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© 2013 KSM Business Services, Inc.
The Patient Protection and
Affordable Care ActJune 4, 2013
Lisa Curry, CPAAmber Moore, CPA
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Signed into law on March 23, 2010
Most significant regulatory overhaul of the U.S. healthcare system since Medicare and Medicaid in 1965
Main purpose is to decrease the number of uninsured and reduce costs of health care
Implemented over the next several years
PPACA – What Is It?
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2010 Extended coverage for young adult
Health insurance reform
Improved health plan administration
Rebate checks for Medicare Part D ($250/enrollee)
1st phase of small business credit
PPACA – Components Effective in 2010-2012
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2011 Community Living Assistance Services and Supports Program
(CLASS Act)
Additional health plan administration improvements
Increased tax on HSA and MSA withdrawals
PPACA – Components Effective in 2010-2012
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2012 Improvements to health insurance reform and health plan
administration continue
Issuers must provide summary of health plans effective September 23, 2012
Medical Loss Ratio Rebates were issued for plans that qualified
Reporting value of health care benefits on Form W-2 (first due by 1/31/2013)
PCORI fee (first due July 31st of calendar year following plan year ending on or after 10/1/12)
PPACA – Components Effective in 2010-2012
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2013
Limit Flexible Savings Accounts Contributions to $2,500
Higher Medicare tax on earned income (.9%)
Medicare taxes on unearned income (3.8%)
Excise tax on medical device manufacturers (2.3%)
Fair Labor Standards Act notices to employees (delayed)
$500,000 compensation deduction limitation for health
insurance issuers
PPACA – Components effective in 2013
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2014
New fee obligations Individual mandateEmployer mandateSmall/Large Employer
Health insurance exchangePremium tax subsidyEmployer Wellness Programs
2018 “Cadillac Tax”
PPACA – Components effective in 2014-2018
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What we knew in January 2013: Individual mandate: all Americans, with some exceptions, must maintain a minimum level of
health coverage or face a tax
Health Care Insurance Exchanges and Premium Tax Credits (PTCs): creates health care
insurance Exchanges and provides PTCs to assist eligible individuals with the purchase of
coverage (open enrollment to begin October 2013)
Medicaid expansion: allows states to expand Medicaid for all individuals up to 138% of federal
poverty level
Employer mandate: requires employers with 50 or more full-time equivalents to offer coverage to
full-time employees (and their dependents) or pay an excise tax if any full-time employee obtains
Exchange coverage and a PTC
2014 Coverage Expansion
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What we know in June 2013:
2014 Coverage Expansion
No Change to the Unknown
Since January 2013, no new guidance has been issued.
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PCORI Per capita fee that funds the Patient-Centered Research Outcome
Institute
Issuers and plan sponsors are responsible for paying the fee on IRS Form 720
Charged on plan years ending after September 30, 2012
$1 per covered life during fiscal year 2013 and $2 thereafter through 2019
Due on July 31st of calendar year following end of plan year
New Fee Obligations(Regardless of Number of Employees)
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Reinsurance Proceeds go to commercial insurers to stabilize premiums in the
individual market during the first three years that the state-based exchanges are in effect
Fee is assessed on a per capita basis for both fully insured and self-funded members
Temporary fee (2014-2016)
First payment is due January, 2015
Per capita fee between $60 and $80 on an annual basis for 2014 through 2016
New Fee Obligations(Regardless of Number of Employees)
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Notice of Coverage Options- Delayed The Act requires employers to provide each employee a written notice:
Informing the employee of the existence of state health insurance exchanges including how to contact the Exchanges for assistance.
Stating that the employee may be eligible for a premium tax credit to purchase coverage through an Exchange if the employer’s group health plan does not provide a certain minimum level of coverage.
Stating that if the employee purchases coverage through an Exchange, then the employee may lose the employer contribution to the employer’s group health plan, which may be excludable from income.
Notice was supposed to be provided no later than March 1, 2013, however that has been delayed by the DOL.
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Individuals are required to maintain minimum essential coverage each month or pay a penalty.
(Exceptions apply)
Insurers and employers are required to report certain information to the Secretary of Treasury
Individuals are responsible for ensuring that they, and any dependent, are covered under
minimum essential coverage.
Penalty for not having coverage is greater of flat dollar amount or percentage of taxable income
Flat dollar - $95 (2014); $325 (2015); $695 (2016); penalty is half of these amounts for any
dependents under age 18
Percentage of taxable income – 1% (2014), 2% (2015) and 2.5% (2016) of household’s
income that is in excess of the tax filing threshold
Individual Mandate
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Qualified small employers Fewer than 50 full-time employees during the previous calendar year
May offer employees the opportunity to enroll in a health exchange-participating qualified health plan through the employer’s cafeteria plan
Small business tax credit available No more than 25 FTEs Average wage less than or equal to $50,000 Contribution to coverage must be a uniform percentage equal to at
least 50% of premium cost Credit is 35%(2013)/50%(2014) of employer contribution Full Credit available for employers with 10 or fewer FTEs
Employer MandateQualified Small Employer
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Applicable large employers must offer 95% of full-time employees (and their dependents) opportunity to enroll in health coverage that is “affordable” and provides the “minimum value” At least 50 full-time employees during the previous calendar year
Affordable Coverage – employee’s share of the self-only premium for the employer’s lowest-cost plan that provides minimum value cannot exceed 9.5% of household income Safe Harbor W-2 Rate of Pay Federal Poverty Line
Employer MandateLarge Employer
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Minimum Value – a plan fails to provide minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs.
Proposed regulations on the calculation of minimum value Actuarial value calculator Checklist based on array of designed based safe harbors Certified actuary
Employer MandateLarge Employer (Continued)
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Employee Categories
Employee Category How is the category of employee used to determine “large
employer?”
Once an employer is determined to be a “large employer,” could
the employer be subject to a penalty if this type of employee
received a premium credit?Full-time Counted as one employee, based
on a 30-hour or more work weekYes
Part-time Prorated (calculated by taking the hours worked by part-time employees in a month divided by 120)
No
Seasonal Not counted, for those working less than 120 days in a year
Yes, for the month in which a seasonal worker is full time
Temporary Agency Generally, counted as working for the temporary agency (except for those workers who are independent contractors)
Yes, for those counted as working for the temporary agency
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Steps to Calculating # of Employees1. Count number of full-time employees for each month
50 employees that worked over 130 hours=50 FTEs2. Determine number of FTEs for non full-time employees:
• Add hours of all employees who are not full-time (do not use any hours over 120) and divide total by 120 for each month.
25 employees that each worked 100 hours=(25*100)/120=20.83 FTEs3. Add #1 and #2 to calculate number of FTEs for that month
(50+20.83=70.83 FTEs)4. Take average for time period in “look back” measurement period
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Decision to Pay or Play?
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Notes on Exchange Employee eligibility for premium subsidy through an exchange is a
function of: Household income (three tiers) Employee premium contributions as a percentage of income
(generally > 9.5% trigger) One employee receiving a premium tax credit or cost sharing subsidy
from an exchange triggers penalty
Reporting requirements begin in 2014 for all “offering employers” (contribution for self only coverage exceeds 8% of wages)
Resources www.healthcare.gov www.dol.gov/ebsa/healthreform
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Premium Subsidy Eligibility
Household Income*
Single: > $46,121Family of four: > $95,174
Single: $15,912 - $46,121Family of four: $32,835 -$95,174
Single: < $15,912Family of four: < $32,835
Employer Sponsored-Plan: Employee Premium Contribution as a Percent of Income
FPL 0.0% - 9.5% 9.5%+
Tier III 400%+
Tier II138% -400%
Tier I0% -138%
If a state elects not to implement Medicaid expansion, the population from 100% - 138% of FPL is potentially eligible for premium subsidies.
Not Eligible for Premium Tax Subsidy
Not Eligible for Premium Tax Subsidy due to employee
contribution not exceeding >9.5%Eligible for Premium Tax Subsidy
Medicaid Eligible
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State Health Insurance Exchange
IndianaAs of April 12, 2013, the state has submitted a waiver to CMS requesting permission to expand coverage to expansion-eligible residents through the Healthy Indiana Plan
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PPACA creates new incentive and builds on existing wellness programs
Programs are designed to improve overall health Health screenings Fitness center reimbursement Immunizations Smoking cessations programs
Reward to employee increased from 20% to 30%
Resources www.ofr.gov www.dol.gov
Employer Wellness Programs
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We are under 50 FTE’s and currently offer health insurance-Is this a good policy or should we have them buy it on the exchange? If so, how do you keep your employees whole?
Will small business be able to join the exchange for better rates?
What is the cost of insurance on the exchange going to be?
Frequently Asked Questions
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Has your company developed a strategy and prepared a project plan to implement the ACA?
Does your health care plan comply with the ACA market reform provisions? Is it affordable? Does meet minimum value?
Has your company estimated the cost of implementation/financial impact? Necessary changes in health care plan Mandatory fees (approximately 3.8% increase on premiums) Additional administration expense
Has your company estimated the number of employees who may be eligible for the premium tax credit?
Top Considerations in This Time of Uncertainty
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Has your company developed an employee education and communication strategy?
Are the human resource and payroll systems and processes capable of determining who is a full-time employee based on hours worked? Can these systems collect and retain all relevant data for reporting purposes? Have vendor relationships been reviewed?
Was consideration given to how your company will handle notifications from the health care exchange?
Is your company prepared to defend an IRS assessment of the excise tax or an IRS audit of the health care plan offerings?
Top Considerations in This Time of Uncertainty – (continued)
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Contact Information
Lisa CurryDirectorHealthcare Resources [email protected]
Amber MooreManagerHealthcare Resources [email protected]
