Public Sector Compliance with the Affordable Care Act July 31, - PDF document

Public Sector Compliance with the Affordable Care Act July 31, 2013 IRS Circular 230 Disclosure: To insure compliance with Treasury Regulations, we are required to inform you that any tax advice contained in this communication (including any attachments) was not intended or written by us to be used, and may not be used by you or anyone else, for the purpose of: (i) avoiding penalties imposed by the Internal Revenue Code; or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed in this communication. Scott Wold and Hitesman and Wold, P.A. are not affiliated with Financial Concepts, Inc.

Welcome James R. Sarych Principal Financial Concepts, Inc. Scott A. Wold Attorney Hitesman and Wold, P.A. Andrew C. Weitnauer Benefit Consultant Financial Concepts, Inc. 2 2

Today’s Agenda  Delay of Play or Pay and Status of Other Rules  New Fees, Taxes, and Notices  Cafeteria Plan Elections  Update on HRA/VEBA Issues  Insurance and Health Plan Reform  Same Sex Spouses  Play or Pay Framework  Things to Consider 3 3

PPACA Timeline (Based Upon Legislation) 4

How the Pieces Fit Together Exchange Play or Pay Individual Subsidy Mandate All Interrelated* 5

Delay of Play or Pay (Employer Mandate)  In July, 2013, IRS announced one-year delay in enforcement of play or pay requirements under Section 4980H of the Code  No penalties imposed on large employers until 2015  Limited only to Section 4980H penalties and related information reporting requirements under Sections 6055 and 6056  Does not impact:  Individual mandate  Operation of exchanges  Availability of subsidies through exchanges  Employer’s exchange notice obligation  Insurance/plan mandates  Fees 6

PCOR Fee  Will fund Patient Centered Outcomes Research Institute that will research the effectiveness of medical treatments, procedures, drugs, and other strategies  Paid by issuers for fully insured plans, and plan sponsors for self funded plans  Temporary Fee - applicable to policy and plan years ending on or after Oct. 1, 2012 and before Oct. 1, 2019 7

PCOR Fee  Amount of PCOR fee? Plan year ending between Amount of fee Oct. 1, 2012- Sept. 30, $1 times avg. number of 2013 covered lives Oct. 1, 2013- Sept. 30, $2 times avg. number of 2014 covered lives Oct. 1, 2014- Sept. 30, Fee will increase based on 2019 projected per capita amount of National Health Expenditures  Due date is July 31 following last day of the plan year. Plan years ending in 2012 need to pay first fee by July 31, 2013. Plan years ending in 2013 pay fee in 2014.  IRS Form 720, “Quarterly Federal Excise Tax Return” is now available 8

PCOR Fee Counting “covered lives” for most plans  Includes all lives (employee, spouse, dependents)  Two methods available for public sector: actual count and  snapshot Counting “covered lives” for HRAs (and non -  excepted health FSAs): Stand-alone HRAs. If the same sponsor has no other  applicable self-insured health plans, the sponsor must pay the fee based on the average number of lives covered by the HRA, but counting only one life per participant. HRAs integrated with insured coverage. If a plan sponsor  has other coverage, but that coverage is fully insured, the plan sponsor must pay the fee with respect to the average number of lives covered by the HRA in addition to the fees that will be paid for the insured plan by the insurer. The HRA's covered lives will be determined using the one life per participant rule. HRAs integrated with self-funded coverage. If the same  plan sponsor has another applicable self-insured health plan with the same plan year, then each person covered by both plans is only counted once. The individuals covered by both plans are counted using the counting method for the other plan (so the one life per participant rule does not apply to them). If the HRA covers anyone who is not also covered under the other plan, the sponsor must pay the fee for those individuals using the one life per participant rule. 9

Transitional Reinsurance Contributions  Reinsurance Program (Temporary Fee 2014-2016)  HHS needs to collect $12.02 billion in 2014, $8 billion in 2015 and $5 billion in 2016  Proposed national uniform contribution rate of $63 per covered life ($5.25/month) for 2014  2015 Estimate: $42  2016 Estimate: $26.25  Payable annually (rather than quarterly)  May also pay contributions from plan assets as a plan expense under ERISA (per DOL) 10

Transitional Reinsurance Contributions Who pays the reinsurance contributions?  Fully insured major medical- insurers are liable for contributions  Self-insured major medical- the plan is ultimately responsible,  although TPA can be used to remit contributions Payable for active, COBRA, retiree-only, disabled or other  employees where Medicare is not primary, pre-Medicare retirees, all covered dependents HHS will collect contributions for all plans, even where a state  is operating its own reinsurance program Exceptions:   Contributions not required from integrated HRAs or HSAs (major medical plan associated would pay contributions)  Not required for health FSAs, EAPs, disease management or wellness programs that do not provide major medical coverage  Not required for excepted benefits (stand-alone dental, stand-alone vision, excepted health FSA and supplemental coverage) – exception does not include retiree-only  Hospital indemnity, dread disease and stop-loss insurance 11

Transitional Reinsurance Contributions  Counting “covered lives”  Contributions are made for all reinsurance contribution enrollees, i.e. every enrollee in the plan  Several methods for counting covered lives (including dependent coverage), building on methods used for PCOR fee and taking into account all individuals of a family covered by the plan  Plan sponsors that maintain two or more group health plans (whether fully insured or self- insured) that collectively provide major medical coverage for the same covered lives will be treated as a single self-insured plan. This prevents double counting of lives across multiple plans.  Use same general rules as PCOR fee with this in mind  Do not count individuals who have Medicare as primary payer 12

Health Insurance Tax  Health Insurance Tax (HIT)  Helps fund cost of ACA implementation and exchanges  Permanent Tax, due for each calendar year beginning after Dec. 31, 2013  Applies only to fully insured plans. Paid by insurance carrier.  Tax is based on specified amount of money needed per year, apportioned among various insurers based on a ratio designed to reflect market share of the U.S. health insurance business  Insurance carrier estimates range from .75% to 2% first year  Amount of money HIT needs to collect:  2014: $8 billion  2015: $11.3 billion  2016: 11.3 billion  2017: 13.9 billion  2018: 14.3 billion  2019 and beyond: Preceding fee year amount increased by rate of premium growth 13

Exchange Notification  New ongoing employer responsibility  All employees (part time and full time)  Originally by March 1, 2013; delayed  Now by October 1, 2013 for existing employees; within 14 days for new hires on/after October 1, 2013  DOL Tech. Rel. No. 2013-02 (May 8, 2013) 14

Exchange Notification  Model Notices  Employer with health plan  Employer without health plan  Content  Existence of Exchange, contact information, description of services available  Information regarding premium tax credit  Impact on employer contributions towards employer coverage if purchase through Exchange  Delivery  Written notice  Calculated to be understood by average participant  First class mail or DOL recognized method; hand delivery  Consider using to communicate other important information 15

Summary of Benefits and Coverage (“SBCs”)  2012 first year for requirement; good faith effort  New FAQ and Updated Template issued April 23, 2013  New questions about MEC and MV  Information needed for employee to determine likelihood of subsidy  Enforcement relief extended for additional year 16

Insurance and Health Plan Reform  Effective upon first renewal or plan year in 2014  No annual limits on EHB for all group health plans.  Special concern for HRAs  Cost-sharing limits for group health plans (except grandfathered plans)  Limit on annual deductible will be $2,000/$4,000 (applies to small group and individual insurance only)  Currently no offset for employer contributions to HRA, FSA, or HSA  Limit on overall out-of-pocket maximum will be $6,350/$12,700 for 2014 (equal to HDHP IRS max) (applies to all group health plans)  Guaranteed issue and guaranteed renewability for insured plans (except grandfathered plans)  New for large group market 17