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Obamacare, PPACA, Health Care Reform: It’s Coming, are You Ready? April 17, 2013

Obamacare, PPACA, Health Care Reform: It’s Coming, are You Ready? April 17, 2013. PPACA Background. Enactment in 2010 Supreme Court Decision in 2012 Effective Date (generally) is January 1, 2014. Individual Mandate.

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Obamacare, PPACA, Health Care Reform: It’s Coming, are You Ready? April 17, 2013

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  1. Obamacare, PPACA, Health Care Reform:It’s Coming, are You Ready?April 17, 2013

  2. PPACA Background • Enactment in 2010 • Supreme Court Decision in 2012 • Effective Date (generally) is January 1, 2014

  3. Individual Mandate • If an applicable individual fails to obtain minimum essential coverage beginning in 2014, then a penalty will be imposed, equal to the greater of: • $95, or • 1% of the excess of the taxpayer's household income over the taxpayer's filing threshold in 2014. • 2015: $325 or 2% • 2016: $695 or 2.5%

  4. Individual Mandate • The Individual Mandate does not apply to: • Religious conscience objectors • Members of health care-sharing ministries • Non-citizens, non-nationals or aliens • Incarcerated individuals • Certain individuals with low incomes • Members of certain Indian tribes • Individuals with gaps in coverage of less than 3 months • Individuals with hardships

  5. Individual Mandate • Minimum Essential Coverage is coverage under any of the following: • A government-sponsored program • An “eligible employer-sponsored plan” • A health plan offered in the individual market • A grandfathered health plan • Other health benefits coverage.

  6. Individual Mandate • Enforcement of penalty- • Shared responsibility payment is reported on the individual’s federal income tax return. • IRS will most likely offset tax refunds in order to refund the amount due.

  7. Individual Mandate • Insurance Affordability Programs • Starting in 2014, there are premium assistance tax credits and cost sharing subsidies to offer assistance to those who have difficulty in affording to pay for coverage. • In order to be eligible, the individual’s income must meet fall between 100% - 400% of the federal poverty level. • $11,500 - $46,000 for an individual • $23,500 - $94,000 for a family of 4

  8. Individual Mandate • Insurance Affordability Programs • An individual will be ineligible for tax credits or cost-sharing subsidies if he or she is eligible for an employer sponsored plan that is affordable and of minimum value.

  9. Health Insurance Exchanges • What is an Exchange? • An online marketplace for health insurance • Exchanges will be in place by January 1, 2014. • Purposes: • Provide individuals and small employers a place to purchase qualified health plans • Enhance competition in the health insurance market • Improve choice of affordable health insurance • Give small businesses the same purchasing clout as large businesses

  10. Health Insurance Exchanges • Types of Exchanges include state-run, federally-facilitated and partnership • Functions: • Plan Management (certification of qualified health plans) • Consumer Assistance (eligibility for enrollment and assistance programs)

  11. Health Insurance Exchanges • A qualified health plan is an Exchange-certified health plan that offers an “essential health benefits” package. • Essential Health Benefits: • Ambulatory patient services • Emergency services • Hospitalization • Maternity and newborn care • Mental health and substance use disorder services • Prescription drugs • Rehabilitation services and devices • Laboratory services • Preventive and wellness services and chronic disease management • Pediatric services

  12. Health Insurance Exchanges • Plans offered by the Exchange require that each plan pay for the specified percentage of costs as follows: • Bronze: 60 percent • Silver: 70 percent • Gold: 80 percent • Platinum: 90 percent

  13. Health Insurance Exchanges • Eligibility for Enrollment • 2014: All individuals • 2014: Small employers • 2017: Large employers (101+ employees) • Exchange is not required for employers. If an employer chooses to obtain coverage through an Exchange, it must elect to make all of its full time employees eligible for one or more qualified health plans offered through the Exchange.

  14. Notice of Exchange • By late summer/early fall of 2013, all employers must provide employees with a notice that informs employees of the Exchange (among other things) • Provide to new hires on date of hire • DOL is preparing a template

  15. Employer Mandate • Starting in 2014, certain large employers may be subject to a penalty tax for: • Failing to offer health care minimum essential coverage to 95% of full time employees and their dependents; • Offering minimum essential coverage that is unaffordable; or • Offering minimum essential coverage where the Plan pays less than 60% of cost.

  16. Employer Mandate • Large employers are those that employ an average of at least 50 full time equivalents on business days in the preceding calendar year.

  17. Employer Mandate • Large employers- continued • In making this determination, the employer must include part time employees. • Full time employees are those employed on average at least 30 hours per week (130 hours per month). • Hours of service include certain categories of paid time off. • Controlled group rules apply.

  18. Employer Mandate • Large Employer calculation: • Determine number of full-time employees • Determine number of full-time equivalents by counting all hours of part time employees and dividing that number by 120 • Add together the numbers from steps 1 and 2 • Repeat for remaining 11 months of the year • Calculate the total sum over 12 months and divide by 12

  19. Employer Mandate • Seasonal Worker Exception- An employer is not considered to employ more than 50 full time employees if: • Its workforce only exceeds 50 full time employees for 120 days or less during the year, and • The employees in excess of 50 employed during the 120 day period were “seasonal workers.” • Seasonal Workers: those whose employment is of the kind exclusively performed during certain periods of the year and which may not be carried on throughout the year.

  20. Employer Mandate • Minimum Essential Coverage: coverage under any of the following: • A government-sponsored program • An “eligible employer-sponsored plan” • A health plan offered in the individual market • A grandfathered health plan • Other health benefits coverage. • Eligible employer-sponsored plan: group health plan that is a governmental plan or any other plan or coverage offered in a state’s small or large group market.

  21. Employer Mandate • Penalties are triggered when at least 1 full time employee obtains coverage through the Exchange and receives a premium tax credit or cost sharing subsidy.

  22. Employer Mandate • Penalty- No Coverage Provided • The employer will be subject to a $2,000 annual penalty for each full time employee, regardless of the number of employees who actually trigger the penalty. • However, when calculating this penalty, the large employer is permitted to disregard the first 30 of its full time employees. *Note: No penalty will be assessed for failure to offer coverage to part time employees.

  23. Employer Mandate • Example 1: Assume that a large employer has 100 full time employees and does not provide employee health insurance coverage. If at least one full time employee independently obtains health coverage through the Exchange and qualifies for a premium tax credit or cost sharing subsidy, the penalty would be calculated as follows: (100 – 30) x $2,000 = $140,000 penalty per year.

  24. Employer Mandate • Example 2: Assume that a large employer has 25 full time employees, 200 part time employees, and does not provide employee health insurance coverage. If at least one full time employee independently obtains health coverage through the Exchange and qualifies for a premium tax credit or cost sharing subsidy, the penalty would be calculated as follows: (25 – 30) x $2,000 = $0 penalty.

  25. Employer Mandate • Penalty- Some Coverage Provided, but • coverage is unaffordable or • does not provide a minimum value • The large employer will be penalized $3,000 per year for each full time employee who purchases his or her own coverage through the Exchange, if the employee qualifies for a tax credit or cost sharing assistance. *Note: There is no 30 employee reduction, but there is a cap on the penalty.

  26. Employer Mandate • Coverage will be considered unaffordable if the employee's required contribution to the health insurance premiums is greater than 9.5% of the employee's household income. • This is based on the lowest cost plan option for single individuals provided by the employer. • Safe harbor allows an employer to use the employee’s W-2 earnings instead of household income. *Note: This is an employee-by-employee determination that allows for planning opportunities.

  27. Employer Mandate • Coverage will be deemed not to provide a minimum value if it does not cover at least 60% of medical costs. • Minimum value is determined by 3 potential approaches: • Minimum value calculator • Design-based safe harbor checklists • Actuarial certification

  28. Employer Mandate • Example 3: Assume that a large employer with low value health coverage has 100 full time employees. If 3 of those full time employees purchase their own health coverage through the Exchange and qualify for a premium tax credit or cost sharing subsidy, the employer would be penalized $3,000 x 3, or $9,000. • Note: If the same employer did not offer any coverage, the penalty would be $140,000 (see Example 1).

  29. Employer Mandate • Measurement and Stability Period safe harbor methods assist employers in determining the number of full time employees. • Allow employers to avoid complicated month-to-month determinations • Are especially helpful for employers with seasonal workers, variable workweeks or high employee turnover

  30. Measurement and Stability Period Safe Harbor • Basic Concept: Employers identify full-time employees by calculating hours during a specified period of time (measurement period) and then locking in that status for a separate period of time (stability period). • Administrative period also allowed

  31. Measurement and Stability Periods • When should this safe harbor be considered? • If the employer’s full time employee number approaches 50. • If the employer employs variable hour employees who may be full-time one month and part-time the next month

  32. Transitional Rule for 2014 • Allows for a shortened measurement period • Consider taking advantage of this rule and start tracking hours now!

  33. Small Business Tax Credit • Small employers are eligible for a tax credit if they cover the cost of 50% of single health care coverage for each employee. • A small employer: • Has no more than 25 full time equivalents for the tax year, and • Pays average annual wages to employees that do not exceed $50,000.

  34. Small Business Tax Credit • The amount of the credit is based on a sliding scale calculation. • 2013- Maximum credit is 35% • 2014- Maximum credit may be 50% • The amount paid in excess of the credit can be deducted as a business expense. • The credit can be carried back or forward to other tax years.

  35. Fees • Patient Centered Outcomes Research Institute (PCORI): $1-$2 per covered life • Transitional Reinsurance: $63 per participant

  36. Summary of Benefits and Coverage Document • Department of Labor template: www.dol.gov/ebsa/healthreform/ • Distribute to participants no later than the first day of the first open enrollment period that takes place on or after September 23, 2012. • Anti-duplication rule: If you have an insured plan, the insurance company should do this work for you.

  37. Waiting Periods Effective January 1, 2014, employers cannot require a waiting period in excess of 90 days before health coverage becomes effective. * Note: You may need to update your Employee Handbook or Plan documents to incorporate this requirement.

  38. Limitation on Health Flexible Spending Accounts Effective for Plan Years beginning after December 31, 2012, the limit on annual salary reduction contributions to health flexible spending accounts offered under cafeteria plans is $2,500. * Note: You may need to update your Plan to reflect this new limit.

  39. Automatic Enrollment • Certain large employers with more than 200 full-time employees must automatically enroll employees in a health benefit plan. • Must provide notice and opportunity to opt-out. • Enforcement date is not yet established.

  40. Form W-2 • Certain employers must begin including the aggregate cost of employer-sponsored health coverage on employees’ W-2s. • Employers that issued fewer than 250 Form W-2s in the preceding calendar year are currently exempt from this reporting requirement. • This is for informational purposes only and will not make the benefits taxable to employees. • Effective: 2012 tax year (or, by January 31, 2013).

  41. Nondiscrimination Rules for Fully-Insured Plans • Fully-insured plans must comply with non-discrimination rules related to eligibility and benefits that are similar to those non-discrimination rules currently effective for self-insured plans. • This requirement will not become effective until some time after regulations are issued to assist with compliance.

  42. Action Items for 2013 • Meet with advisors • Review current Plans • Evaluate budgets • Make educated decisions concerning benefits • Track hours and count employees • Stay informed about changing rules

  43. Contact: Mindi M. Johnson Foster Swift Collins & Smith, PC 1700 E. Beltline NE, Suite 200 Grand Rapids, MI 49525 (616) 726-2252 Email: mjohnson@fosterswift.com

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