William C. Potter, CPA, JD
Postlethwaite & Netterville
Baton Rouge, LA
October, 2013

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1099 reporting - deleted
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Free choice vouchers – deleted
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CLASS Act - deleted
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Automatic enrollment - delayed
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Nondiscrimination testing - delayed
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Employer mandate and reporting - delayed
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Income verification – delayed
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SHOP – delayed
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MSPP - delayed

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All other provisions continue on:
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Individual mandate – expected to leave about 1 million people scrambling to get insurance
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Monetary caps on annual out–of–pocket maximums
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Elimination of lifetime and annual limits
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New wellness plan rules
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Notice of exchange options

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Plan in existence on March 23, 2010 and employer has maintained the status quo
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Only about 27% are GF plans
• Don’t have to:
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Offer free preventive services
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Satisfy nondiscrimination
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Enhance review and appeals process
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Meet cost sharing restrictions

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Starts January 1, 2013
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Wages - an additional 0.9% employee only
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Threshold amounts - $250,000 MFJ,
$125,000 MFS, $200,000 all others
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Net Investment Income – an additional
3.8%
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Same thresholds and applies to trusts
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Statute – a couple of paragraphs
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Proposed regs – 100+ pages
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Planning for trusts and estates
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S Corps

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Tanning bed tax
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DME tax
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Prescription drug fee – other than orphan drugs
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PCORI fee
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Transitional reinsurance fee
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Health insurance tax

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You pay a fine if your spouse or dependent is not covered
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Minimum essential coverage
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Pretty much any group health plan meets this
– Watch for proliferation of “skinny plans”
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Small fines will incentivize more people to go without coverage
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Particularly since no issue with pre-existing condition

YEAR
2014
2015
2016
Applicable Dollar Amount
Penalty is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater
Penalty is $325 per adult and $162 per child (up to $975 for a family) or 2.0% of family income, whichever is greater.
Penalty is $695 per adult and $347.50 per child (up to $2,085 for a family) or
2.5% of family income, whichever is greater.

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Exemptions:
• coverage is unaffordable (exceeds 9.5% of household income);
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Not required to file an income tax return ;
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Native Americans - eligible for IHS or participates in a healthcare sharing ministry;
• short lapse in coverage = less than three months;
• suffered a hardship – 11 listed events, such as, eviction and bankruptcy;
• dependent;
• Qualify for the foreign earned income exclusion
• People who have no plan options in their states health insurance exchange
• Religious conscience – member of a recognized religious sect
(Amish) or meets the requirements of Section 1402(g)(1) which requires an annual application

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Three types for insurance purchased through an Exchange
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Premium limits
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Cost-sharing limits (co-pays, deductibles, coinsurance)
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Out-of-pocket spending
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Subsidy amount is dependent on income with respect to Federal Poverty Level (FPL)
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For 2012, 400% of FPL is $44,680 for an individual and $92,200 for a family of 4

Income Level in terms of FPL
Up to 133%
133 – 150%
150 – 200%
200 – 250%
250 – 300%
Max % of
Income Paid for
Insurance
2%
Income Level in terms of FPL
3 – 4%
4 – 6.3%
150 – 200%
200 – 250%
250 – 300%
6.3 – 8.05% 300 – 400%
8.05 – 9.5% Income Level in terms of FPL
Cost sharing
Limit
6%
13%
27%
30%
Out-of-pocket
Spending Limits
300 – 400% 9.5% 100 – 200%
200 – 300%
300 – 400%
$2,016(I)/$4,03
3(F)
$3,025(I)/$6,05
0(F)
$4,033(I)/$8,06
7(F)

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Delayed until 2015
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Questionable whether Obama could delay it
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Applicable large employer
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Employees exceed 50 full-time
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Full-time: average of at least 30 hours per week
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Big issues with definitions:
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Employee – common law test
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Seasonal
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Who is an employer?

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Measurement periods
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Stability period
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Coverage
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Importance of HR records
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Penalties
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Offering no coverage
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Offering coverage but fail to cover at least one qualifying employee
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To be subject to the penalty at least one employee must go on the Exchange and get tax subsidies

Collecting the Individual Mandate or Excess Subsidies
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No teeth – no fines, no levies, no interest
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Can withhold from refund or SS payment
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Can sue, but recovery limited to 2xs penalty

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Guidance from Notice 2012-9
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Regulations to come
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Reporting starts in 2013 for 2012 W-2s
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Exempt from filing: < 250 W-2s in the preceding year including those issued by a PEO, Indian tribal governments, and self-insured church plans not subject to
COBRA, mutliemployer plans

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No reporting required for a terminated employee requesting their W-2 before year end
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Coverage included: Major medical, EAP if a group health plan, individual policies if considered a group, indemnity policies
(AFLAC) purchased on a pretax basis, onsite clinic subject to COBRA, Er flex credits applied to FSA in limited situations

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Funds the Patient Centered Outcomes
Research Trust Fund – which pays for the
Patient Centered Outcomes Research
Institute to promote evidenced based medicine
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Insured and self-insured plans to pay a poll tax based on the average number of lives covered
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Plan years ending on or after 10/1/12 and before 10/1/19 - $1/head/12; $2/head/after

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Applies to most governmental plans
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Applies separately to HRAs
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Applies to FSAs that are not HIPAA excepted
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Form 720 – calendar year plan due 7/31
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Plan sponsor responsible for filing for self-funded plans

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Even if employer mandate is not resurrected these rules will be applicable to nondiscrimination
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Businesses organized in multiple forms may be considered as a single employer
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Controlled groups can be parentsubsidiary, brother-sister, combinations, or affiliated service groups
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Existing tax law applies to corporations, this brings in partnerships, LLC’s

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Control exists if parent owns more than
80% of the subsidiary
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Could involve multiple subsidiaries

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The same five or fewer individuals own more than 80% of the related entities,
AND
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Effectively control more than 50%
(identical ownership)
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Must consider the rules of attribution and community property

Percentage of Ownership
B
C
Member
A
A Corp
80%
10%
5%
B LLC
20%
50%
15%
Effective
20%
10%
5%
D 5% 15% 5%
Total 100% 100% 40%
The four owners have more than 80% of A and B, so that requirement is satisfied. But identical ownership is only 40% so they fail the 50% test. They are two separate employers.

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Related entities may or may not have ownership relationships
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Performing services to or on behalf of the other entity, and when capital is not a material income producing factor
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Can be a subjective determination, particularly since the proposed regulations were pulled in 1993

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PCORI fee
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Funds the Patient Centered Outcomes
Research Trust Fund – which pays for the
Patient Centered Outcomes Research
Institute to promote evidenced based medicine
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Insured and self-insured plans to pay a poll tax based on the average number of lives covered
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Plan years ending on or after 10/1/12 and before 10/1/19 - $1/head/12; $2/head/after

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$25 billion collected from 2014 -2016 from insured and self-insured plans to stabilize the individual market
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$5 billion to repay ERRP
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$12 in 14, 8 in 15, and 5 in 16
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Expected to be $63.50 per covered life in 14
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Tax deductible and can be paid from plan assets
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Submit info by 11/15 receive bill within 15 days

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Annual fee imposed on health insurance companies; including, multiple employer self-funded plans not using a VEBA
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Exceptions:
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Self-insured single employer
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Governmental entity
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VEBA

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Fees to be collected:
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2014 $8 billion
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2015 $11.3 billion
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2016 $11.3 billion
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2017 $13.9 billion
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2018 $14.3 billion
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2019 thereafter indexed

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Annual fee to be paid by each insurer is apportioned
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Numerator = net premiums underwritten in prior year, with some exclusions
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Denominator = aggregate of net premiums

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A permanent program
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Applies to non-grandfathered individual and small group plans
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Modeled after Medicare
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Transfers funds between health plans based on the relative risk of the insureds
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Designed to compensate for adverse selection

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Temporary 2014 – 2016
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Used to mitigate pricing risk with movement to community rating
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Limits insurers gains and losses
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Modeled after Medicare Part D
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Plans will set an income target, if income is within 3%, the plan keeps all; between
3-8% 50% to/from gov’t; over 8% 80% to/from gov’t

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All employers subject to FSLA must provide the notice to all employees by
October 1
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Provide to all new employees upon hire, within 14 days from date of hire will be deemed timely for 2014
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Two versions of the notice
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Notice for employers offering coverage
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Notice for employers not offering coverage

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Employers offering coverage – page 3 is optional but matches Marketplace Employer
Coverage Tool and should the employer mandate come into play in 2015 this will impact the penalty for affordability and
MEC
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Includes revised COBRA notice
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May want to add to mini-COBRA notice
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Electronic delivery of the notice must follow ERISA standards

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Excise taxes for the failure to comply with group health plan mandates
• Due date? Same as the employer’s income tax return without extension
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How much? Varies with the mandate, but generally $100 per individual, per day
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Exceptions? Yes, where exercising reasonable diligence or reasonable cause and it is timely corrected
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Correction? Restoration to the extent that the failure had not occurred

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COBRA – is the cafeteria plan FSA included in the notice?
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HIPAA portability, access, renewability, nondiscrimination
– this includes Special Enrollment Rights
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CHIPRA notice
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Genetic Information Nondiscrimination Act (GINA)
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Mental Health Parity
• Newborn’s and Mother’s Health Protection Act
• Michelle’s Law – coverage of dependent students on medical leave for up to 12 months
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Health Savings Account contribution comparability requirements – does not apply to employer contributions through a cafeteria plan
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Archer MSA contribution comparability requirements

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Incorporates by reference a portion of the
PHSA, for non-grandfathered plans:
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Nondiscrimination
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Summary of Benefits and Coverage
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Appeals process
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90 day waiting period
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FT employees
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Participation in clinical trials

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Provided to participant and beneficiaries
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Due at open enrollment, special enrollment, and upon request within 7 business days
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Needed for standalone HRAs and for EAPs
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Can be used in connection with Summary of
Material Modification due 60 days prior to change
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Modified for 2014 to address whether minimal essential coverage and the minimum value standards are met

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Does not apply to grandfathered plans
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Compliance not required until regulations issued and time for compliance allowed
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Imports definition of Highly
Compensated Individuals applied to selfinsured plans
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The five highest paid officers; or
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More than 10% owner; or
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The highest paid 25% of all employees

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Thinking of workforce realignment?
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Interference under ERISA §510 and/or ACA
Whistleblower
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Whistleblower – no adverse action against an employee for receiving a premium tax credit, this may include a reduction in hours
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Complaint filed with OSHA under the
Consumer Product Safety Improvement Act
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Damages – reinstatement, back pay with interest and special damages for discharge or discrimination

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Unlawful to interfere with present and future entitlements
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No adverse action for exercising rights available under the plan
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No adverse action with the attainment of any right which may be come available
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Limiting new hire hours may be viewed differently than cutting current employee hours
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Business decision to limit ACA penalties should not infer intent to interfere

Bill Potter bpotter@pncpa.com
Brandon Lagarde blagarde@pncpa.com
Steve Mehaffey smehaffey@pncpa.com
www.healthcarereformlouisiana.com