The Patient Protection and Affordable Care Act (PPACA), also referred to as health care reform, introduced several new laws and regulations that impact businesses of all sizes. The following health care reform checklist outlines some key PPACA compliance issues employers may need to address to ensure compliance in 2015.
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Summary of Benefits Coverage Documents
All group health plans must issue a uniform plain language summary of benefits and coverage (SBC) to participants and beneficiaries (including COBRA participants) that accurately describes the benefits and coverage provided under the plan. Compliant documents should be available from your carrier or administrator (TPA).
Employers issuing 250 or more W-2s for a prior year must report the value of the applicable employer sponsored coverage in Box 12 on each employee’s annual form W-2.
Employer Shared Responsibility
Beginning in 2015, the Patient Protection and Affordable Care Act places responsibility on applicable large employers (i.e., employers with 50 or more full-time equivalent employees) to offer group health insurance coverage to their full-time employees, or potentially pay a penalty if at least one full-time employee obtains a subsidy for coverage through a health insurance marketplace. These provisions are commonly known as Employer Shared Responsibility (ESR) or “pay-or-play” requirements.
The ESR provisions go into effect for applicable large employers with 100 or more full-time employees on January 1, 2015. Employers with 50-99 full-time employees will see enforcement on ESR provisions beginning on January 1, 2016. Employers will use their employee information in 2014 to determine whether they have enough employees to be subject to these new provisions in 2015. The process for identifying potential fines for non-compliance will begin in 2015.
Transitional Reinsurance Program Fees
Section 1341 of the Affordable Care Act and Health and Human Services (HHS) mandates an ACA Transitional Reinsurance fee that is assessed for years 2014 ($63 per enrolled life , including dependants) and 2015 ($44 per covered life, including dependents) to stabilize premiums in the individual market inside and outside of the Marketplace. The transitional reinsurance program will collect contributions from contributing entities to fund reinsurance payments to issuers of non-grandfathered reinsurance-eligible individual market plans, the administrative costs of operating the reinsurance program, and the General Fund of the U.S. Treasury for the 2014, 2015 and 2016 years. This is applicable to insurance issuers and self-insured plans. Annual enrollment and contribution submission form is available on Pay.gov. Below is a list of important deadlines:
- December 5, 2015: Contributing entity must submit annual enrollment count
- January 15, 2015: Remit first contribution amount (Or combined contribution amount) $52.50 per covered life (if remitting first contribution only), $63.00 if remitting combined contribution amount)
- November 15, 2015: Remit Second Contribution, $10.50 per covered life (if remitting second contribution amount)
Additional Medicare Tax
For individuals earning more than $200,000 and joint filers earning more than $250,000, the Medicare Part A (hospital insurance) tax has increased – from 1.45 to 2.35 percent. It goes into effect for taxable years starting after December 31, 2012. This change is to the employee portion of Medicare only; the employer portion of this tax has not changed. Employers must only match the first 1.45 percent of the Medicare tax.
Small Business Tax Credits
Your small business may qualify if you meet the following requirements:
- Have less than 25 employees
- Have average annual wages less than $50,000 (as adjusted for inflation beginning in 2014)
- Contribute 50 percent or more of the aggregate single premium cost for each enrolled employee
- Purchase coverage through the Small Business Health Options Program (SHOP)
Form 720 Quarterly Excise Tax Return (PORCI Fees)
The Affordable Care Act created an entity known as the Patient-Centered Outcomes Research Institute (PCORI). The institute researches and compares the clinical effectiveness of different medical treatments, and it will be funded by clinical effectiveness research fees (PCORI fees).
Section 4375 of the ACA imposes the PCORI fees on each specified health insurance policy. For insured plans, the insurance carrier is responsible for paying the PCORI fees, and, in many cases, the carriers are passing along the cost to the employers.
Section 4376 of the ACA imposes the PCORI fees on the plan sponsor of an applicable self-insured health plan. These include plans maintained by employers for the benefit of their employees, which provide accident or health coverage where any portion of the coverage is provided other than through an insurance policy. For self-insured plans, the plan sponsor is responsible for paying the PCORI fees.
The filing and payment of fees must be completed and paid by July 31 of the calendar year immediately following the end of the plan year.
Employer Shared Responsibility (Play or Pay)
Enforcement of ESR provisions begins January 1, 2015 for employers with 100 or more full-time employees and January 1, 2016 for employers with 50-99 full-time employees.
- If an applicable large employer with 100 or more full-time employees does not offer minimum essential coverage(MEC) to at least 70 percent of its full-time employees and their dependents in 2015, and at least one full-time employee receives a premium subsidy through a health insurance exchange, the employer may be assessed an annual penalty of $2,000 per full-time employee above the first 30 full-time employees.
- If an applicable large employer with 100 or more full-time employees does offer MEC to at least 70 percent of its full-time employees and their dependents in 2015, but at least one of the full-time employees obtains a premium subsidy through a health insurance exchange, the employer may be subject to a penalty of $3,000 for each non-covered full-time employee who receives a subsidy. However, the penalty cannot exceed the penalty that would be assessed for not offering any health coverage.
- If an applicable large employer with 100 or more full-time employees offers health coverage in 2015 that provides MEC but it is determined to be either: 1) unaffordable or 2) doesn’t meet the minimum value and at least one full-time employee whose coverage was deemed to be unaffordable or lacked minimum value receives a subsidy through a health insurance exchange, then the employer may be fined $3,000 for each employee in that circumstance receiving a subsidy. The penalty cannot exceed the penalty that would be assessed for not offering any health coverage.
The FTE calculation is based on both full- and part-time employees. Whether an employer is subject to the ESR provision is based upon the number of employees in the previous calendar year, therefore applicable employers should currently track employees hours of service to help them make these determinations.
For the purposes of this provision, full-time employees are defined as working an average of 30 hours per week, or 130 hours per calendar month.
Hours worked by part-time employees (those working less than 30 hours per week) are included by, on a monthly basis, dividing their total number of monthly hours worked by 120. For example, a company with 40 full time employees also has 20 part time employees who each work 24hrs per week, or 96hrs per month. These part time employees would count as 16 full time employees:
20 employees x 96hrs = 1920, 1920 / 120 = 16
This employer would be considered to have 56 full time equivalent employees
Minimum Essential Coverage (MEC)
Health-insurance coverage that meets the minimum benefits standard of the small- or large-group market within the state is considered to offer minimum essential coverage (MEC). Must abide by all PPACA guidelines such as:
• No lifetime maximum limitations
• No pre-existing condition limitations
• Offers coverage for dependents up to age 26
• Offers a PPACA-compliant benefit set, including preventive care covered at 100%
Minimum value (MV)
A health-insurance plan that has an actuarial value that covers at least 60 percent of the cost of medical expenses is considered to provide minimum value.
Determine if health benefit required employee contribution to the plan meets PPACA’s affordability guidelines. Assuming a plan with minimum essential and minimum value coverage is offered, the employer must determine if its contributions to health plan costs are in compliance with PPACA’s affordability rules.
Affordability: The rules require that the employee does not pay more than 9.5% of their household income towards the cost of their employer’s health plan.
Household Income: In 2011 the IRS issued safe harbor options for the challenging task of assessing the “household income” of an employee:
Form W-2 safe harbor; an employer can determine affordability by referring to an employee’s wages. Wages for this purpose would be the amount required to be reported in box 1 of Form W-2.
Rate of Pay safe harbor; Benefits are affordable if monthly contributions for self-only coverage for the lowest cost plan are equal to or lower than 9.5% of employee’s hourly rate of pay on the first day of the plan year, multiplied by 130.
Cost of Health Plan: The IRS recently issued guidance that the ‘cost of an employer’s health plan’ is based on the cost of Employee Only coverage.
If an employer fails to provide affordable coverage and one or more employees apply for and receive a subsidy to purchase coverage from the exchange the employer is subject to a $3,000 penalty for each employee that receive the subsidy.
Individuals enrolling in the exchange must have total household income of less than 400% of the Federal Poverty Level (FPL) in order to be eligible for a subsidy. In 2014, 400% of the federal poverty level is approximately $95,000 for a family of four.
|Federal Poverty Guidelines 2014 – for Continental U.S.
|Persons in Household
||2014 Federal Poverty Level (100% FPL)
||Medicaid Eligibility* (138% of FPL)
||Cost Sharing Reduction and Premium cap guideline (150% FPL)
||Cost Sharing Reduction subsidy threshold (250%
|Premium subsidy threshold (400% of FPL)
|*Medicaid eligibility is different in states that did not expand Medicaid. Federal Poverty Guidelines are different in Hawaii and Alaska.
On-going Eligibility Reporting Requirements
Beginning in 2014, PPACA requires that large employers track each
employee’s status as a full-time employee or part-time. They will be required to report each employee’s status to the IRS and keep as part of their tax records the status of each employee.
• Hours worked
• Hours for which an employee is paid but does not work (vacation, holi days, paid sick days, jury duty, military duty or all paid periods of leave of absence
• Periods of unpaid leave under FMLA.
Hours of service must be tracked on an actual hours basis for hourly employees. The rules provide optional days-worked and weeks-worked tracking categories. These are designed to facilitate tracking wages of salaried employees.
Employers may also use weekly, bi-weekly or semi-monthly payroll periods rather than months as the basis for their elected measurement (aka “look back”) period; again, to facilitate easier compliance with the PPACA’s eligibility tracking rules.
This material is intended for general information purposes only. It should not be construed as legal advice or legal opinions on any specific facts or circumstances. For answers to your questions call;
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