PPACA: What You Need to Know (June 2013)

Patient Protection and
Affordable Care Act:
What You Need To Know
Travis A. Sinquefield, PHR, MBA
June 3, 2013
www.hscompanies.com/PPACA

WHAT IS THE PPACA?
• Patient Protection and Affordable Care Act of 2010
• Single largest health care reform in U.S. history
• Implements shared responsibility provisions for
employers
• Implements individual insurance mandates
• Changes how the overall health care system operates
for insurers
www.hscompanies.com/PPAC
A

TIMELINE OF KEY EVENTS
2013
• Health flexible spending account limit of $2,500.
• Restricted annual limit on essential benefits at $2
million.
• Exchange notices to all employees due in Fall 2013 –
exchanges set to open for purchase October 1
• Elimination of Medicare Part D subsidy tax advantage
(any Medicare subsidies received must be reported as
taxable income)
A

2013 (continued)
• Medicare tax on unearned income of 3.8% (MAGI of
$200k for individuals, $250k for joint filers)
• Medicare tax increase of 0.9% for wage earners over
$200k ($250k for joint filers)
• Change in deductible limits and minimums for high
deductible health plans
A

2014
• Individual and employer mandates
• Health insurance premium tax credit (refundable)
• Exchange coverage
• Waiting periods limited to 90 days
• No annual dollar limit on essential health benefits
• Cost-sharing limits of $6,250 for individual
coverage/$12,500 for in-network family coverage
A

2014 (continued)
• Deductible limit of $2,000 for individual
coverage/$4,000 for family coverage (small
business plans only)
• Section 6055 IRS reporting for plans that provide
minimum essential coverage (IRS Notice 2012-32)
• Section 6056 IRS reporting for large employers
(at least 50 full-time employees), presumably to
verify individual mandate and pay-or-play
information. (IRS Notice 2012-33)
A

HOW DOES IT AFFECT MY BUSINESS?
• What applies to me, regardless of the size of my
business?
• Am I a large employer?
• What happens if I am a large employer?
• Are there tax credits available?
A

What applies regardless of the size of my business?
• Exchange notices to your employees in the Fall of 2013
• Provide revised Summary of Benefits and Coverage
• Non-discrimination testing for fully insured plans –
implementation date TBD
• Benefits offered – contraceptive, pre-existing
conditions
• Increase Medicare Taxes - 0.9% increase for incomes
over $200k www.hscompanies.com/PPAC
A

What applies regardless of the size of my business?
(cont.)
• New limits & minimums for high-deductible health
plans (plan year starting in 2013)
• $3250/$6450 maximum annual contribution limit –
total
• $1250/$2500 minimum deductible
• Max out of pocket (deductibles and copays) of
$6250/$12,500
A

AM I CONSIDERED A LARGE EMPLOYER?
What exactly is a large employer?
• Definition: organizations with 50 or more full-time and
full-time equivalents
• Need to consider number of part-time employees and
their hours worked
• New full-time definition: 30 or more hours per week or
130 hours per month
• Done on a controlled-group basis, not individual
company
A

AM I CONSIDERED A LARGE EMPLOYER?
What exactly is a large employer? (cont.)
• Seasonal employees are included in the FTE equation
for hours they worked during that month
• Calculated on a monthly basis
• Average over entire year OR a consecutive 6 month
period
• Use employee count numbers from 2013 to calculate
whether large employer for 2014
A

WHAT HAPPENS IF LARGE EMPLOYER
Ok, so I am a large employer. Now what?
• Must offer insurance to full-time employees that is
both affordable and provides minimum value
• Do not have to offer to part-time employees, even
though they are included in large employer calculation
• Proposed 95% rule – must offer the insurance to at
least 95% of eligible full-time employees
A

What do you mean by affordable?
• Insurance is considered affordable if the premium
cost for self-only coverage is less than 9.5% of W-2
wages
• Safe harbor provisions for affordability:
• W-2 Wage Safe Harbor
• Rate of Pay Safe Harbor
• Federal Poverty Line Safe Harbor
A

What do you mean by minimum value?
• Plan must pass an actuarial test with a 60% score – i.e.
the plan covers 60% of health care costs
• IRS to provide online calculator to help with this
determination
• Work with insurance agent to make sure your plan
meets this standard
• Some current high deductible health plans do not
meet this test!
A

What happens if my plan is not affordable or does not
provide minimum value?
• You pay a fine!
What is the fine?
• Pay either $3,000 per subsidized employee OR $2,000
per full-time employee (minus first 30 FT), whichever
is less
A

What do you mean by “subsidized employee”?
• It is an FT employee who receives the premium tax
credit (subsidy) to purchase insurance on the
exchange
• Will only qualify if meet certain conditions, such as
plan not affordable or not providing minimum value
and buying insurance through the exchange
How do I avoid paying the fine?
• Make sure to offer at least 95% of your full-time
employees insurance that is BOTH affordable AND
provides minimum value (minimum essential
coverage) www.hscompanies.com/PPAC
A

What if I decide not to offer insurance?
• You may pay a fine!
Can I not offer insurance and avoid paying a fine?
• Yes!
How?
• Paying the fine is dependent on an employee
qualifying for credit and purchasing from exchange
• If no one applies and qualifies for the tax credit, then
you will not pay the fine, regardless of whether you
offered insurance or not
A

A

How often are the penalties paid?
• On a monthly basis – employers will need to run
calculations on FTEs monthly
A couple wrinkles in the penalties:
• Seasonal employees ARE included in the penalty
calculation if they are full-time during that month
• You don’t have to offer them insurance, but are
counted in the calculation
• If you have less than 30 full-time employees (under
new rules), not subject to fines
A

Employee Category How Category is used to
determine “Large
Employer”
Subject to penalty if
“Large Employer” and
employee receives
credit
Full-Time Counted as one
employee, based on 30
hour work week
Yes
Part-Time Prorated (total PT hours
worked per month
divided by 120)
No
Seasonal Prorated for month they
work; can’t be cause for
exceeding 50 FTEs
Yes, for month in which
a seasonal worker is full-
time
Temp Agency Yes, for the temp agency Yes, for the temp agency
A

Safe Harbor Provisions
• Employers can utilize a safe harbor provision for
current and new employees if they are unsure if they
are going to be working 30+ hours/week
• Utilizes measurement, stability and optional
administrative periods
• Can be very complicate to figure out and track!
• Can possibly work against you!
A

What about these state insurance exchanges?
• Developed as a gateway for individuals to have access
to various insurance plans
• Established by the states, but can pass and use the
federal exchange
How to they work?
• Supposed to be open starting October 1, 2013
• Access and purchase insurance online
• National & local help lines
STATE AND FEDERAL EXCHANGES
A

Can employer purchase coverage through the exchange?
Possibly…
• Depends on number of FTEs and state statutory
guidelines
• Per the law:
• Have average of greater than 1 employee
• No more than 100 employees during any business
during previous year
• Employee at least one employee at beginning of
plan year
• Before 1/1/2016, states may lower requirement to 50
employees
A

How are these exchanges funded?
• PCORI Fee: $1 to $2 per covered life – due by 7/31/13 for
first payment on plan years ending 12/31/12; paid by
insurance company unless self-insured
• New fee of $63 per person charged to all group health
insurance plans – fee will be passed on to employees
• Insurers who sell policies on the exchange will be
charged a 3.5% fee – will be passed on to individuals
buying on the exchange
• Health Insurance Tax: $8 bln in 2014, $11.3 bln in 2015-
2016; spread across all insurers
A

A

NEW TAXES PER THE ACA
A
Health Insurance Tax
• Spread across all health insurers
• $8 billion flat fee in 2014
• $11.3 billion in 2015-2016
• $13.9 billion in 2017
• $14.3 billion 2018
• Indexed for inflation after 2018
• Largest tax included in the ACA

SMALL BUSINESS TAX CREDIT
So tell me about this small business tax credit for
offering health insurance…
• Employs less than 25 FTE employees during a tax
year
• Pays average annual wages less than $50k per
FTE employee
• Has qualified plan that requires the employer to
make a non-elective contribution equal to
uniform percentage not less than 50%
• In 2014, will only be eligible if purchasing through
the SHOP program (on the Exchanges)
A

SMALL BUSINESS TAX CREDIT (2013)
Number of
Employees
Average Wages
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%
12 30% 23% 16% 9% 2%
13 28% 21% 14% 7%
14 26% 19% 12% 5%
15 23% 16% 9% 2%
16 21% 14% 7%
17 19% 12% 5%
18 16% 9% 2%
19 14% 7%
20 12% 5%
21 9% 2%
22 7%
23 5%
24 2%
25 0%

SMALL BUSINESS TAX CREDIT (2014)
Number of
Employees
Average Wages
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%
12 43% 33% 23% 13% 3%
13 40% 30% 20% 10% 0%
14 37% 27% 17% 7%
15 33% 23% 13% 3%
16 30% 20% 10% 0%
17 27% 17% 7%
18 23% 13% 3%
19 20% 10% 0%
20 17% 7%
21 13% 3%
22 10% 0%
23 7%
24 3%
25 0%

W-2 REPORTING
Who has to report the cost of insurance on their
W-2?
• Employers with 250 or more employees must
report cost of the insurance benefits on W-2’s
issued for 2012
• Based on individual employer, not controlled
group
• Must report “aggregate reportable cost” it
provided - total cost of all applicable insurance
coverage,
• Do not have to issue a W-2 for the sole purpose
of reporting insurance cost (i.e. to a retiree)
A

SUMMARY OF BENEFITS & COVERAGE
• Issued to all participants of the health insurance plan
• Is issued by the insurance company and uses a
standard template provided by the government
• Self insured plans must create with the help of the
TPA
• Is in addition to the SPD and must be issued by all
plans, even if exempt from ERISA
• Also provided at other times (initial enrollment, etc.)
• Not required for stand-alone benefits (vision, dental,
etc.)
• Must be linguistically and culturally appropriate
• $1,000 fine per individual who didn’t receive properly
for non-compliance
A

NON-DISCRIMINATION TESTING
• Non-grandfathered insured plans must undergo
discrimination testing; details TBD per the IRS
• Expected to follow same current rules as self-
insured plans
• Essentially: if you have multiple plans, one plan
cannot substantially benefit one group versus
another
A

SIMPLE CAFETERIA PLANS
• Available to small employers – average 100 or less
employees
• Meet certain eligibility requirements for
employees
• Meet certain contribution requirements for
employers
• Must be uniform for all employees
A

AUTOMATIC ENROLLMENT
Who has to participate?
• Employers with 200 or more employees must
automatically enroll their employees in the plan
• Employees can opt-out
• Originally scheduled for 2014 but is now delayed
A

CADILLAC PLANS
• Effective in 2018
• 40% excise tax charged to the plan sponsor
• Excise tax is based on difference between the
actual plan value and the plan limits below, and is
per participant in the plan
• Based on aggregate annual value amounts
• Individual coverage: $10,200
• Family: $27,500
• Based on total cost of benefits
• Ex: If plan value is $1,000 over the individual
limit, pay $400 per participant in excise tax
A

QUESTIONS
For more information visit:
http://www.hscompanies.com/PPACA

PPACA: What You Need to Know (June 2013)

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