ACCOUNTING IMPLICATIONS OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT
Presented by Christopher Doolittle
PRESENTATION OUTLINE
• PPACA information reporting requirements
 Current
 Delayed
• Budgeting for reform
 PCORI Fee
 Transitional Reinsurance Fee
 Employer mandate – “pay or play”
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IMPACT OF PPACA
• Budget changes due to PPACA
 Employer mandate

Company has forecasted health care cost will be
$4,500,000 (pre-tax)
 Employer has 895 covered lives

PCORI fee will be (895 X $1) $895 (pre-tax)

Transitional Reinsurance fee will be (895 X$63) $56,385 (pre-tax)
 After tax cost = $2,962,232 ($4,557,280 x 65%)
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IMPACT OF PPACA
• Budget changes due to PPACA (continued)
 None of these costs would have been in budget if PPACA was not
enacted
 Above costs do not take into account resource commitments to comply
with new regulations
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REPORTING REQUIREMENTS
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REPORTING REQUIREMENTS
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Hospitals
Federal,
state & local
government
agencies
Applicable Employers –
have one or more employees engaged
in, or producing goods for, interstate
commerce & have $500,000 or more in
annual sales volume
Institutions
of higher
education
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Schools for
children who
are mentally
or physically
disabled or
gifted
Preschools,
elementary
&
secondary
schools
www.dol.gov/ebsa/healthreform
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REPORTING REQUIREMENTS
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INTERNAL REVENUE CODE §6056 & §6066 REPORTING
REQUIREMENTS
• Additional information to be reported
 Disclosure of insurer’s name
 Insurer’s address
 Insurer’s identification number
 Portion of premium paid by employer
 If plan is a qualified health plan in a small group market
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BUDGET FOR FEES
July 31, 2013
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PCORI FEE
• $1 per covered life for plan years
 Ending on or after October 1, 2012, & on or before
September 30, 2013
• $2 per covered life for plan years
 Ending on or after October 1, 2013, & on or before
September 30, 2014
• Increasing amount in later plan years
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REMITTING PCORI FEE
• IRS Form 720, Quarterly Federal Excise Tax Return
 Due July 31, 2013 for plans ending between October 1, 2012 &
December 31, 2012

Other plans will be due July 31, 2014
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COVERED LIVES
• A covered life is anyone covered by employer’s insurance plan
 Self-funded plans
 Actual count method
 Snapshot count method
 Snapshot factor method
 Form 5500 method
 Fully insured plans
 Actual count method
 Snapshot count method
 NAIC member months method
 State form method
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BUDGET FOR FEES
Nov/Dec 2014/Jan 2015
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TRANSITIONAL REINSURANCE FEE REMITTANCE
• Enrollment counts must be reported to U.S. Department of Health
and Human Services (HHS)
 Counts due by November 15 of each year through 2016
 Notice will be issued by HHS (December 15)
 Fee due within 30 days of notice (January 15)

Fee may be paid through third-party claims administrator
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TRANSITIONAL REINSURANCE FEE IMPACT
• Budget for covered lives
 250 X $63 = $ 15,750
 500 X $63 = $ 31,500
 1,000 X $63 = $ 63,000
 1,500 X $63 = $ 94,500
 2,000 X $63 = $126,000
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BUDGET FOR FEES
January 1, 2015
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NEW PREMIUM RATES
• New premium rates need to be analyzed to determine
budget impact
 No gender-based rating
 Standardized 3:1 ratio maximum age rating

Younger workforces could see higher premiums

Older workforces could see lower premiums
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EMPLOYER MANDATE
• §4980H – Applicable employers must provide minimum essential
coverage
 Large employers – 50 or more full-time equivalents
• Nondeductible penalties for not offering minimum essential
coverage

$2,000 penalty for each employee

Excluding first 30
• Nondeductible penalties for not offering “affordable” minimum
essential coverage

$3,000 penalty for each employee
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PENALTY CALCULATION
• Example
 An employer with 50 employees does not provide minimum essential
coverage
 At least one of these employees becomes certified to employer as
having enrolled in a qualified health plan, i.e., gets health insurance
from an exchange
 Employer will be subject to $2,000 penalty per employee
 Excluding first 30 employees
 $2,000 X (50-30) = $40,000 nondeductible penalty
 Employer offers minimum essential coverage, but it is not affordable
 Ten employees become certified
 Employer will be subject to $3,000 penalty per employee certified
 $3,000 X 10 = $30,000 nondeductible penalty
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PAY OR PLAY - EXAMPLE
• Example: $40,000 penalty
• Employer-paid health care costs
 Assuming 35% tax rate
 $40,000/(1-.35) = $61,538 breakeven
• If health care costs exceed breakeven, paying penalty
could be advantageous
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THANK YOU
FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact:
Christopher Doolittle// Senior Manager
[email protected] // 501.372.1040
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