John C. Godsoe, Esq. John J. CureoBond, Schoeneck & King, PLLC Lawley Benefits Group LLC

2

Topics Covered TodayBackground“Shared Responsibility” RequirementsExchanges and SHOP ProgramSmall Business Healthcare Tax CreditNew Taxes and Fees2013 Action Items

3

BackgroundPatient Protection and Affordable Care Act

(“ACA”) passed in 2010

U.S. Supreme Court decision in 2012

November 2012 elections

Many provisions of ACA already in effect

4

“Shared Responsibility” RequirementsShared Responsibility Requirements

- Individual Mandate- Employer Mandate

Shared Responsibility Requirements work in conjunction with the health insurance Exchanges (Marketplaces)

5

Individual MandateEach citizen and legal resident (and his/her

dependent(s)) must be covered under minimum essential coverage each month, beginning in 2014

Exceptions- Not required to file tax return based on income- Short coverage gaps- Coverage options are unaffordable

6

Individual MandateMinimum tax imposed for failure to maintain

coverage:- 2014: $95- 2015: $325- 2016 and later: $695- If greater, penalty tax based upon a percentage

of household income applies- Indexed beginning after 2016- Dependents under age 18 are 50% of that

amount

7

ExchangesState-based competitive marketplaces to purchase health insurance and qualify for premium tax credits and cost-sharing reductions.

Initial open enrollment will run October 1, 2013 through March 31, 2014 with coverage effective dates beginning January 1, 2014

To be eligible for the premium tax credit:

•a taxpayer must enroll in one or more qualified health plans through an Exchange

•must have household income for the year between 100% (138% in NY) and 400% of the Federal Poverty Line (FPL) for the taxpayer’s family size

•may not be claimed as a tax dependent of another taxpayer

•must file a joint return, if married, and

•cannot be eligible for minimum essential coverage (including government-sponsored programs and eligible employer-sponsored plans)

8

ExchangesHealth Insurance Exchange

Purchaser

Tax Credit/Subsidy

ProductLevels

Carriers

Individuals Small Groups

Below 400% FPL

Platinum Gold Silver BronzeCata-

strophicPlatinum Gold Silver Bronze

Employer SelectsMember Selects

Member selects from available carriers/products

9

2013 Federal Poverty Guidelines 48 Contiguous States and DC

Note: The 100% column shows the federal poverty level for each family size, and the percentage columns that follow represent income levels that are commonly used as guidelines for health programs.

Household Size 100% 133% 150% 200% 300% 400%

1 $11,490 $15,282 $17,235 $22,980 $34,370 $45,960

2 $15,150 $20,628 $23,265 $31,020 $46,530 $62,040

3 $19,530 $25,975 $29,295 $39,060 $58,590 $78,120

4 $23,550 $31,322 $35,325 $47,100 $70,650 $94,200

5 $27,570 $36,668 $41,355 $55,140 $82,710 $110,280

6 $31,590 $42,015 $47,385 $63,180 $94,770 $126,360

7 $35,610 $47,361 $53,415 $71,220 $106,830 $142,440

8 $39,630 $52,708 $59,445 $79,260 $118,890 $158,520

For each additional person, add:

$4,020 $5,347 $6,030 $8,040 $12,060 $16,080

10

Employer MandateBeginning January 1, 2014, an applicable large

employer is subject to an assessable payment if :

- The employer fails to offer to at least 95 percent of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan and any full-time employee is certified to receive a premium tax credit or cost-sharing reduction in connection with exchange coverage; or

11

Employer MandateBeginning January 1, 2014, an applicable large

employer is subject to an assessable payment if:

- The employer offers at least 95% of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, but the coverage either is not affordable or does not provide minimum value, and any full-time employee is certified to receive a premium tax credit or cost-sharing reduction in connection with exchange coverage

12

Employer MandatePenalty Example AEmployer Fails To Offer Minimum Essential CoverageExample assumes payment for 12 months:

- ABC Corp. has 100 full-time employees- ABC Corp. does not offer any health insurance

coverage- One full-time employee purchases health insurance on

an exchange and receives a federal subsidy (premium credit or cost-sharing reduction)

- ABC Corp. is subject to penalty tax of $2,000 x number of full-time employees (first 30 employees not counted)

- Penalty tax = $140,000 (70 x $2,000)

13

Employer MandatePenalty Example BEmployer Offers “Deficient” CoverageExample assumes payment for 12 months:

- ABC Corp. has 100 full-time employees- ABC Corp. offers minimal essential coverage- ABC Corp.’s coverage is “unaffordable”- Twenty employees decline company coverage and purchase

health insurance on an exchange and receive a federal subsidy (premium credit or cost-sharing reduction)

- ABC Corp. is subject to penalty tax of $60,000 ($3,000 x 20 employees enrolled in exchange with subsidy)− Penalty subject to cap of [total FT employees – 30 x

$2,000]

14

Important Questions For Your BusinessAm I an applicable large employer?

- 50 FTE standardWho are my full-time employees that must be offered

coverage to avoid penalties?- 30 hours/week standard- FT status determined based on “lookback” measurement

period; coverage offered during subsequent stability period

Is my coverage “affordable”?Does my coverage provide “minimum value”?

15

Affordable Employer CoverageEmployer sponsored coverage is considered

affordable if- The employees’ contribution for self-only cover of the lowest cost plan

providing minimum value does not exceed 9.5% of the employee’s W-2 wages for the current year, or

- The employees’ monthly contribution for self-only coverage of the lowest cost plan providing minimum value does not exceed 9.5% of the employees’ computed monthly wages, or Salaried employees – use monthly salary Hourly employees – determine monthly wage amount by multiplying

employees’ hourly rate of pay by 130 hours per month- The employees’ monthly contribution for self-only coverage of the

lowest cost plan providing minimum value does not exceed 9.5% of the FPL for a single individual ($90.96/month based on 2013 FPL of $11,490/year)

16

Affordable Employer CoverageExample

- Employer makes 70% contribution towards single premium for HDHP with $2,000 single deductible

- Total premium cost is $317.50/month- Employee contributes $95.25/month- All salaries above $12,031 would meet the

9.5% affordability test

17

Minimum ValueThe plan’s share of total allowed costs of

benefits provided under the plan is at least 60% of those costs (i.e., 60% actuarial value)

Methods to determine value- Minimum Value Calculator- Design-Based Safe harbor Checklists (no need

for calculations or actuary)- Actuarial Certification

18

SMALL BUSINESS HEALTH OPTIONS PROGRAM (SHOP)Designed to assist small businesses in providing health

insurance options to employees at lower costsEligible Employers

- 2014 and 2015: small businesses with 50 or fewer employees

- 2016: 100 or fewer employees- Post-2016 states can include larger employers

Coverage options- Select among qualified health plans (QHPs) offered by a specific

carrier- Select QHPs offered by multiple carriers- Select metal tier of coverage

www.healthbenefitexchange.ny.gov

19

Small Business Healthcare Tax CreditCredit of up to 35% of health premiums paid in

2013 (50% in 2014 and thereafter)Eligibility requirements

- Pay at least 50% of cost of single coverage for all employees

- Employ fewer than 25 FTEs- Employees must have average wages of <$50k/yr- Stricter requirements for full premium credit- Must participate in SHOP (beginning in 2014)

IRS Form 8941

20

New TaxesAdditional Medicare Tax

- Effective 1/1/13, an additional .9% tax on wages in excess of $200,000 ($250,000 for joint returns) will be assessed for hospital insurance

- The employer must withhold and report the tax only to the extent the wages the taxpayer receives from the employer exceed $200,000. Wages received by the spouse are disregarded.

21

New Fees• Patient Centered Outcome Research Institute (PCORI) fees

- Funds research to evaluate and compare health outcomes and clinical effectiveness of medical procedures and drugs

• Fees are payable beginning with the first plan or policy year ending on or after October 1, 2012:

– one dollar multiplied by the average number of lives covered under the policy or plan, in the case of policy or plan years ending before October 1, 2013; and

– two dollars multiplied by the average number of lives covered under the policy or plan thereafter until 2019 (indexed annually).

22

New Fees

Insured plans – fee paid by insurance carrierSelf-insured plans – paid by plan sponsor

- HRAs and certain Health FSAs with employer contributions are exempt if integrated with other self-insured plan coverage

- First payment deadline is July 31, 2013.Use/file IRS Form 720

23

New FeesTransitional Reinsurance Program Fee

- Designed to fund reinsurance repayments to health insurance issuers that cover high risk individuals in the individual market

• Effective in 2014

• Fee = $63 per covered life

• Insured Plans – fee paid by insurance carrier

• Self-insured plans – fee paid by plan sponsor

• Exemptions- FSAs, integrated HRAs, HSAs, retiree plans (if secondary to

Medicare), stand alone self-insured prescription drug arrangements

24

Other 2013 Action Items$2,500 Health FSA limit

- Plan years beginning in 2013- Applies to employee contributions

Health Exchange Notices- Designed to notify employees of the availability

of the Exchanges- Required for employers subject to the FLSA- Provide notice no later than October 1, 2013- www.dol.gov/ebsa

25

Questions?

132804