The topic this month focuses on bringing clarity to some of the myths that are surrounding Health Care Reform currently including:
Please contact our office directly if you have any questions about Health Care Reform and how it will affect your business.
On July 2, 2013, the U.S. Treasury Department delayed enforcement of the employer “play or pay” mandate penalties and reporting requirements by one year to 2015. Removing the penalties for noncompliance and the requirement to report compliance or noncompliance essentially allows large employers one more year to prepare for implementation of the play or pay provisions.
There has been some confusion, however, on the healthcare reform changes taking effect in 2014 regarding what was and was not postponed. Still taking effect in 2014 are the State Exchanges (and the October 1, 2013 employer’s notice of Exchange requirement), the individual mandate to obtain minimum essential coverage, federal premium assistance, the 90-day limit on waiting periods, the termination of all pre-existing condition limitations for all participants, the removal of annual limits on essential health benefits and the optional increase in wellness program incentives from 20% to 30% (50% if tobacco related).
Please contact our office for more information on Health Care Reform and how it will impact your business.
The Obama administration recently kicked off the Health Insurance Marketplace education effort with a new, consumer focused HealthCare.gov website paired with a 24-hours a day consumer call center to help Americans prepare for open enrollment and sign up for private health insurance. The new tools will help Americans understand their choices and select the coverage that best suits their needs when open enrollment for the Exchange begins October 1, with coverage beginning January 1, 2014.
The website will continue to add functionality over the summer months so that, by October, consumers will be able to create accounts, complete an online application, and shop for qualified health plans. For Spanish speaking consumers, CuidadoDeSalud.gov, will also be updated to match HealthCare.gov’s new consumer focus.
Key features of the website include integration of social media, sharable content, and engagement destinations for consumers to get more information. The site will also launch with web chat functionality to support additional consumer inquiries.
Between now and the start of open enrollment, the Marketplace call center will provide educational information and, beginning October 1, 2013, will assist consumers will application completion and plan selection. In addition to English and Spanish, the call center provides assistance in more than 150 languages through an interpretation and translation service. Customer service representatives are available for assistance via a toll-free number at 1-800-318-2596 and hearing impaired callers using TTY/TDD technology can dial 1-855-889-4325 for assistance.
The DOL’s Employee Benefits Security Administration (EBSA) has made available Spanish language versions of model notices to employees of health coverage options. The Affordable Care Act (ACA) requires employers to provide employees with a notice of their health insurance coverage options available through the future health insurance exchanges no later than October 1, 2013. The English version of these model notices were released in May 2013.
Please contact our office for copies of the model notice(s) in English and/or Spanish.
On May 31st, the US Department of Health and Human Services (HHS) issued a final rule delaying the implementation of a significant portion of the Federal Small Business Health Options Program (SHOP) Exchanges until 2015.
The Patient Protection and Affordable Care Act (PPACA) calls for the creation and implementation of health Exchanges for both individuals and small businesses. These marketplaces were to be operational by October 1, 2013 in time for the open enrollment period for a January 1, 2014 effective date.
The Obama administration announced that SHOPs will only offer one health plan now in 2014, instead of offering small employer groups a choice of several health plans. As reported in the Wall Street Journal, “For transitional purposes we have proposed that in 2014, a state may elect to have businesses choose one plan to offer employees, and in 2015 employees will be able to choose from the full range of plans in the marketplace,” said Fabien Levy, an HHS official.
This delay will apply to states in which the federal government will administer the Exchanges, and makes the requirement optional for state-run Exchanges. The administration cited operational challenges as the reason for the delay.
This announcement has been met with disappointment by many small businesses as it will limit the attractiveness of exchanges to small businesses. The vast majority of small employers want their employees to be able to choose among multiple insurance carriers so employees can pick the plan to best meet their personal needs.
Whether a similar delay will be announced for the individual Exchanges remains to be seen.
A provision of Health Care Reform requires employers to provide a notice to all employees regarding the availability of health coverage options through the state-based exchanges. The Department of Labor delayed the original requirement that the notice be distributed by March 1, 2013, as it was determined that there was not enough information regarding exchange availability.
The DOL recently issued temporary guidance along with a model notice. The DOL has issued the model notice early so employers can begin informing their employees now about the upcoming coverage options through the marketplace.
Two model notices were released by the DOL. One is for employers who currently offer medical coverage and the other is for those who do not offer medical coverage.
Employers are required to issue the exchange coverage notice no later than October 1, 2013. This will coincide with the beginning of the open enrollment period for the marketplace.
The notice must be provided to all employees, regardless of their enrollment on the group health plan. It must be provided to both full time and part time employees as well. Employers are not required to provide a separate notice to dependents. Employers will need to provide the notice to each new employee (regardless of their status) who are hired on or after October 1, 2013 within 14 days of their hire.
An exchange coverage notice must include –
The DOL also modified its model COBRA election notice to include information about the availability of exchange coverage options and eliminate certain obsolete language in the earlier model.
Please contact our office for a copy of the model notice(s).
If you currently have an individual health insurance plan, you will be in for a big change when you sign up for your coverage in 2014.
Approximately 50% of the individual health plans that are currently being sold in the marketplace do not meet the standards of Obamacare to be sold in 2014. The reason for this is because the Affordable Care Act (ACA) sets new minimums for the basic coverage every individual health care plan must provide effective on renewals on or after January 1, 2014.
About 15 million Americans (or about 6% of non-elderly adults) currently have coverage in the individual health market. Beginning in the fall of 2013, they will be able to shop for and enroll in health insurance through state-based exchanges (aka SHOP or The Exchange) with coverage taking effect in January. By 2016, it is projected that around 24 million people will get their insurance through the exchanges, while another 12 million will continue to obtain individual coverage outside of the exchange.
Beginning in 2014, nearly all plans, both group and individual, will be required to cover an array of “essential” services regardless of if they are purchased within the exchange or not. These “essential” services will include medication, maternity, and mental health care. Many individual plans do not currently offer these benefits.
What will happen to the plans that do not meet the new minimum standards? They will more than likely disappear and you will not be allowed to renew your existing coverage on the plan you currently have. A handful of existing plans will be grandfathered in, but the qualifying criteria for a grandfathered plan is hard to meet. In order for your existing individual plan to be considered “grandfathered”, (1) you have to have been enrolled on this plan before the ACA was passed in 2010 and (2) the plan has to have maintained fairly steady co-pay, deductible and coverage rates until now.
Many insurers in the individual marketplace have already acknowledged that the majority of their existing individual plans do not meet Obamacare standards for 2014 and they are currently working to ready new product lineups for 2014.
In the future, consumers buying individual plans will be able to choose between four levels of coverage: platinum, gold, silver, and bronze.
Platinum plans will carry the highest premiums but will offer the lowest out of pocket expenses, with enrollees paying no more than 10%, on average. At the other end of the spectrum are the bronze plans, which will have the lowest monthly premiums but will have higher deductibles and copayments totaling up to 40% of the out of pocket costs on average.
Starting also in 2014, all Americans will be required to carry health care coverage or face fines. Those penalties will start at $95 per adult or 1% of the adjusted family income, whichever is greater, and will escalate in later years.
Individuals will annual incomes of up to 400% of the poverty line (or roughly $45,000 for an individual and about $92,000 for a family of four) will get federal subsidies to help defray the premium costs.
Most individual plans sold next year, even the lowest level bronze plans, are likely to charge higher premiums than today’s most “bare-bones” individual insurance plans. Many consumers feel the costs will be offset by having lower out of pocket costs and more comprehensive coverage than their current “bare-bones” plan offers.
In today’s marketplace, with deductibles of $10,000, an individual can buy a policy and then when they get sick, they may go broke because the policy leaves them with such a high level of out of pocket expenses to pay. Many insurance industry experts feel, however, that consumers may now wind up with more coverage–and higher monthly costs– than they want. As a result, some individuals may just choose to simply pay the fine instead of obtaining health insurance coverage they will not use or can not afford.
One of the ways in which the Affordable Care Act helps bring down costs for small employers is through the tax credit available to eligible small businesses that provide health care insurance to their employees. The credit significantly offsets the cost of providing insurance and with the 2012 corporate tax filing deadline rapidly approaching (March 15th), you don’t want to let this valuable tax break pass you by.
What is the Small Business Health Care Tax Credit?
Currently the maximum tax credit is 35% for small businesses employers and 25% for small tax-exempt employers (i.e. charities and non-profits). This percentage applies to tax years 2010 through 2013. Even better, in 2014 the credit will increase to 50% for eligible small business employers and up to 35% for tax-exempt employers through the new Small Business Health Options Program (SHOP) Marketplace (also known as the Exchange).
The credit can also be carried back or forward to other tax years. Since the amount of the health insurance premium payments are more than the total credit, eligible businesses can still claim a business expense deduction for the premiums in excess of the credit. That equals out to both a credit and a deduction for employee premium payments.
Who Qualifies for the Small Business Health Care Tax Credit?
To qualify for the credit, you must meet the following criteria:
To help determine whether you qualify for the credit, follow this step by step guide from the IRS.
How to Claim the Credit
You must use the IRS Form 8941 to calculate the credit.. Then include the credit amount as part of the general business credit on your income tax return. If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T. You must file the Form 990-T in order to claim the credit even if you do not ordinarily do so. Remember, you may be able to carry the credit back or forward. Be sure to talk to your tax advisor for more assistance.
Released 4/2/13, the Obama Administration is delaying a key portion of the federally-run SHOP Marketplace, in which small businesses can offer a choice of health plans to their employees through the public marketplace. As a result, small businesses will be limited to offering a single plan through the federally-run SHOP Marketplace until 2015.
The multi-place choice option was supposed to become available to small employers via the federally-run SHOP Marketplace in January 2014. But administration officials said they would delay it until 2015 in the 33 states where the federal government will be running the SHOP insurance marketplaces.
Many feel this delay will “prolong and exacerbate healthcare costs that are crippling 29 million small businesses” according to a recent NY Times article.
What is the SHOP Marketplace?
As part of the Affordable Care Act (ACA), states are required to provide a Group Market Health Insurance Exchange for businesses (called the Small Business Health Options Program or “SHOP”). The SHOP Marketplace is essentially a public group health insurance exchange that will be available for small businesses starting January 1, 2014. The new program was designed to simplify the process of finding health insurance for small businesses and applying any applicable tax credits that an individual may qualify for.
As with the individual health insurance marketplace, all states have three options for offering a SHOP marketplace: (1) create their own state-run marketplace, (2) join a federal-state partnership, or (3) default to the federally-run SHOP marketplace. As mentioned above, 33 states are expected to default to the federally-run marketplace.
Initially, the SHOP marketplaces are for businesses with up to 100 employees. However, states can limit participation to businesses with up to 50 employees until 2016, so eligibility will ultimately vary from state to state.
The Patient Protection and Affordable Care Act (the “ACA”) adds a new Section 4980H to the Internal Revenue Code of 1986 which requires employers to offer health coverage to their employees (aka the “Employer Mandate”). The following Q&As are designed to deal with commonly asked questions. These Q&As are based on proposed regulations and final regulations, when issued, may change the requirements.
Question 3: When Is the Employer Mandate Effective and What Transition Rules Apply?
Large employers are subject to the Employer Mandate beginning on January 1, 2014. However, the effective date for employers that have fiscal year health plans is deferred if certain requirements are met. There are also special transition rules for offering coverage to dependents, offering coverage through multi-employer plans, change in status events under cafeteria plans, determining large employer status, and determining who is a full-time employee.
Fiscal Year Health Plans
An employer with a health plan on a fiscal year faces unique challenges concerning the Employer Mandate. Because terms and conditions of coverage may be difficult to change mid-year, a January 1, 2014 effective date would force fiscal year plans to be compliant for the entire fiscal 2013 plan year. Recognizing the potential burdens, the IRS has granted special transition relief for employers that maintained fiscal year health plans as of December 27, 2012. Both transition relief rules apply separately to each employer in a group of related employers under common control.
Coverage of Dependents
Large employers must offer coverage not just to their full-time employees but also to their dependents to avoid the Employer Mandate penalty. A “dependent” for this purpose is defined as a full-time employee’s child who is under age 26. Because this requirement may result in substantial changes to eligibility for some employer-sponsored plans, the IRS is providing transition relief for 2014. As long as employers “take steps” during the 2014 plan year to comply and offer coverage that meets this requirement no later than the beginning of the 2015 plan year, no penalty will be imposed during the 2014 plan year solely due to the failure of the employer to offer coverage to dependents.
Multiemployer Plans
Multiemployer plans represent another special circumstance because their unique structure complicates application of the Employer Mandate rules. These plans generally are operated under collective bargaining agreements and include multiple participating employers. Typically, an employee’s is determined by considering the employee’s hours of service for all participating employers, even though those employers generally are unrelated. Furthermore, contributions may be made on a basis other than hours worked, such as days worked, projects completed, or a percentage of earnings. Thus, it may be difficult to determine how many hours a particular employee has worked over any given period of time.
To ease the administrative burden faced by employers participating in multiemployer plans, a special transition rule applies through 2014. Under this transition rule, an employer whose full-time employees participate in a multiemployer plan will not be subject to any Employer Mandate penalties with respect to such full-time employees, provided that:
(i) the employer contributes to a multiemployer plan for those employees under a collective bargaining agreement or participation agreement
(ii) full-time employees and their dependents are offered coverage under the multiemployer plan, and
(iii) such coverage is affordable and provides minimum value.
This rule applies only to employees who are eligible for coverage under the multiemployer plan. Employers must still comply with the Employer Mandate under the normal rules with respect to its other full-time employees.
Change in Status Events under Fiscal Year Cafeteria Plans
The IRS has also issued transition rules that apply specifically to fiscal year cafeteria plans. Under tax rules applicable to cafeteria plans, an employee’s elections must be made prior to the beginning of the plan year and may not be changed during the plan year, unless the employee experiences a “qualifying event”. An employee’s mid-year enrollment in health coverage through an Exchange or in an employer’s health plan to meet the obligation under the ACA’s individual mandate to obtain health coverage is not a “qualifying event” under the current cafeteria plan rules.
The IRS addresses this by providing that a large employer that operates a fiscal year cafeteria plan may amend the plan to allow for mid-year changes to employee elections for the 2013 fiscal plan year if they are consistent with an employee’s election of health coverage under the employer’s plan or through an Exchange. Specifically, the plan may provide that an employee who did not make a Sec. 125 election to purchase health coverage before the deadline for the 2013 fiscal plan year is permitted to make such an election during the 2013 fiscal plan year, and/or that an employee who made a Section 125 election to purchase health coverage is permitted to revoke/change such election once during the 2013 fiscal plan year, regardless of whether a qualifying event occurs with respect to the employee.
This transition rule applies only to elections related to health coverage and not to any other benefits offered under a cafeteria plan. Any amendment to implement this transition rule must be adopted no later than December 31, 2014 and can be retroactively effective if adopted by such date.
Determining Large Employer Status and Who is a Full-Time Employee
The IRS has also issued transition rules for determining large employer status and determining who is a full-time employee. In general, large employer status is based on the number of employees employed during the immediately preceding year. In order to allow employers to have sufficient time to prepare for the Employer Mandate before the beginning of 2014, for purposes of determining large employer status for 2014 only, employers may use a period of no less than 6 calendar months in 2013 to determine their status for 2014 (rather than using the entire 2013 calendar year).