FEDERAL HEALTHCARE REFORM
2013 AND BEYOND
For
301.214.7666
www.thecapgroup.net
Small Group vs. Large Group

For Employer Responsibility and Exposure to Fines
 50

or more employees
For Tax Credits
 Small

Employer eligibility to 25 employees
For Exchange Eligibility
 Less
than 50 employees
 In 2016 100+ at the discretion of the state
 After 2016 100+ or greater as defined by the state
Current
Issues
For
Immediate
Concern
Compliance 1
W- 2 Reporting
W-2 Reporting




Employers will be required to include the value of group health plan
coverage on W-2’s issued after 1/1/2013
Do not have to report on early W-2’s for the 2012 tax year
The requirements do not change the tax treatment of employer coverage
The reporting is for informational purposes only
Employers are required to report the value of all “applicable employersponsored coverage.” Generally, group health plans, including:


Major medical, Mini-meds, On-site medical clinics, Medicare supplemental coverage, Health
FSA contributions (employer), Employee assistance & Wellness programs (with separate
COBRA rates)
Optional Reporting

IRS guidance permits employers to report the cost of coverage that is not required to be
reporting (e.g. multiemployer, HRA). For combined coverage, the employer can use any
reasonable method to separate costs
Small Employer Exception



Employers issuing fewer than 250 W-2 forms in the preceding calendar year
are exempt from the reporting requirements at least through 2014. Refers to
the number of W-2’s, not employees
The regulation is unclear about when the exception applies to an entity
rather than on a controlled group basis

To tell, you need to refer back to the group’s electronic filing status. If the group is not
required to file electronically, they probably do not have to comply with the extra W-2
reporting

Filing is generally done by EIN UNLESS you use a common paymaster. So unless the
affiliated groups use a common paymaster, they can probably count themselves separately
for the purposes of this requirement

Groups with questions should consult with their CPA
Applies to all employers who provide applicable employer sponsored
coverage
Reporting Aggregate Cost





Must report the “aggregate cost”
Include pre-tax and post-tax coverage
Include employer and employee contributions (e.g. employer
premium contribution or employee cafeteria plan contributions)
An employer who uses a composite rate for active employees
but not for COBRA beneficiaries may use either rate for
determining the applicable cost to be reported, as long as it is
used consistently
General Rule: Use cost of COBRA premium
Compliance 2
Uniform Summary of Benefits
Uniform Summary of Benefits

All employers will have to give people who apply for or
enroll in employer-sponsored coverage a standardized
summary of benefits and coverage that includes:




Four page coverage summary
Coverage terms glossary
Coverage examples of two set medical scenarios
Customer service and website information
Uniform Summary of Coverage
Requirements
Beginning September 23, 2012


Applies to all plans, including grandfathered plans and
self-funded plans
HIPAA excepted benefit plans (e.g., stand-alone dental,
specific diseases, etc.) do not have to comply
Changes for 2013

Notice of the Exchange effective October 1, 2013
 Employers
 Of
must notify employees
Exchange’s existence
 How to qualify for subsidies
 Loss of employer contribution if participating
Employer Size in 2014

Employers with over 200 EE’s that offer coverage
Must automatically enroll employees in coverage
 But…provide opt-out opportunity

Compliance 3
FSA Cap in 2013
FSA Limitations



Effective January 1, 2013, PPACA limits FSA annual
contributions to $2,500
In May 2012, the IRS issued Notice 2012-40, which
provides transition relief to non-calendar-year FSA
plans. Clearly establishing that the requirements does
not apply for plan years that begin before 2013
The term “taxable year” in the law refers to the plan
year of the cafeteria plan as this is the period for
which salary reduction elections are made
FSA Limitations (cont.)



Allows for “contributions exceeding the $2,500 limit
that are due to a reasonable mistake”
Cap does not apply to certain employer flex credits,
non-healthcare FSA contributions, HSAs, HRAs or
health plan premium payments made under a Section
125 plan
Individuals who already made reduced FSA elections
may not increase contributions for 2013 absent of
another qualifying event
Compliance 4
Rebates
Who paid the premiums in 2012




If they were paid 100% by the employer, the
employer can retain 100% of the rebate
If paid 100% by the employees, the employer must
turn 100% of the rebate over to the employee
If the premiums were paid partly by the employer
and partly by the employees, the rebate must be split
according to the contribution formula
If paid by a trust then they are deposited into the
trust and used in accordance with the trust agreement
ERISA Groups

Plan assets distributed for the exclusive benefit of
participants and beneficiaries in the following three ways:




The rebate can be paid to the participants, under a fair and
equitable allocations method
The employer can apply the rebate toward future participant
premium payments
The employer could use the rebate to provide enhanced benefits
for the participants
The DOL suggests that the second and third options should
be used only if distributing payments to participants is not
cost effective
Rebate Taxation


In general, if the individual or employee receive a tax
deduction on their contribution in anyway, the rebate is
taxable
If the individual or employee paid their insurance
contribution with after tax dollars, their rebate is NOT
taxable
Exchanges
Role of the Exchange

Instrumental in:
 Medicaid Enrollment
 Tax Subsidy Qualification
 Tax Credit Qualification
 Platform for Qualifying health plans
 Much more…
Demystifying the Health Care Exchanges
WHAT IS AN EXCHANGE?



New “insurance standards” apply to individual and small
group plans sold inside AND outside of an Exchange
Insured plans must provide “essential health benefits” and
are subject to limits on cost sharing
Premium rating rules prohibit rating based on health status

Rates may only vary based on age, tobacco use, coverage tier (i.e.,
family or individual) and rating area
Demystifying the Health Care Exchanges
EXCHANGES AND EMPLOYER HEALTH PLANS


Exchanges will initially service individuals and
families through the individual market and small
employers
In 2017, states may elect to provide large
employers access to their Exchange, but this is not
required
State Exchanges & Medicaid
Recent Developments


Exchange Development
 18 - have declared Exchanges
 7 - are Planning for Partnership Exchange
 26 - intend to default to Federal Exchange
Medicaid
 29 Supports
 20 Opposes
 2 Weighing Options
Medicaid in Neighboring Markets
Exchange Incentive Summary

Individual
 Incentives
 For
those between
139% - 400% FPL
 Not eligible for
“affordable” employersponsored plan

SHOP
 Incentives
 Small
employers < 25
employees
 Average income below
$50,000
 Best for < 11
employees with income
below $25,000
Let’s Examine the Individual
Exchange Incentives
Using the Kaiser Family Foundation
Research for Individual Exchanges Subsidy
Calculator Estimates
How does this
impact Employees?
The Requirement to Buy
Coverage Under the
Affordable Care Act
Along with changes to the health insurance system that guarantee access to coverage to
everyone regardless of pre-existing health conditions, the Affordable Care Act includes a
requirement that many people be insured or pay a penalty. This simple flowchart illustrates how
that requirement (sometimes known as an "individual mandate") works.
Individual Responsibility
Require U.S. citizen and legal residents to have qualifying health coverage.
o Those without coverage pay a tax penalty of the greater of $695 per year up
to a maximum of three times that amount ($2,085)per family or 2.5% of
household income.
o The penalty will be phased-in according to the following schedule: $95 in
2014, $325 in 2015, and $695 in 2016 for the flat fee or 1.0% of taxable
income in 2014, 2.0% of taxable income in 2015, and 2.5% of taxable income
in 2016.
The Requirement to Buy Coverage Under the Affordable
Care Act Beginning in 2014
Start here
Do any of the following apply?
• You are part of a religion opposed to
acceptance of benefits from a health
insurance policy.
•You are an undocumented immigrant.
•You are incarcerated.
•You are a member of an Indian tribe.
•Your family income is below the threshold
requiring you to file a tax return ($9,350 for
an individual, $18,700 for a family in 2010).
•You have to pay more than 8% of your
income for health insurance, after taking into
account any employer contributions or tax
credits.
No
Yes
There is no
penalty for being
without health
insurance
The Requirement to Buy Coverage Under the Affordable
Care Act Beginning in 2014 (cont)
Were you insured for the whole year
through a combination of any of the
following sources?
• Medicare.
•Medicaid or the Children’s Health Insurance
Program (CHIP).
•TRICARE (for service members, retirees,
and their families.
•The veteran’s health program.
•A plan offered by an employer.
•Insurance bought on your own that is at
least at the Bronze level.
•A grandfathered health plan in existence
before the health reform law was enacted.
No
Yes
The requirement to
have health
insurance is satisfied
and no penalty is
assessed.
The Requirement to Buy Coverage Under the Affordable
Care Act Beginning in 2014 (cont)
The requirement to
have health
insurance is
satisfied and no
penalty is
assessed.
2014
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.
2015
Penalty is $325 per adult and
$162.50 per child (up to $975 for a
family) or 2.0% of family income,
whichever is greater.
2016 and beyond
Penalty is $325 per adult and
$162.50 per child (up to $975 for
a family) or 2.5% of family income,
whichever is greater.
The penalty is pro-rated by the number of months without coverage, though there is no penalty for a single gap in
coverage of less than 3 months in a year. The penalty cannot be greater than the national average premium for
Bronze level coverage in an Exchange. After 2016 , penalty amounts are increased annually by the cost of living.
How does this
impact Employers?
Avoiding the Fines
Penalties for Employers Not Offering Affordable Coverage Under the Affordable Care Act
Beginning in 2014
Does the
employer have a
least 50 full-time
equivalent
employee?
Start Here
No
Penalties do not
apply to small
employers.
If the employer has 25 or
fewer employees and
average wage up to
$50,000, it may be eligible
for a health insurance tax
credit.
Yes
Does the employer
offer coverage to
its workers?
Yes
No
Did at least one
employee receive
a premium tax
credit or cost
sharing subsidy in
an Exchange?
Yes
The employer must pay
a penalty for not
offering coverage.
The penalty is $2,000
annually times the number
of full-time employees
minus 30. The penalty is
increased each year by the
growth in insurance
premiums.
Avoiding the Fines (cont)
Does the
coverage offered
meet MEC
requirements?
No
Employees can
choose to buy
coverage in an
Exchange and
receive a premium
tax credit.
Yes
Do any employees
have to pay more
than 9.5% of
individual income
for the employer
coverage?
No
There is no penalty
payment required of
the employer since it
offers affordable
coverage.
Yes
Those employees
can choose to buy
coverage in an
Exchange and
receive a premium
tax credit.
The employer must pay
a penalty for not
offering affordable
coverage.
The penalty is $3,000
annually for each full-time
employee receiving tax
credit, up to a maximum of
$2,000 times the number of
full-time employees minus
30. The penalty is
increased each year by the
growth in insurance
premiums.
Employer Responsibilities
Groups of 50+ employees
 Provide “affordable care”


Minimum essential coverage
Safe Harbor



Employee contribution < 9.5% of income;
Employer sponsored plan pays at least 60% of the actuarial
value of the benefits provided
Alternately pay penalties

If an employee receives tax subsidies for coverage through
the Exchange
Employer Responsibilities
Employers with at least 50 FTEq’s

Not Offering minimum essential coverage (MEC)



If any EE receives federal assistance, then
$2,000 fine per FTEe after the first 30
If offering MEC and an any employee receives
federal assistance (presuming the employer
contribution does not qualify them as providing
“affordable coverage” )

Lesser of:


$3,000 fee for each FTEe receiving assistance, or
The above fine for non-offering employers
Multi-State Issues
Essential Health Benefits – Small Group
National Standard has been abandoned

States to select EHBs independently

Numerous benefit sets will exist and vary by
state but likely more complex
Minimum Essential Value – large group

Small Group Plan Requirements

Platinum = 90% of EHB value


Gold = 80% of EHB value


$2,000
Bronze = 60% of EHB value


$1,000
Silver = 70% of EHB value


Very low out of pocket… $300
$3,000
Young Invincible
Employer Group Size(s)

For purposes of Small Employer Tax Credits


For purposes of the SHOP Exchange


<25 Full-Time “equivalent” Employees using 2080 hours
excluding family and family attribution
Up to 50 (possibly 100 in some states, 100 or more in 2016)
Full-time equivalent using 30 hours for Full-time, and dividing
part times hours by 120 per month to determine “FT equivalents”
For purposes of the Employer Responsibility to
Provide Affordable Coverage (the Mandate)

>50 Full-time equivalent employees using 30 hours for Full-time
and 120 hours per month for “FT equivalent”
Evaluating Your Plan Design
LIMITATION ON WAITING PERIODS


Effective for plan years beginning on or after
January 1, 2014
Plans may not apply a waiting period that
exceeds 90 days


“Waiting Period” = the period of time that must
pass before coverage becomes effective for an
employee or dependent who is otherwise eligible
to enroll in the plan
Rule is not violated if an employee fails to
elect coverage within 90 days
Evaluating Your Plan Design
LIMITATION ON WAITING PERIODS


To be “otherwise eligible” means that all
other substantive eligibility criteria have been
met (e.g., job classification or full-time status)
Eligibility criteria that are not based solely
on the passage of time are still permitted—
so long as they are not designed to
circumvent the 90-day limit on waiting
periods
Evaluating Your Plan Design
LIMITATION ON WAITING PERIODS

One day = One day
The 90-day period is calculated based on calendar
days
 Weekends and holidays are counted
 If the 91st day falls on a weekend or holiday  plan
may provide coverage sooner


Waiting periods that will no longer work
Three months
 1st of the month or 1st payroll period following 90 days
of employment

Your Action Plan Now




Make Pay or Play Decision
Develop waiting period/eligibility criteria for 2014
plan year
Build tracking systems necessary to monitor
employee hours and document eligibility
determinations
Implement standardized and verifiable process for
making coverage offers
America’s Most Popular Team
in Post 2014 Health Care
Summary
Questions and Answers
Thank you for giving The Capital
Group the opportunity to serve you.
P. 301-214-7666 F. 301-581-4111 www.thecapgroup.net
6903 Rockledge Drive Suite 950 Bethesda, MD 20817