Exemptions

Report
IF THE AFFORDABLE CARE ACT HAS
BEEN DELAYED, WHAT DO I NEED TO
WORRY ABOUT NOW?
William C. Potter, CPA, JD
Postlethwaite & Netterville
Baton Rouge, LA
October, 2013
What’s Been Deleted or Delayed
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1099 reporting - deleted
Free choice vouchers – deleted
CLASS Act - deleted
Automatic enrollment - delayed
Nondiscrimination testing - delayed
Employer mandate and reporting - delayed
Income verification – delayed
SHOP – delayed
MSPP - delayed
Delay of the Employer Mandate
• All other provisions continue on:
– Individual mandate – expected to leave
about 1 million people scrambling to get
insurance
– Monetary caps on annual out–of–pocket
maximums
– Elimination of lifetime and annual limits
– New wellness plan rules
– Notice of exchange options
Grandfathered Plan
• Plan in existence on March 23, 2010 and
employer has maintained the status quo
• Only about 27% are GF plans
• Don’t have to:
– Offer free preventive services
– Satisfy nondiscrimination
– Enhance review and appeals process
– Meet cost sharing restrictions
Additional Medicare Tax
• Starts January 1, 2013
• Wages - an additional 0.9% employee only
• Threshold amounts - $250,000 MFJ,
$125,000 MFS, $200,000 all others
• Net Investment Income – an additional
3.8%
• Same thresholds and applies to trusts
• Statute – a couple of paragraphs
• Proposed regs – 100+ pages
• Planning for trusts and estates
• S Corps
New Fees/Taxes
• Tanning bed tax
• DME tax
• Prescription drug fee – other than orphan
drugs
• PCORI fee
• Transitional reinsurance fee
• Health insurance tax
New Regulations
• You pay a fine if your spouse or
dependent is not covered
• Minimum essential coverage
– Pretty much any group health plan meets
this
– Watch for proliferation of “skinny plans”
• Small fines will incentivize more people
to go without coverage
– Particularly since no issue with pre-existing
condition
Individual Mandate
YEAR
Applicable Dollar Amount
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 per
child (up to $975 for a family) or 2.0% of
family income, whichever is greater.
2016
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.
Individual Mandate
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Exemptions:
coverage is unaffordable (exceeds 9.5% of household income);
Not required to file an income tax return ;
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
Subsidies for Individuals
• Three types for insurance purchased
through an Exchange
– Premium limits
– Cost-sharing limits (co-pays, deductibles, coinsurance)
– Out-of-pocket spending
• Subsidy amount is dependent on income
with respect to Federal Poverty Level (FPL)
• For 2012, 400% of FPL is $44,680 for an
individual and $92,200 for a family of 4
Subsidies - 2014
Income Level in Max % of
Income Level in Cost sharing
terms of FPL
Income Paid for terms of FPL
Limit
Insurance
Up to 133%
2%
150 – 200%
6%
133 – 150%
3 – 4%
200 – 250%
13%
150 – 200%
4 – 6.3%
250 – 300%
27%
200 – 250%
6.3 – 8.05%
300 – 400%
30%
250 – 300%
8.05 – 9.5%
Income Level in
terms of FPL
Out-of-pocket
Spending Limits
300 – 400%
9.5%
100 – 200%
$2,016(I)/$4,03
3(F)
200 – 300%
$3,025(I)/$6,05
0(F)
300 – 400%
$4,033(I)/$8,06
7(F)
Large Employer Mandate
• Delayed until 2015
• Questionable whether Obama could delay it
• Applicable large employer
– Employees exceed 50 full-time
– Full-time: average of at least 30 hours per week
• Big issues with definitions:
– Employee – common law test
– Seasonal
– Who is an employer?
Large Employee Mandate (cont.)
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Measurement periods
Stability period
Coverage
Importance of HR records
Penalties
– Offering no coverage
– Offering coverage but fail to cover at least one
qualifying employee
• 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
• No teeth – no fines, no levies, no interest
• Can withhold from refund or SS payment
• Can sue, but recovery limited to 2xs
penalty
New W-2 Rules
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Guidance from Notice 2012-9
Regulations to come
Reporting starts in 2013 for 2012 W-2s
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
W-2 Rules
• No reporting required for a terminated
employee requesting their W-2 before year
end
• 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
PCORI Fee
• Funds the Patient Centered Outcomes
Research Trust Fund – which pays for the
Patient Centered Outcomes Research
Institute to promote evidenced based
medicine
• Insured and self-insured plans to pay a poll
tax based on the average number of lives
covered
• Plan years ending on or after 10/1/12 and
before 10/1/19 - $1/head/12; $2/head/after
PCORI Fee
• Applies to most governmental plans
• Applies separately to HRAs
• Applies to FSAs that are not HIPAA
excepted
• Form 720 – calendar year plan due 7/31
• Plan sponsor responsible for filing for
self-funded plans
Controlled Group
• Even if employer mandate is not
resurrected these rules will be applicable
to nondiscrimination
• Businesses organized in multiple forms
may be considered as a single employer
• Controlled groups can be parentsubsidiary, brother-sister, combinations,
or affiliated service groups
• Existing tax law applies to corporations,
this brings in partnerships, LLC’s
Parent-subsidiary
• Control exists if parent owns more than
80% of the subsidiary
• Could involve multiple subsidiaries
Brother – sister controlled group
• The same five or fewer individuals own
more than 80% of the related entities,
AND
• Effectively control more than 50%
(identical ownership)
• Must consider the rules of attribution and
community property
Example
Percentage of Ownership
Member
A Corp
B LLC
Effective
A
80%
20%
20%
B
10%
50%
10%
C
5%
15%
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.
Affiliated Service Groups
• Related entities may or may not have
ownership relationships
• Performing services to or on behalf of the
other entity, and when capital is not a
material income producing factor
• Can be a subjective determination,
particularly since the proposed
regulations were pulled in 1993
Indirect Employment Taxes
• PCORI fee
• Funds the Patient Centered Outcomes
Research Trust Fund – which pays for the
Patient Centered Outcomes Research
Institute to promote evidenced based
medicine
• Insured and self-insured plans to pay a poll
tax based on the average number of lives
covered
• Plan years ending on or after 10/1/12 and
before 10/1/19 - $1/head/12; $2/head/after
Transitional Reinsurance Fee
• $25 billion collected from 2014 -2016 from
insured and self-insured plans to stabilize
the individual market
• $5 billion to repay ERRP
• $12 in 14, 8 in 15, and 5 in 16
• Expected to be $63.50 per covered life in 14
• Tax deductible and can be paid from plan
assets
• Submit info by 11/15 receive bill within 15
days
Health Insurance Tax
• Annual fee imposed on health insurance
companies; including, multiple employer
self-funded plans not using a VEBA
• Exceptions:
– Self-insured single employer
– Governmental entity
– VEBA
Health Insurance Tax
• Fees to be collected:
– 2014 $8 billion
– 2015 $11.3 billion
– 2016 $11.3 billion
– 2017 $13.9 billion
– 2018 $14.3 billion
– 2019 thereafter indexed
Health Insurance Tax
• Annual fee to be paid by each insurer is
apportioned
– Numerator = net premiums underwritten in
prior year, with some exclusions
– Denominator = aggregate of net premiums
Risk Adjustment
• A permanent program
• Applies to non-grandfathered individual
and small group plans
• Modeled after Medicare
• Transfers funds between health plans
based on the relative risk of the insureds
• Designed to compensate for adverse
selection
Risk Corridor
• Temporary 2014 – 2016
• Used to mitigate pricing risk with
movement to community rating
• Limits insurers gains and losses
• Modeled after Medicare Part D
• 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
Notice of Exchange Options
• All employers subject to FSLA must
provide the notice to all employees by
October 1
• Provide to all new employees upon hire,
within 14 days from date of hire will be
deemed timely for 2014
• Two versions of the notice
– Notice for employers offering coverage
– Notice for employers not offering coverage
Notice of Exchange Options
• 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
• Includes revised COBRA notice
• May want to add to mini-COBRA notice
• Electronic delivery of the notice must
follow ERISA standards
Form 8928
• Excise taxes for the failure to comply with group
health plan mandates
• Due date? Same as the employer’s income tax
return without extension
• How much? Varies with the mandate, but
generally $100 per individual, per day
• Exceptions? Yes, where exercising reasonable
diligence or reasonable cause and it is timely
corrected
• Correction? Restoration to the extent that the
failure had not occurred
Group Health Plan Mandates
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COBRA – is the cafeteria plan FSA included in the notice?
HIPAA portability, access, renewability, nondiscrimination
– this includes Special Enrollment Rights
CHIPRA notice
Genetic Information Nondiscrimination Act (GINA)
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
Health Savings Account contribution comparability
requirements – does not apply to employer contributions
through a cafeteria plan
Archer MSA contribution comparability requirements
ACA adds §9815
• Incorporates by reference a portion of the
PHSA, for non-grandfathered plans:
– Nondiscrimination
– Summary of Benefits and Coverage
– Appeals process
– 90 day waiting period
– FT employees
– Participation in clinical trials
SBC
• Provided to participant and beneficiaries
• Due at open enrollment, special enrollment,
and upon request within 7 business days
• Needed for standalone HRAs and for EAPs
• Can be used in connection with Summary of
Material Modification due 60 days prior to
change
• Modified for 2014 to address whether
minimal essential coverage and the
minimum value standards are met
Nondiscrimination
• Does not apply to grandfathered plans
• Compliance not required until regulations
issued and time for compliance allowed
• Imports definition of Highly
Compensated Individuals applied to selfinsured plans
– The five highest paid officers; or
– More than 10% owner; or
– The highest paid 25% of all employees
Litigation Risks
• Thinking of workforce realignment?
• Interference under ERISA §510 and/or ACA
Whistleblower
• Whistleblower – no adverse action against
an employee for receiving a premium tax
credit, this may include a reduction in hours
• Complaint filed with OSHA under the
Consumer Product Safety Improvement Act
• Damages – reinstatement, back pay with
interest and special damages for discharge
or discrimination
ERISA §510
• Unlawful to interfere with present and
future entitlements
• No adverse action for exercising rights
available under the plan
• No adverse action with the attainment of
any right which may be come available
• Limiting new hire hours may be viewed
differently than cutting current employee
hours
• Business decision to limit ACA penalties
should not infer intent to interfere
QUESTIONS?
Bill Potter
[email protected]
Brandon Lagarde
[email protected]
Steve Mehaffey
[email protected]
www.healthcarereformlouisiana.com

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