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The Patient Protection and Affordable Care Act signed on March 23, 2010, and the provisions in the Health Care & Education Reconciliation Act of 2010 has many of us questioning the affect this new law, and subsequent amendments, will have on their group and individual and Medicare health coverage.

What’s Changing and When?
–> implementation timeline

Go to the following link to view the preventative services covered under the Affordable Care Act:
http://www.healthcare.gov/law/about/provisions/services/lists.html

What to expect 2013/2014 with the Affordable Care Act

This information is based on what is currently available. Please be aware that future IRS regulations and Department of Health and Humana Services (HHS) regulations could modify the information below. Please consult with your CPA/tax advisor, as they are familiar with the numerous IRS regulations involved and the details of your organization.

Group/Employer Policies

July 2013 – IRS announced that the Pay or Play Mandate for Employers with 50 or more Full Time Equivalent Employees is delayed until 2015

January 2013

  • Employers must disclose the value of the health benefits for each employee’s health coverage on the employee’s annual W-2. 2012 values only have to be reported by employers that have 250 or more employees. Those under 250 will begin reporting 2013 in January 2014.
  • FSA (Flexible Spending Account) contributions for medical expenses are limited to $2500 per year, with the cap annually indexed for inflation.

October 2013

  • The original March 1, 2013 deadline where you were to provide your employees with a notice about the availability of the Public Exchanges has been postponed until October 1, 2013. A suggested notice for comment was recently published. When finalized, we will be sending to our group clients with needed information.
  • Waiting period for coverage for new employee cannot be more than 90 days. Small group will go to a maximum of 60 days so the initial effective date for each employee will be the 1st of a month and when termed will be covered through the month when termination occurred.
  • January 1, 2015 Employer responsibilities take effect for companies that employ 50 or more full-time equivalents (under IRC §4980H). See details and potential penalties described below. Those employers with 50 or more full-time equivalent employees (example, two 15 hour per week part-time employees would count as one full-time 30 hour equivalent employee) must offer coverage to only those employees that work on average 30 hours per week. The employer does not have to offer coverage to those that work less than 30 hours per week, even though they were included in the count to determine if the employer must provide coverage or pay a penalty if they do not provide coverage. Companies that have a common owner are combined for purposes of determining whether they are subject to this mandate. However any penalties would be the responsibility of each individual company if they were not in compliance.
    • If no coverage is offered by the employer and just one employee receives a premium tax credit or cost subsidy in the public exchange, the employer must pay a penalty of $2000 annually times the total number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums. Additionally this penalty does not qualify as a tax deduction; whereas insurance premium does.
    • If the employer does not offer a plan that provides at least 60% of covered health care expenses for a typical population (definition of a bronze level plan) or if any employee has to pay more than 9.5% of his/her Adjusted Gross Income (AGI) towards his/her employee group coverage; and then buys coverage through the public exchange and receives a premium tax credit; then the employer must pay a penalty for not offering affordable coverage. This is using the employee’s W2 income from the employer compared to the cost of the employee-only base plan coverage. (Most employers will want to offer a bronze plan for this base coverage to keep cost within the affordable definition.) It does not include dependent premium or other family member income in the calculation, at this time. The penalty is $3000 annually for each full-time employee receiving a tax credit, up to a maximum of $2000 times the number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums. Additionally these penalties do not qualify as a tax deduction; whereas insurance premium does.
    • We have an Excel sheet where you can plug in your applicable numbers for the three safeguards to determine the maximum you can charge an employee to be within the guidelines to avoid the penalty. Please contact us and we will be glad to email this Excel sheet to you.
    • http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act is an IRS link with Q and A to further assist you in this area.
    • After 2014 employers must also offer coverage to dependent children under age 26, but not required to pay. Currently all of our fully-insured plans offer coverage to these dependents. So this is a non-issue for our clients. Some large self-insured plans do not offer coverage currently to dependents, but will be required to do so in 2015.
  • Employers of 200 or more employees have to auto-enroll all new employees into any available employer–sponsored health insurance plan. This is assumed to be in effect for 2014, but it is unclear until regulations are issued. We will keep the affected groups updated on this issue.
  • States are to operate a public exchange or if they elect not to do so then HHS will operate one for them. Texas so far has elected not to operate a public exchange.
  • Non-grandfathered individual and small group plans must cover Essential Health Benefits (EHB) as defined by HHS. Those plans that do not have to cover EHB are: grandfathered individual and small group health plans, fully insured large group health plans (over 50 employees for 2014 and 2015; then over 100 starting 2016), and self-insured/ASO health plans. If EHB are offered, even if not required, the plans cannot limit the annual dollars or the annual out-of-pocket expense for the member. But there are except some exceptions under a safe harbor. Fully insured group plans already cover most of these items, except for mental health with no limits and pediatric dental preventative coverage and orthodontia.
  • All non-grandfathered plans on their 2014 annual renewal date will have to adhere to maximum annual in-network out of pocket limits, which matches HSA annual max out of pocket limits and increases based on CPI every year. For 2014 the limit is $6,350 for an individual and $12,700 for family max. Copays will be applied to out of pocket. Family max is times 2 instead of times 3 for groups under 50 (over 50 is already times 2). These changes will impact premium, since groups may have to get a richer plan then they currently have to be in compliance. There are some exceptions under a safe harbor.
  • Non-grandfathered fully insured small group plans (1-50 for now) have an in-network deductible cap for plans beginning on their 2014 renewal date. The cap is $2000 individual/$4000 family. There is some allowance being made to increase the deductible if necessary to meet 60% AV (Bronze plan). For 2014 and 2015 small group plans are 1-50 FTE (full time eligible employees). Beginning in 2016 small group will be defined as 1-100 FTE.
  • 2014 will bring change to the rating of non-grandfathered plans. Mental Health coverage will be modified so it is covered as any other illness. Male/females will not be rated differently—maternity will be rated on all members since community rating will apply. Premium variations are only allowed for age (3:1-currently is 5:1 or 6:1 older to younger), tobacco use (1.5:1), family composition (may see a per child rate), and geographic regions. Medical conditions will no longer be used to determine rating. Any new plan will be non-grandfathered.
  • Grandfathered plans will continue to be rated as they had been in the past. A grandfathered plan was written 3/23/2010 or earlier and has maintained specific guidelines to continue as a grandfathered plan each year. All plans written after 3/23/2010 or did not maintain the guidelines are non-grandfathered.
  • There will not be a pre-existing clause in the non-grandfathered plans. Enrollees will be covered immediately for any covered medical condition, even if no prior health insurance coverage.

Individual Policies

Grandfathered Plans – These are plans that were in effect prior to or on 3/23/2010 and have remained in effect with either very little or no plan modification. (For example, a change in deductible from $1000 to $1500 would make the plan become a non-grandfathered plan since the deductible increase is greater than that allowed.) Almost any deductible change or special offer plan change would make a plan non-grandfathered. Any plan purchased after 3/23/2010 would be a non-grandfathered plan.

If you have a grandfathered plan, please do NOT make a plan change or apply for another policy without checking with us first! Starting in 2014, grandfathered plans should be considerably less expensive than non-grandfathered plans with similar deductible levels and out of pocket maximums. In many cases, they will be less expensive than even higher deductible non-grandfathered plans. In 2014, individual non-grandfathered plans will have to provide coverage for Essential Health Benefits (EHB) as defined by HHS. In particular, maternity and mental health will have to be covered as any other illness on non-grandfathered individual plans. Also non-grandfathered plans will not have exclusions for pre-existing conditions. This means with the 2014 plans, people will be covered on day 1 for any allowed service.

Beginning in 2014, carriers cannot vary premium based on past health problems or gender. Carriers will be allowed to vary premiums only based on age (3:1 for old to young instead of the current 5:1 or 6:1 old to young), tobacco use (1.5:1), family size (could see rate for each family member), and geography.

The annual maximum out of pocket limits will be the same as the highest HSA-compatible plans annual maximum out of pocket limits. For 2014, the highest annual max out of pocket for an individual plan is $6350, for a family (any individual with any other family member-spouse, child(ren) or both)the highest annual out of pocket max is $12,700. For each subsequent year this max will be adjusted by the CPI. Most copay plans will have to be significantly adjusted to meet this guideline. Copays will be applied to the annual maximum out of pocket, where they did not previously apply. Also family max on individual copay plans was 3 times the individual max; but with ACA, the family max can only be 2 times the individual max. The Health Savings Account compatible plans already fit into the out of pocket limits since based on the HSA annual maximum.

The current non-grandfathered plans will no longer be available and will be replaced with plans that have all of the EHB (including maternity and mental health) and do not exceed the highest allowed annual maximum out of pocket limits. The bottom line is most people on non-grandfathered plans will either change to a new plan 1/1/2014 or renew with their current carrier for a special December 2013 renewal.

However, some people will qualify for a subsidy on the public exchange based on family income. Based on the Federal Poverty Level (FPL) from 100% up to 400% of FPL, people can get a subsidy based on the threshold of what % of income can be spent on premium. 100%-133% FPL – 2% is the threshold. 133% FPL – 3% is the threshold. 150% FPL – 4% is the threshold. 200% FPL – 6.3% is the threshold. 250% FPL – 8.05% is the threshold. 300%-400% FPL – 9.5% is the threshold. The cost of a Silver Plan on the public exchange will be the basis for the subsidy calculation. People can take the subsidy and buy a Silver Plan or buy down to a Bronze Plan or buy up to a Gold or Platinum plan. Plans on the public exchange may also be different than those offered on private exchanges. To save premium cost, public exchange plans may have smaller networks than those plans available on the private exchange. As the exchanges are developed, this will become clearer.

Individuals who are enrolled in employer-sponsored coverage or eligible for employer-sponsored coverage that meets affordability (less than 9.5% of their income) and minimum value standards (EHB) are ineligible to receive subsidies through the public exchange.

Exchanges (public and private) are to be available starting October 2013 to apply for a plan effective 1/1/2014. For this first enrollment year, enrollment will also be allowed in January, February, and March since people are not subject to the tax penalty if they do not have coverage less than 3 months. So an individual who purchases a policy with an April 1, 2014 effective date and keeps it the rest of the year; will not have to pay a tax penalty for 2014. This additional enrollment time for 2014 helps allow for more initial enrollees. In subsequent years the exchanges will be open in October through December for the plan selection for January 1 of the following year. People will NOT be allowed to apply just at any time. Example: Someone cannot wait until an illness and then enroll later in the year when diagnosed. Enrollment outside of October through December each year will only be available if there is a special enrollment event, such as loss of group coverage. Each year people can switch plans for the coming year. People can buy a Bronze plan one year, and Platinum the next depending upon their needs/budget.

The plans available will be within 4 metallic categories: Bronze, Silver, Gold, and Platinum. Bronze is 60% actuarial value, Silver 70% actuarial value, Gold 80% actuarial value and Platinum 90% actuarial value. This is to make it easier for the public to compare plans. A catastrophic low-cost plan may be available to those under age 30 and those below 100% of the Federal Poverty Level.

The tax penalty for not obtaining health coverage either through your employer or obtaining an individual policy through the private or public exchange is:
The penalty is on a sliding scale for three years and is the greater of:

  • For 2014, $95 per uninsured adult in the household (capped at $285/household) or 1% of the household income over the tax filing threshold.
  • For 2015, $325 per uninsured adult in the household (capped at $975/household) or 2% of the household income over the tax filing threshold.
  • For 2016 $695 per uninsured adult in the household (capped at $2,085 per household) or 2.5% of the household income over the tax filing threshold.

2012/2013 Miscellaneous items

August 2012

  1. Medical Loss Ratio – Shortly after ACA was upheld, some carriers issued MLR Rebates if they fell below required levels. Based upon specific methodology, if 80% of premium was not spent on claims/allowed expenses for small group policies (1-50 employees up to 2016 then 1-100 employees) and individual policies), then the insurance carrier will issue a rebate. For large group if 85% of premium was not spent on claims/allowed expenses, then the insurance carrier will issue a rebate. 2011 was the first rebate year and this will continue annually. Rebates are to be issued prior to August 1 for the prior year.
  2. Women’s Preventive Services – For plan years beginning on or after August 1, 2012 non-grandfathered insured plans (individual and group) and non-grandfathered self-insured group health plans will cover women’s preventive services, including birth control, without copayment or deductibles. Plans may require these to be received in-network. This includes the following services for women with no cost sharing:
    • Annual well-woman visits – some grandfathered plans also cover these with no cost sharing and have for some time.
    • Screening for gestational diabetes
    • HPV DNA testing for women 30 years and older
    • Sexually-transmitted infection counseling
    • HIV screening and counseling
    • FDA-approved contraception methods and contraceptive counseling
    • Breastfeeding support, supplies, and counseling
    • Domestic violence screening and counseling

For more detail visit: http://www.hrsa.gov/womensguidelines/

September 2012
Effective 9/23/12 for new and renewing individual and group health plans, there are strict timeframes for the carriers and group employers to provide a Summary of Benefits and Coverage (SBC) to members/employees so they can elect coverage initially or at renewal. For renewing groups, the SBC must be provided 30 calendar days prior to the new policy effective date. If for some reason it is not finalized, the SBC must be provided within 7 business days after the start of the new policy or within 7 business days after the receipt of written confirmation of intent to renew- whichever is earlier. The member/employee can also request SBC at any time and it must be provided within 7 business days of the receipt of the request. The carrier and/or the employer can face significant financial risk for not complying. Failure to comply could result in up to a $1000 fine per plan participant/beneficiary for each failure. JME Insurance Agency has always provided the benefit summaries with the initial enrollment and also at renewal. The format of the SBC’s will change to be in compliance with the guidelines from the Dept. of HHS, but we will continue to provide this service to assist our employer groups. Also a uniform glossary of health coverage and medical terms are to be accessible. Most carriers have provided this glossary on their web site and it is also available at http://www.healthcare.gov/glossary/04262011a.pdf.

January 2013

  1. Increase in Medicare Payroll Tax on self-employed and wages of individuals earning in excess of $200,000 annually, married couples earning more than $250,000 annually. The increase is 0.9%. In addition a Medicare tax of 3.8% will apply to unearned income, specifically the lesser of net investment income or the amount by with adjusted gross income exceeds $200,000 for an individual or $250,000 for a couple.
  2. A premium tax on fully insured and self-insured health plans will be $1 times the average number of covered lives under the plan for policy/plan years ending on or after 10/1/2012 and before 10/1/2013. After 10/1/2013 and before 10/1/2019 the amount is $2 times the average number of lives on the policy. After 10/1/2014 the amount is subject to certain adjustments based on the projected capita amount of the National Health Expenditures.
  3. For those who itemize their tax return the threshold for deducting unreimbursed medical expenses increases from 7.5% of AGI to 10% of AGI. The increase is waived for those 65 and older through 2016.
  4. There will be a 2.3% excise tax on the sales of medical device makers (pacemaker, prosthetic limb, stent, etc.).
  5. Capital gains tax rises from 15 to 20 percent in 2013 and dividends are to be taxed at ordinary income tax rates instead of capital gains rates.
  6. Real Estate Sales Tax – The tax is on the gain, not the sales price, and only applies to those over a certain income level (see below). If you lived in the house 2 out of the last 5 years you also get to exclude some of the gain since it was a principal residence. The 3.8% tax on the gain of a home sale applies to individuals with Adjusted Gross Income (AGI) of more than $200,000 or to couples with Adjusted Gross Income (AGI) of more than $250,000. Additionally, if you have lived in the home for 2 out of the last 5 years, $250,000 of the gain is not taxable for an individual and $500,000 of the gain is not taxable for a couple.

Group/Employer Policies

Do You Qualify for a Small Employer Health Care Tax Credit?

September 20, 2010

New Employer Reporting Requirements

  1. After the format is finalized in 2011, employers must provide their new and open enrollment employees 4 page benefit summaries that describe the health insurance coverage being offered. There is a penalty of $1000 per employee for failure to comply.
  2. Employers must provide a new notice to employees at the time of hiring and to all of their existing employees no later than March 1, 2013 that the new health insurance exchange that will be available January 1, 2014.

June 23, 2010

If an employer group is on a plan that was issued prior to March 23, 2010 and does not have significant changes after March 23, 2010; then it is Grandfathered. Deductible changes, coinsurance changes, co-payment changes and reduced employer contribution changes after March 23, 2010 would most likely result in a plan no longer being Grandfathered.

Is it a bad thing to not be Grandfathered? These items apply to non-Grandfathered, but not to Grandfathered plans:

  1. Coverage of recommended prevention services without cost to the member will apply to non-grandfathered plans on their effective date or renewal date after September 23, 2010. Depending upon the plan design, you had preventative coverage with either a copay or covered at no cost on HSA compatible plans. How could this additional benefit impact you? We believe that the cost of this benefit will be minimal based on final preventative definitions released probably in September. Plans in place prior to March 23, 2010 will continue to cover preventative as it has in the past and defined under the policy until you make a plan change.
  2. Patient Protection for guaranteed access to OB-GYN’s and pediatricians. This is not an issue for our group clients, since the group plans we offer are PPO plans that allow access to specialists in the network without referral.
  3. Emergency services must be covered at in-network level regardless of the provider. This is already in place for our Texas policies due to an earlier State Mandate, so it should have minimal impact depending upon further clarification of definitions.
  4. Plan must comply with IRS Section 105(h) rules that prohibit discrimination in favor of highly compensated employees. Most of our employer groups do this already by offering all chosen plans to all employees.

Effective for plan years beginning 9/23/2010 the items listed below will apply to BOTH Grandfathered and Non-Grandfathered plans:

  1. No lifetime limits.
  2. No annual limits on specified standards that are to be defined in future regulations.
  3. Coverage for dependents to age 26 (currently in TX it is to age 25). Many carriers have already implemented this item.
  4. No coverage exclusions for children under age 19 with pre-existing conditions. This has been estimated to impact plans maybe 2 percent as this benefit was already available if coming from prior coverage.

April 7, 2010

  • Six months after enactment, coverage for dependent children would be to age 26. Currently in Texas, for fully insured plans, the age for dependent children coverage is to age 25.
  • Six months after enactment, lifetime benefit limits will be eliminated. Can impose annual limits, but only those determined by the Secretary of Dept. of Health and Human Services.
  • Six months after enactment, provide coverage for some preventative services without cost sharing by the member. Services will be defined by the U.S. Preventative Services Task Force.
  • For 2010 tax year, small businesses with no more than 25 employees and certain annual wage levels may receive tax credits if they provide insurance to employees For specific qualifications, we recommend consulting with your CPA or company tax consultant.
  • In 2011, Health Savings Accounts will still have tax benefits, but if the funds are used for ineligible expenses you will be responsible for taxes on that amount and a penalty of 20%, instead of the current 10%penalty.
  • In 2011, over the counter drugs that are obtained without a prescription will no longer qualify as an eligible expense for HSA’s, FSA’s or HRA’s.
  • Effective 2011, employers with 250 or more employees will be required to report on their employee’s W2 form the aggregate cost of medical benefits, vision, dental, and supplemental insurance coverage.
  • A voluntary long-term care program called CLASS will be created. After 5 years of contributions, enrollees would be entitled to defined benefits.

Individual Policies

October 12, 2010

If your plan that was issued prior to March 23, 2010 and does not have significant changes after March 23, 2010; then it is Grandfathered. Deductible changes, coinsurance changes, co-payment changes after March 23, 2010 would most likely result in a plan no longer being Grandfathered.

Is it a bad thing to not be grandfathered? These items apply to non-Grandfathered, but not to Grandfathered plans:

  1. Coverage of recommended prevention services without cost to the member will apply to non-grandfathered plans on their effective date or renewal date after September 23, 2010. Depending upon the plan design, you had preventative coverage with either a copay or applied to your deductible/coinsurance (such as HSA compatible plans). How could this additional benefit impact you? We believe that the cost of providing this benefit would be calculated and included in the premium of plans issued after March 23, 2010 when final preventative definitions are released probably in September. Plans in place prior to March 23, 2010 will continue to cover preventative as it has in the past and defined under the policy until you make a plan change.
  2. Patient Protection for guaranteed access to OB-GYN’s and pediatricians. This is not an issue for our individual clients, since the individual plans we offer are large PPO plans that allow access to specialists in the network without referral.
  3. Emergency services must be covered at in-network level regardless of the provider. This is already in place for our Texas policies due to an earlier State Mandate, so should have minimal impact depending upon further clarification of definitions.
  4. Children under 19 with pre-existing conditions cannot be declined for coverage after 9/23/2010 when written with a parent.
  5. No annual limits for specified benefits to be defined in future regulations.

Effective for plan years beginning 9/23/2010 the items listed below apply to BOTH Grandfathered and Non-Grandfathered plans:

  1. No lifetime limits
  2. Coverage for dependents to age 26 (currently in TX it is to age 25).

April 7, 2010

  • 90 days after enactment, a temporary national high-risk insurance pool would be created to provide health coverage to individuals with pre-existing conditions and who have been uninsured for at least six months. Plan designs and pricing have yet to be determined.
  • Six months after enactment, insurance companies would be barred from denying coverage to children under age 19 who have pre-existing medical conditions.
  • Six months after enactment, coverage for dependent children would be to age 26. Currently in Texas for fully insured plans, the age for dependent children coverage is to age 25.
  • Six months after enactment, lifetime benefit limits will be eliminated. Can impose annual limits, but only those determined by the Secretary of Dept. of Health and Human Services.
  • Six months after enactment, provide coverage for some preventative services without cost sharing by the member. Services will be defined by the U.S. Preventative Services Task Force.
  • In 2011, Health Savings Accounts will still have tax benefits, but if the funds are used for ineligible expenses you will be responsible for taxes on that amount and a penalty of 20%, instead of the current 10% penalty.
  • In 2011, over the counter drugs that are obtained without a prescription will no longer qualify as an eligible expense for HSA’s, FSA’s or HRA’s.

Medicare and Part D

  • 2010 – The immediate benefit will be a Medicare drug rebate for Medicare Part D members who meet the coverage gap. These members will receive a $250 rebate to help pay for medication.
    •  We do not know how you will receive this rebate yet. As regulations are developed we will keep you informed.
  • 2011 – Part D members will receive a 50% discount on brand-name drugs in the coverage gap.
  • 2011 – Annual check-ups and defined preventive services/screenings will be covered at no cost to the member.

By 2020 the Part D coverage gap is expected to be closed

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