Patient Protection and Affordable Care Act of 2010.

Patient Protection and Affordable Care Act of 2010

KEY EFFECTIVE DATES

Health Care ReformKey Effective Dates for Employers

2010

Enactment Grandfathered plans established Auto enrollment of new employees for employers with more than 200 employees

1/1/2010 Small business tax credits available (maximum of 35% of costs)

90 days after enactment

Retiree reinsurance program available (Interim Final Regulations issued May 5, 2010; program to be implemented June 1, 2010)

Plan years beginning six months after enactment

All plans subject to some plan design constraints:• No pre-existing condition exclusions• Cover adult children (Interim Final Regulations issued May 10,

2010)• No rescissions• No annual or lifetime caps on “essential benefits”

All plans, except grandfathered plans, subject to further plan design constraints:

• Appeals process• Insured health plans subject to anti-discrimination testing (Code

Section 105(h))• Coverage for emergency services• Preventive care with no cost sharing • OB/GYN primary care physician

(Note: not all provisions of the Patient Protection and Affordable Care Act, as amended, are summarized below)

Health Care ReformKey Effective Dates for Employers (cont’d)

2012

24 months after enactment

Disclosure obligations, including:• Summary of coverage• Notice of changes (mid-year)• Quality of care


20131/1/13 FSA contributions limited to $2,500

New 3.8% surtax on unearned income Additional .9% Medicare tax

3/1/13 Employer’s notice to employees concerning Exchange

2014

1/1/14 Plan design changes and benefit mandates Individual mandate and individual subsidies begin State-run Exchanges begin Additional employer requirements:

• Report minimum essential coverage;• Penalty for failure to provide affordable coverage (more than 50 employees)

• Free Choice Vouchers Small group subsidies increase Increased financial incentives for HIPAA wellness

programs



20151/1/15 Penalties for non-compliance with individual mandates

increase



2016 – 2018

1/1/16 Penalties increase for non–compliance with individual mandates

1/1/17 Large employers may be permitted in Exchange

1/1/18 40% excise tax on “Cadillac Plans”

MANDATED COVERAGES

Individual Mandate• Effective Date: January 1, 2014• Individuals must maintain minimum essential

coverage or pay tax• Limited exemptions– Religious– Illegal aliens– Prisoners– Low-income individuals– Hardship recipients– Small breaks in coverage – Members of Indian tribes

Individual Mandate

• Minimum Essential Coverage– Medicare Part A– Medicaid– CHIPs– TRICARE– VA– Employer-sponsored coverage– Individual coverage– Grandfathered plans

Individual Mandate

• Consequences for failure to maintain coverage– Flat level tax or percentage of income• $95 or 1% of income in 2014• $325 or 2.0% of income in 2015• $695 or 2.5% of income in 2016

• Smaller penalty for minors• Taxpayer is responsible for tax on all

dependents• Assistance available for low-income taxpayers

Employer Mandate• Effective Date: January 1, 2014• Large employers must offer affordable minimum

essential coverage or be subject to tax• Must be offered to employees and their

dependents• Who is a large employer for this purpose?– 50 or more full-time employees– 30+ hours per week is considered full time– Number of employees includes full-time equivalents

for purposes of minimum threshold– Determined on a controlled group basis

Employer Mandate• Minimum essential coverage

– No required benefits, employer coverage suffices

• Affordability must be determined for employees whose household income does not exceed 4 x the federal poverty level (poverty level for a single person is $10,830)– Cost of coverage

• Eligible for subsidy if employee premium exceeds 9.5% of AGI– Minimum level of benefits

• Eligible for subsidy if benefits offered under the plan not reimbursed at least at a 60% level (for example, 60/40 plan)

• Determined on an aggregate actuarial basis, not benefit specific

• Free choice voucher– Available for employees who must pay between 8% and 9.8% of AGI on

healthcare– Income does not exceed 4 x the federal poverty level

Employer Mandate• Consequences for failing to offer minimum coverage

– Tax is based upon number of full-time employees; full-time equivalents are excluded

– Exclude first 30 full-time employees in calculating the tax– Amount of tax depends upon whether any coverage is offered at all

• If no coverage offered, then $2000 x number of full-time employees less 30• If coverage is offered and an employee is entitled to a federal subsidy, then the

lesser of – $2000 x number of full-time employees less 30 and– $3000 x number of full-time employees receiving assistance

Employer Mandate• Example

– Employer offers no health coverage, has 46 employees working 30 + hours per week, and 10 employees working 25 hours per week.• The employer is subject to the mandate because the part-time employees convert

to a sufficient number of full-time equivalents• The nondeductible tax is $32,000 (16 x $2000) per year.• Assuming a 39% corporate tax rate, the actual cost to the plan sponsor is $52,500

($32,000 / .61).

• Example– Employer has 250 employees and offers coverage to all of them but the cost

of coverage exceeds 9.5% of the household income of 35 employees. • The employer will pay a penalty tax equal to the lesser of $440,000 (220 x $2000) or

$105,000 (35 x $3000) • Assuming a 39% corporate tax rate, the actual cost to the plan sponsor is $172,000

($105,000 / .61)

Employer Mandate

• Example– Employer has 250 employees and offers coverage

to all of them but the cost of coverage equals 9% of the household income of 35 employees. • The employer must provide a free choice voucher to

the 35 employees• The voucher is deductible and no penalty tax is due

Healthcare Exchange

• Effective Date: January 1, 2014• Established by states– Regional or statewide coverage available

• Small employers and individual coverage– 100 or fewer employees

• Intended to permit consumer comparison of policies

Healthcare Exchange

• Essential benefits– Same as essential benefits under annual and

lifetime limits– Required for plans offered under the exchange

Healthcare Exchange

• Bronze-level coverage (minimum coverage) (60% of actuarial value)

• Silver-level coverage (70% of actuarial value)• Gold-level coverage (80% of actuarial value)• Platinum-level coverage (90% of actuarial

value)• Young-invincibles coverage

REPORTING, TAXES AND REVENUE RAISERSAFFECTING EMPLOYERS

Employer-Sponsored Coverage - W-2 Reporting

• Effective Date: Coverage provided after December 31, 2010• New IRS Form W-2 reporting obligation • Employer Sponsored Coverage:

– Report COBRA premium values– Includes employer and employee contributions– Covers medical, dental, vision– Excludes flex spending contributions, single disease, fixed indemnity coverage

Additional Medicare Tax

• Effective for tax years after December 31, 2012• Applies to taxpayers with wages in excess of

$200,000 (single) $250,000 (married filing jointly)• Additional 0.9% on wages in excess of

$200,000/$250,000– Employee contribution only (no employer match)

• Employer withholding required only if employee receives wages in excess of $200,000

Flexible Spending Accounts (cafeteria/125 plans)

• Effective for tax years beginning after December 31, 2012

• Limit on salary reduction contributions: $2,500– Adjusted for inflation beginning 2014;– CPI-Urban

• Plan document requirement for “qualified” status

Flexible Spending Accounts - Health Savings Accounts

• Effective for expenses incurred in tax years after December 31, 2010

• Eligible Expenses: – “Qualified medical expense” means an amount paid

for medical care– Includes medicine and drugs only if prescribed by

physician or insulin • Special Timing Considerations:– Fiscal year plans;– Plans adopting a 3/15 “run off period”

Health Savings Accounts

• Effective for distributions in tax years beginning after December 31, 2010

• Ineligible distributions subject to a 20% excise tax, in addition to income tax

High Cost Employer Coverage (Cadillac Plans)

• Effective for tax years beginning after 2017• Excise Tax: 40% of “excess benefits”– Calculated as the value of employer-sponsored

coverage over dollar limit

• Imposed on health care providers– Insurer (fully insured plan);– Employer/administrator (self-insured plan);– Employer (HSA or MSA contributions)

• Determining Applicable Dollar Limit: – Beginning thresholds (in 2010):

• $10,200 self-only; • $27,500 other than self-only

– Single formula adjustment for period between 2010 and 2018 to reflect medical inflation; based upon cost of Federal Employees Health Benefit Plan• For example:

– Cost of self-only coverage increases by 80% between 2010 and 2018

– Adjustment percentage under formula is 135% (100 + (80-55))– In 2018, threshold is $13,770 for self-only ($10,200 X 135%)

– Annual adjustments permitted for CPI – Urban and employer’s specific demographics


• Determining Value of of Employer-Sponsored Coverage: – COBRA premium valuation to determine cost– Aggregate the value of employer-sponsored coverage, including medical,

drugs, FSA and HSA, on site clinics, EAPs• Premiums included whether paid by employer or employee (whether paid before

or after tax)

– Separate dental/vision benefits, disability, long-term care, secondary benefits and fixed indemnity coverage may be excluded


For Example: Assume coverage in 2018$13,770 threshold for self-only ($1,148 per month)$14,500 value of employer-sponsored coverage ($1,208 per month)$60 excess coverage ($1,208 – $1,148 = $60)9 months of coverage during 2018

$60 monthly excess X 9 months X 40% = $216 excise tax


Patient Protection and Affordable Care Act of 2010.

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Transcript of Patient Protection and Affordable Care Act of 2010.