
FINAL STEP
Calculating The Tax Credit
Formulas to determine averages required to claimtax credits
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01/01/2010 AND BEYOND
Small Business Tax CreditFINAL STEP: Calculating The Tax Credit
Employer Contribution $31,032Maximum Credit 35%Full Credit Amount $10,861
Equivalent Employees 17FTEs in Exceeds of 10 (10 is a constant) 10Result (number of EE minus 10) 7Denominator is Always 15 15Multiplier (Divide result by denominator) 0.46667Full Credit Amount $10,861Tax Credit $5,069
STEP 1:Determine the full credit amount by multiplying the
nonelective premiums paid, by 35 percent Before Any Reduction
STEP 2:Multiply the initial full credit amount by a fraction with a
numerator equal to the employer's FTEs in excess of 10 and a denominator of 15Credit Reduction for FTEs in Excess of 10
Average Annual Wage (Step 2 above) $27,000Avg. Ann. Wages Above $25,000 ($25,000 is a constan $25,000Results $2,000Multiplier (Divide result by denominator) 0.080Full Credit Amount $10,861Calculation (Multiplier times full credit amount) $869
Step 2 $5,069Step 3 $869Total Credit Reduction $5,937
STEP 4:Add the amounts arrived at in the second and third steps and subtract that sum from the initial full credit amount (calculated
in Step 1). This gives you the amount of tax credit that is available to the small employer. Total Credit Reduction
STEP 3:Multiply the initial full credit amount by a fraction with a
numerator equal to the employer's average annual wages above $25,000 and a denominator of $25,000Credit Reduction
for Average Annual Wages Over $25,000
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01/01/2010 AND BEYOND
Small Business Tax CreditFINAL STEP: Calculating The Tax Credit
Full Credit Amount $10,861Total Credit Reduction $5,937Tax Allowance $4,924
$4,924
$31,032
$26,108
STEP 5:Total Tax Credit
Company's Health Care Tax Credit
Company's Premium Contribution
Cost/Business Expense After Credit
Tax/Premium deductionThe health care credit will reduce any income tax for the business. Also,employers generally may deduct the cost of health insurance premiumspaid on behalf of employees. The health care reform package does notchange this general rule and since the amount of the health insurancepremium payments are more than the total credit, eligible smallbusinesses can still claim a business expense deduction for thepremiums in excess of the credit. That's both a tax credit and adeduction for employee premium payments.
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01/01/2010 01/01/2013
FOR P
ROFIT
UP TO 50% IN 2014
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01/01/2010 01/01/2013
NON
PROF
IT
UP TO 35% IN 2014
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Small Business Tax CreditSo What Do I Do?
SINCE 01/01/2010
SimpleAll Rights Reserved 2013
So What Do I Do?
IRS FORM 8941 – FOR PROFIT
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So What Do I Do?
IRS FORM 990‐T NON PROFIT
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WHAT YOU MAY NOT KNOW ABOUT
PPACA?
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Income Tax Provisions
Itemized Medical Deductions Threshold increasedform 7.5% to 10%
Medical Devise Excise Tax of 2.3% Sales of MedicalDevices will be Subject to a 2.9% National Sales TaxOccurring After December 31, 2012
A Non‐deductible Federal Tax on Health InsuranceIndustry Tax Starting at $8B in 2014 Increasing to$14.3B in 2018; Trended After 2018
Pharmacy Manufacturer Tax of $2.5B in 2011Increasing to $4.2B in 2018; $2.8B in 2019+
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Income Tax Provisions
Exchange Reinsurance Tax of $25B on Insurers andTPAs from 2014 to 2016
Medicare Hospital Insurance Tax Rate Increased from1.45% to 2.35% for high Income and 3.8% Tax on NetInvestment Income (Income in Excess of $250K JointFilers; $200K others)
Comparative Effectiveness Research Tax on Insuredand Self‐funded Plans of $1/Participant/Year FirstYear; $2 Second Year and Indexed Thereafter
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Workplace Breastfeeding Support
Employers shall provide reasonable, unpaid break timeand a private, non‐bathroom location for an employeeto express breast milk for her nursing child for up to oneyear after the child’s birth with “undue hardship”exclusions for employers with less than 50 employees
Domestic Violence HelpAs of Aug. 1, 2012, the law requires that allinsurance plans cover screening andcounseling for domestic abuse, a provisionfound under preventive services forwomen’s health
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Tanning Service Tax 7/01/2010
Indoor tanning services have to pay a 10% taxIndoor tanning has been linked with skin cancers includingmelanoma, squamous cell carcinoma, and cancers of the eye
Smokers SurchargeSmokers can pay up to 50% more thannonsmokers for health insurance beginning in2014The surcharge is an effective method of discouragingsmokers and may result in more wellness programsaimed at reducing the number of workers who lightup
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Caloric Reality Restaurants with 20 or more locations to list caloriecounts on menus, menu boards and even drive‐throughand the entire nutrition label would have to beavailable in writing upon request
Greater Mental Health Attention PPACA mandates coverage parity, puttingmental health treatment on par with medicalcare, which means deductibles, co‐paymentsand doctor visits can’t be more restrictive formental illnesses than medical and surgicalcoverage (applies to employers with 50 ormore employees)
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01/01/2018
"Cadillac Plan" Excise Tax40% tax on value above $10,200/individual and$27,500/family (Indexed at CPI‐+1% for 2019, CPIonly after 2019)
$11,850/$30,950 for pre‐Medicare retirees
Adjusted for high risk industries, age, gender
Excludes dental and vision
For multiemployer plans all coverage is consideredfamily
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QUESTIONS
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