The Impact of PPACA on your Business

Kimberly A. Nash, MBA, SPHR, CMSDirector of Human Resource ServicesBrown & Brown Alpha Benefits DivisionJanuary 2013

Disclaimer

Brown & Brown Alpha Benefits Division provides a variety of business advisory consulting services for its clients. Brown & Brown Alpha Benefits Division does not, however, provide legal services and does not employ individuals licensed or competent to practice law in any jurisdiction. Therefore, any services or information provided by Brown & Brown Alpha Benefits Division are not legal opinions or legal advice. If legal advice, counsel, or representation is needed, the services of a competent legal professional should be sought.

Revenue Generators (Taxes)

Medicare Tax

• Effective January 1, 2013• Taxpayers with wages in $200,000 (single) $250,000

(married & filing jointly)• Additional .9% tax on wages above threshold • Employers should withhold the tax on wages in excess of

$200,000• Additional tax is assessed on the employee share only; not

the employer share

Patient-Centered Outcomes Research Institute (PCORI)• For plan years ending on or after October 1, 2012• Used to finance comparative clinical effectiveness research• 1st year the fee is based on average number of covered lives

(employees & dependents) * $1• 2nd year the fee is increased to $2 each per covered person.• 3rd year and beyond the fee will be based on National Health

Expenditures• The fee no longer applies for plan years ending after October 1,

2019• Applies to HRA/MERP if not part of a self-funded plan

Patient-Centered Outcomes Research Institute (PCORI)

• Use actual count, snapshot, Form 5500 to determine covered lives

• The insurer will pay the fee for fully insured plans• The employer will pay the fee for self-insured plans,

HRA/MERP plans• Use IRS Form 720 to pay once per year by July 31. Calendar

year plans, the fee is due July 31, 2013.

Transitional Reinsurance Program

• Tax to support the transfer of risk from the individual health insurance market to the group health insurance market

• Goal is to raise $25 Billion over a three year period• 2014 - $12 Billion• 2015 - $8 Billion• 2016 - $5 Billion

• Estimate the fee to be $63 per covered person in 2014• Fee is paid by insurer for fully insured plans; Fee is paid by

employer/TPA for self-insured plans

Health Insurance Tax (HIT)• Tax on health insurance carriers impacting fully insured

plans. • Tax will be passed from the insurance carrier to the

employer• 2014 - $8 Billion• 2015-2016 - $11.3 Billion• 2017 - $13.9 Billion• 2018 - $14.3 Billion• 2019 and beyond – amount will be indexed to the rate of

premium growth• Based on market share

Impact on Health Plans

Medical Loss Ratio (MLR)

• Health Insurers must utilize a percentage of premiums received for claim payments, clinical services and activities that improve healthcare quality

• Fully Insured Small Group (2-50 employees) – 80%• Fully Insured Large Group (51 or more employees) - 85%• Does not apply to Self-Insured plans• The calculation is performed by insurance carriers in

aggregate for lines of business – not based on group’s claim experience

• Checks issued in August for previous year

Medical Flexible Spending Accounts

• Over-the-Counter Medications not eligible (2011)

• 2013 Contributions are capped at $2500

• Verify Section 125 documents are updated

Plan Mandates/Cost Sharing Limits

• Coverage for dependents to Age 26• Lifetime dollar limits and annual dollar limits are not permitted on

essential benefits• Pre-existing conditions exclusions not permitted for enrollees under

age 19• Pre-existing conditions exclusions not permitted for all enrollees in

2014• Certain preventive benefits may not have a cost share (co-pay,

deductible)• Preventive Services for Women for plan years beginning August 1,

2012 no cost share. (Contraceptives, well visits, counseling, screenings, etc.)

• 2014 - Small Health Plans Deductibles $2000/$4000• 2014 - Maximum Out of Pocket Expenses will be capped as well• 2014 Small Group Rates – favor older population, unfavorable to

younger population.

Waiting Periods

• Effective with the 2014 plan, employee waiting periods may not exceed 90 days.

• Plans with a waiting period of the 1st of the month after 90 days will need to be changed

• First of the month following 60 days is an alternative

Employer’s Shared Responsibility(Play or Pay)

Guidance through 2014

Applicable Large Employer

• Employers with 50 or more full-time equivalent employees in the preceding calendar year.

• Aggregate hours of part-time employees for 1 month/120 hours + Full-time Employees (Employees with less than 120 days per year subtracted out)

• Transitional relief for 2014, can use a 6 month consecutive period in 2013 to measure FTE

• Full-time employee is defined as paid for 30 or more hours per week

• Full-time employees (children to age 26) must be offered affordable and MEC

• Do not have to offer spouse coverage

Affordable Coverage

• Employee contribution toward employee only coverage cannot exceed 9.5% of their wages.

Safe Harbor:• Box 1 of W-2 wages for the current year• Rate of Pay: $7.25 x 130 hours x 12 = $11,310 x 9.5% =

$1,074.45 annual or $89.54/month• Based on Federal Poverty Level – currently $11,170 for individual *

9.5% = $1,061.15/year or $88.43/month

Minimum Essential Coverage

• Plan covers at least 60% of the total allowed benefits• Employer contributions to HSA and HRA can be included• November 2012 proposed regulations offer 3 different

methods to determine minimal essential coverage• Calculator method• Safe harbor checklists• Actuarial certification method

Penalties

• Applicable Large Employers must offer affordable and MEC coverage to full-time employees and their children.

• Employer will be charged a $2,000 penalty per full-time employee if no coverage is offered and if one employee goes to the exchange and receives a subsidy.

• The first 30 employees are “free.”• The penalty will be calculated monthly and the amount

will increase after 2014 based on inflation.• The penalty is a non-deductible business expense• 95% of full-time employees must be offered coverage. 5%

or 5 employee which ever is greater

Penalties

• Employer sponsored health insurance that is not affordable and/or does not meet MEC

• Annual penalty of $3000 for each full-time employee who goes to the exchange and receives a subsidy

• Total penalty is capped at $2000 penalty for all full-time employee minus the 30 “free” employees

• Penalty is calculated monthly and will be increased after 2014 based on inflation.

• Subsidy is based on employee’s household income. Employee may be eligible for a subsidy on the exchange but employer may not be assessed a penalty if the employee’s contribution met the affordability requirement

• Penalty is a non-deductible business expense

Variable Hour Employees (New Employee)

• At the time of hire, unsure if employee meets full-time requirement

• Initial Measurement Period 3 – 12 months• Stability Period at least 6 months and same length of

measurement period• Administrative period no more than 90 days • Combined measurement and administrative periods cannot

exceed 13 months and a fraction of a month

Variable Hour Employees (Ongoing Employee)

• Standard Measurement Period 3 – 12 months• Stability Period at least 6 months and same length of

measurement period• Administrative period no more than 90 days • Transitional relief for 2014 for plans that renew early in the year

(shorter than 12 month measurement period)

Government Reporting Requirements

Reporting & Disclosures

• W-2 Reporting of Health Benefit Costs January 2013 for employers that issued 250 or more W-2s in January 2012.

• Summary of Benefits and Coverages (SBC) plan years beginning after 9/23/12

• Notice of Exchanges to be distributed to employees by 3/1/13 – awaiting regulations

• Quality of Care Report submitted to HHS and public on the internet (doesn’t apply to grandfathered plans)

• Employers with 50 of more FTE report health plan and employee information to the IRS – for 2014 plans

• Report Health Insurance Coverage – Health Insurance carriers and self-insured plans

• Statement to Employees that information has been sent to IRS (January 2015?

Questions?

More Information?

2/7 Webinar5/7 Health Care SymposiumE-newsletter

Kimberly A. Nash, MBA, SPHR, CMS▪ Director of Human Resource

Services▪ Brown & Brown Alpha Benefits

Division▪ kn@alphabenefits.com▪ 717-766-3711 x 107

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