Patient Protection and the Affordable Care Act
Clayton & McKervey
The topic of our September CFO/Controller Roundtable centered on the Affordable Care Act (ACA), otherwise known as “Obamacare.” Timothy J. Hilligoss, CPA, MST, Shareholder of International Accounting Services and Practice Leader for Asia at Clayton & McKervey, P.C. and Mike LaLonde of Expense Reduction Analysis, discussed strategies, timing, and valuable resources related to the forthcoming, and much discussed, reform to the American healthcare system.
Timing of Marketplace
Health Insurance Marketplace Notice
- Provides employees with marketplace (“exchange”) coverage options
- Required to inform your employees about their exchange options (not dependent on number of employees)
- The deadline for distribution of the this notice to employees was October 1, 2013
- New employees should receive notice within 14 days of beginning employment
- Notice can be created by third party as long as all necessary content is included
- There currently are no penalties for failure to provide this notice
Compliance
- Open enrollment in the exchanges runs from October 1, 2013 to March 31, 2014
- Insurance plans purchased by December 15, 2013 will begin coverage on January 1, 2014
- In subsequent years, open enrollment will start on October 15 and end on December 31
- Several documented “glitches” in the exchange software have hindered applicants ability to receive coverage
Shared Responsibility
Employer Mandate
PLEASE NOTE: ON JULY 2, THE OBAMA ADMINISTRATION DELAYED THE EMPLOYER MANDATE UNTIL THE 2015 REPORTING YEAR.
- ACA mandates that all large employers provide “affordable” health care options or be liable for non-conformance fees
- The employer mandate will apply to “large” employers with more than 50 full-time equivalent employees
- The annual non-conformance fee is $2,000 per employee ($3,000 if plan does not meet minimum value standard)
- Full time workers are defined as a minimum of 30 hours worked per week
- First 30 employees are exempt from annual fee calculation
- Seasonal exceptions may apply in defining an employer’s number of full-time equivalent employees
- All individuals are required to obtain health insurance coverage by March 31, 2014 (some exceptions apply)
- Employee requirements have not been extended although there has been legislative pressure to delay
- State run exchanges are coming into place to provide an insurance coverage marketplace
- Penalties for being uninsured are $95 per adult/$47 per child for the year 2014
- Notices of coverage cancellation expected as current plans may not conform to ACA standards, this has been prevalent with single- employee plans
Job Based vs. Exchange Coverage
Employees may be able to reduce insurance premiums by choosing an option available in the marketplace if an employer does not offer an “affordable” plan that meets the “minimum” value threshold
A job-based health plan is considered “affordable” if the employee’s share of premiums for the lowest cost self-only coverage that meets the minimum value standard is less than 9.5% of the employees family income
A health plan meets the minimum value standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population (includes preventive procedures)
No fees or penalties will apply at the employer level if employee chooses marketplace option in lieu of job based coverage (plan must be considered an “affordable” option)
Resources
As discussed, there are plenty of resources available regarding the Affordable Care Act. Many elements of healthcare reform are summarized in these resources which are readily available to employers. A non-comprehensive listing is as follows:
Official Guides
- business.usa.gov/healthcare
- www.sba.gov/healthcare
- www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions
- www.healthcare.gov
Comprehensive Guides with Minimal “Spin”
Other Options
- The Ultimate Guide to Obamacare
- Five Things to Know About Obamacare Premiums: A Guide for the Perplexed
Getting Data
Health Insurance Marketplaces
- All states required to establish exchanges by January 1, 2014
- Exchanges will be set up to assist both individuals and “small” businesses. (states have the option to define “small”)
- All plans offered through exchanges will meet all ACA reform guidelines
- Four levels of coverage (Platinum, Gold, Silver, Bronze)
- Tax subsidies available for covered employees up to certain income thresholds
- 3:1 age bands (versus 5:1) could increase premiums at the lower risk individual level
- Potential shielding from this exposure through tax subsidies
Third parties can assist as shared responsibility resources and advisors in many human resource and payroll functions. Potential sources of assistance consist of:
Professional Employer Organizations (PEOs)
- Can defer a significant amount of ACA compliance to third party entities
- Employer still bears ultimate risk
Payroll Providers
- Can provide valuable education on regulations as well as managing notices and reporting deadlines
Health Care Consultants
- Can assist in cost/benefit analysis of various insurance strategies that comply with ACA
- Compliance vs. business strategies
Strategies
Early Renewal of Current Plans
- Defer compliance until December 2014 (eligibility for this option for most insurance carriers has passed)
- Potential to “grandfather” in lower rates
Self-Funded Plans
- Self-insured plans are no longer viewed as an option for “large” employers, small employers may want to shop around to determine the cost/benefit
- According to Kaiser Health, 15% of covered employees working for firms with fewer than 200 employees were covered by self-insured plans in 2012 (up from 10% in 2011)
- These plans can provide exemptions to certain ACA requirements (i.e. coverage requirements, state mandates)
- “Stop-Loss” potential
- Re-insurance fees of $63, per each insured person, are due by employers in January 2014
- Traditional reinsurance programs fees for self-funded plans run through 2016
Wellness Plans
- ACA can provide incentives for the implementation and continuation of “non-discriminatory” wellness programs
- Incentives could be in the form of discounts or rebates
Seasonal Employees
- An employer is not considered a “large” employer if it exceeds 50 employees for 120 days or fewer during calendar year, if employees in excess of 50 were considered “seasonal” workers
“Skinny” Plans
- Outgrowth of “mini-med” plans
- Very limited coverage, but they also can be very affordable
- Non-formal guidance has implied that well-designed “skinny” plans may meet ACA guidelines as a compliant plan
- Potential risk of non-ACA related penalties
- Precise communication with your third party provider is essential to eliminate any uncertainties
High-Deductible Plans
- Health Savings Account (HSA) contributions can bring these plans into compliance
- Minimum deductible for family coverage for 2014 is $2,500.
- Contribution limit for family coverage for 2014 is $6,550
- Potential to put 2 plans in effect (1 – premium plan with discrimination, 1 – compliance plan)
Tax Credits for Employers
- Employers may qualify for health care tax credit if they have fewer than 25 full-time equivalent employees making an average of $50,000 a year or less
This information is a summary of the CFO Roundtable participant discussions. The audience included CFO’s, controllers, business owners and various service providers. The information shared is the result of the individual participant’s unique circumstances and experience. This information should not be relied upon as accurate. Specific facts and circumstances for your business are unique and you should consult professional advise regarding the impact of the Affordable Care Act on your business.