Health Care Reform Important Upcoming Events

WestLake Update

Health Care Reform Important Upcoming Events

 

With 2014 looming just around the corner, PPACA’s major provisions are set to kick in. Below is a review of the major provisions coming up in 2013 & early 2014. Patient Centered Outcomes Research Institute (PCORI) Fees

Self-insured plans need to pay their PCORI fees. PCORI fees apply to both self-insured and fully insured medical plans. The insurance carrier will calculate and pay the fee for its fully insured plans. However, a self-insured plan sponsor must do the reporting and paying the fee on its own behalf.

The PCORI fees apply for policy/plan years ending after September 30, 2012, but stop applying for policy/plan years ending after September 30, 2019.   (For calendar-year policies/plans, that means the fees would apply for calendar policy/plan years 2012 through 2018.) For calendar year plans, the initial payment of the fee is due by July 31, 2013.

The fee applies per covered member. For 2012, it is $1.00 per member and is reported and paid with the submission of IRS Form 720 Quarterly Federal Excise Tax Return. The fee is due once per year.

Employer Shared Responsibility

Effective on 1/1/2014, employers with more than 50 employees are asked to offer affordable, minimum value health coverage to substantially all of its employees working 30 hours or more or face fines. Some details have recently become known with the issuance of proposed regulations covering the implementation of this requirement.

Just about each word in the statement above is subject to extensive provisions in the proposed regulations, but we will summarize the important concepts here.

The 50 employee threshold is determined by including full-time equivalent hours of the part-time employees even though they may not be eligible for health plan coverage. Should a company not exceed 50 FTE’s then the following employer mandate associated issues do not apply.

The employee must only be offered affordable, minimum value coverage. Whether or not they actually take coverage has no bearing on potential fines of the employer mandate.

Affordability has been defined as a plan with premium that is no greater than 9.5% of an employee’s household income. A “safe-harbor” definition that employer’s can rely on is measuring the cost of coverage against the W2 income for the employee. For 2014, if employee only coverage meets the definition of affordable, meaning it is less than 9.5% of an employee’s earnings from your company, then he has an offer of affordable coverage regardless if the employee enrolls in a coverage tier covering dependents that would exceed 9.5% of their income.

The coverage being offered must provide for a minimum actuarial value of 60%. This corresponds with the Bronze level of coverage offered through the state exchanges. A plan with 60% minimum value is expected to cover at least 60% of the benefits under the plan. The IRS and HHS have announced intentions of developing standardized tools to be used to help plans assess their actuarial value. They envision issuing a “minimum value calculator” and safe-harbor plan design checklists that a plan sponsor can then apply to their plans in order to determine if they meet the 60% threshold. Alternatively, a plan can employ an actuary and obtain an actuarial certification of a plan’s value. Larger and more complex plans will likely have to seek an actuarial opinion.

The mandate applies to employees working over 30 hours per week. The law is written as if the full-time determination would be made on a monthly basis in “real-time”. Because of the administrative difficulty this would present employers, they have offered safe-harbor definitions that would allow an employer to lock-in a full-time or part-time designation for a certain length of time.

To avoid potential fines, coverage must be offered to substantially all full-time (working over 30 hours per week) employees. The substantially all phrase has been defined as 95% of full-time employees. If the employer falls below the 95% threshold, the maximum penalties apply so determining which employees should be offered coverage is critical. Despite this 95% allowance, a FT employee receiving subsidized exchange coverage can trigger the lesser employer mandate penalty.

Plans with employees that are difficult to categorize based on hours worked will have an opportunity to use a complicated safe harbor process to measure and determine employment status. Certain measurement periods, stability periods and administrative period procedures must be followed. 

There are two different penalties that stem from the employer mandate provisions. The larger penalty is $2,000 per year multiplied by the number of full-time equivalent employees minus 30 FTE’s (employer’s under 30 FTE’s therefore have no penalty under the mandate). This penalty applies if the employer does not offer affordable, minimum value health plan coverage to 95% or more of its full-time employees.

The second penalty is $3,000 per year multiplied by the number of full-time employees that opt for exchange provided coverage and they are eligible for certain subsidies offered under health care reform. Persons earning less than 400% of the Federal poverty level may qualify for subsidized coverage in certain instances. Should there be a large employee population eligible for subsidized exchange coverage, this penalty is capped at the amount an employer would pay if it offered no coverage at all.

Transitional Reinsurance Fees

The transitional reinsurance program is temporary and designed to collect $25 billion dollars from insured and self-insured plans over a three year period.  HHS will establish a national reinsurance contribution rate in order to collect the desired amounts.

The payment of the fee will be annual.  Beginning in 2014, every November 15, the employer must report the average number of covered lives upon which the fee will be based.  The participant counting methods available are essentially the same as the requirements for the Patient Centered Outcomes Research Trust Fund fee including the actual count method, the snapshot method and the Form 5500 method.  Once an entity reports the number of covered lives, HHS will notify the reporting entity of the amount that is to be remitted and the entity will have 30 days from the date of this notice to pay the specified amount.  Notifications will be made no later than December 15 of 2014, 2015 and 2016.

The fee applies to major medical coverage and on all members including employee, dependents, COBRA and non-Medicare primary retirees.  Plans excluded from the fee include HIPAA “excepted” plans such as stand-alone dental, vision and health FSA plans.

For 2014, the estimated fee is $5.25 per member per month or $63 annually.  Using similar projections, the fee is estimated to reduce to $42 and $26.25 in future years.  HHS will finalize the fee amount later in 2014 and issue an annual document, the HHS Notice of Benefit and Payment Parameters, with final details.

 Potential Plan Design Changes for 2014

Also for 1/1/2014, employers and their advisors need to take a close look at plan designs and their compliance with PPACA. Restricted annual limits are no longer allowed on any essential health benefit. Plans will need to be compared with state benchmark plans for determination of essential health benefit coverage. The pre-existing condition limitations will be prohibited for all persons, not just those under age 19. A plan will no longer be able to deny coverage for adult children based on the availability of other coverage.

Conclusion

 As we head towards 2014, employers should examine its workforce, determine how many full time employees (working 30+ hours per week) and carefully evaluate the strategy needed to handle the employer mandate. Also, critical to budgeting for the future is to evaluate current plan designs, required plan changes and to seek an actuarial valuation of each medical plan being offered.

 If you have any questions, please contact your WestLake Financial Group, Inc. Representative.

 

 

   

WestLake Financial Group, Inc.

1477 Barclay Blvd

Buffalo Grove, IL  60089

888-WESTLAKE 

www.WestLakeFG.com