Posts Tagged ‘Affordable Care Act’

W-2 Reporting of Employer-Provided Health Coverage

Wednesday, October 30th, 2013

The Affordable Care Act requires many employers to report the cost of coverage under an employer-sponsored group health plan on employees’ W-2s. If you need to have a new earning code setup for this, please contact your Client Account Manager before processing your final 2013 check date.

All employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement, except as provided in the transition relief described below. This includes federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families), churches and other religious organizations, and employers that are not subject to the COBRA continuation coverage requirements, but does not include federally recognized Indian tribal governments or, until further guidance, any tribally chartered corporation wholly owned by a federally recognized Indian tribal government. Those that were not required at this time may choose to voluntarily comply this year and could be required in future years but the IRS will give at least six months of advance notice of any changes to the transition relief.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee whether or not it was pre-tax. In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions.

The cost of these health care benefits will be reported in Box 12 of the Form W-2, with Code DD. It is listed for informational purposes only, and is not taxable.

The transition relief applies to the following:

  • Employers who filed fewer than 250 Forms W-2 for the previous calendar year (employers who filed fewer than 250 W-2s for 2012 tax year, determined without application of any entity aggregation rules for related employers) will not be required to report the cost of coverage on the 2013 W-2s.
  • Multi-employer plans.
  • Health Reimbursement Arrangements.
  • Dental and vision plans that are not integrated into another group health plan or that give participants the choice of declining the coverage or electing it and paying an additional premium.
  • Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements.
  • Employee assistance programs, on-site medical clinics, or wellness programs for which the employer does not charge a premium under COBRA continuation coverage or similar requirements; and
  • Employers furnishing W-2s to employees who terminate before the end of a calendar year and request their W-2 before the end of that year.

Employers are not required to create a W-2 for the sole purpose of reporting health coverage.

For more detailed information on this topic and other Affordable Care Act Tax Provisions for Employers, visit: http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage

Legal Disclaimer:  This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

 

Are You On Top of the Affordable Care Act Requirements?

Wednesday, October 30th, 2013

Employee AbsenteeismImplementation of the Affordable Care Act occurs in stages, with many of the reforms and requirements taking effect in 2013 and 2014.  There is a lot of information out there but it can be difficult to filter through it all.  Here are some great resources to help you make sure you are on top of the requirements that affect your business specifically.

Employers with fewer than 25 employees:

http://www.sba.gov/content/employers-with-fewer-25-employees

Employers with 50 or fewer employees:

https://www.healthcare.gov/what-do-small-businesses-need-to-know/

Employers with 50 or more employees:

http://www.sba.gov/content/employers-with-50-or-more-employees

What if I am self employed?

http://www.sba.gov/content/self-employed

Glossary of key Health Care Reform terms:

https://www.healthcare.gov/glossary/

 

Legal Disclaimer:  This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Women’s Preventive Services Update Impacting Religious Organizations

Wednesday, February 27th, 2013

ACA - Womens Preventative Services UpdateFebruary 6, 2013

The ACA governing agencies are proposing a way to provide the full panoply of women’s health services without unduly burdening religiously affiliated organizations who object to providing contraceptive coverage, as imposed by the preventive services mandate. On February 6, 2013, the Agencies released proposed regulations and a Fact Sheet addressing these issues.

As background, the ACA requires non-grandfathered plans to cover women’s preventive health services without any cost-sharing (see Preventive Care Coverage Expanded to include Women’s Health Services, 8/3/2011). For plan years beginning on or after August 1, 2012 (January 1, 2013 for calendar year plans), plans are required to include coverage for these women’s health services, including contraceptive services.

Group health plans sponsored by certain religious employers are exempt from the requirement to cover contraceptive services. This exemption applies very narrowly to churches, temples and similar houses of worship. The regulations propose a clarification to the definition, as described below. The clarification is intended to provide protection to houses of worship that engage in such activities such as food pantries or other outreach programs.

The definition of a religious employer also left organizations with religious affiliations, such as hospitals, colleges and universities, private primary and secondary schools, and social service organizations who cannot meet the exception exposed to providing the women’s preventive services mandate. Temporary relief from this requirement was issued last year (see Preventive Health Services for Women: Regulations Final – Limited Exception for Certain Church Plans, 2/13/12). The Agencies are now issuing a proposal to offer a more long term solution.

Religious Employer Re-defined.
The proposed regulations re-define religious employer to primarily include churches, other houses of worship, and their affiliated organizations, as defined in IRC Section 6033(a)(3)(A)(i) and (iii).

Accommodation for Religious Organizations
The proposed regulations provide a waiver from the requirement to provide contraceptive services for religious organizations that don’t qualify for the full exemption. To obtain the waiver, the religious organization must:

  1. Oppose providing coverage for some or all of any contraceptive services required by the women’s services mandate on account of religious objections;
  2. Be organized and operate as a nonprofit entity;
  3. Hold itself out as a religious organization; and
  4. Maintain a self-certification form (see below), for each plan year to which the accommodation is to apply.

Organizations that meet this criteria would not be required to endorse, pay for, or otherwise facilitate coverage of the objectionable benefit; but such benefits would continue to be made available to women through a separate individual policy.

Self-Certification Form
HHS provides the form and instructions for obtaining the self-certification (CMS-10459 – Coverage of Certain Preventive Services Under the Affordable Care Act). The self-certification must be executed by an authorized individual of the organization, and specify the types of contraceptive services that the organization does not wish to administer or fund.

Insurer Obligations
An insurer receiving a copy of the self-certification form would be required to provide coverage for any contraceptive services identified in the form through a separate policy for each plan participant and beneficiary. The insurer is then obligated to include a separate written notice to participants of the availability of the contraceptive coverage in its application and enrollment materials. Below is the model language that can be used in the notice:

“The organization that establishes and maintains, or arranges, your health coverage has certified that your group health plan qualifies for an accommodation with respect to the federal requirement to cover all Food and Drug Administration-approved contraceptive services for women, as prescribed by a health care provider, without cost sharing. This means that your health coverage will not cover the following contraceptive services: [contraceptive services specified in self-certification]. Instead, these contraceptive services will be covered through a separate individual health insurance policy, which is not administered or funded by, or connected in any way to, your health coverage. You and any covered dependents will be enrolled in this separate individual health insurance policy at no additional cost to you. If you have any questions about this notice, contact [contact information for health insurance issuer].”

If plan is self-funded, the regulations propose that the third party administrator (TPA) would facilitate this process. The insurer providing the coverage would receive an additional adjustment in the user fees charged by the federal exchange in an amount that would offset the TPA’s charge for performing the service. The insurer would then pass the amount on to the TPA as a condition for receiving a user fee adjustment.

Student health insurance coverage sponsored by higher education institutions
Student health insurance coverage arranged by a group health plan sponsored by an exempt religious organization’s higher education institution would be handled in the same manner as above; except the model notice would change the reference “plan participants and beneficiaries” to “student enrollees and their covered dependents”.

Comment period.
The Agencies are seeking comments on these proposals through April 8, 2013.

Until these rules are finalized, organizations with a religious affiliation can continue to follow the relief described in this Health Reform Bulletin, Preventive Health Services for Women: Regulations Final – Limited Exception for Certain Church Plans.

Conclusion
While this proposal may provide relief to religiously affiliated organizations, it does not provide any relief to private sector entities with moral or religious objections to providing contraceptive services. Numerous lawsuits have been filed on this topic and are winding their way through the court system. It is certainly possible that this issue will reach the Supreme Court at some point.

About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

Individual Minimum Essential Coverage and Affordability Standard

Wednesday, February 27th, 2013

Essential CoverageFebruary 6, 2013

The centerpiece of the ACA is health coverage expansion. One of the ways that this is to be achieved is through a mandate that virtually all people residing in this country maintain a minimum level of coverage or pay a tax. The Agencies have recently issued two sets of proposed regulations and one final regulation targeted at explaining how this coverage mandate will be accomplished.

INDIVIDUAL SHARED RESPONSIBILITY REQUIREMENT – MINIMUM ESSENTIAL COVERAGE
On January 30, 2013, the IRS issued proposed regulations and questions and answers relating to the Individual Shared Responsibility provision. Below is an overview of this guidance.

Who are the individuals required to maintain Minimum Essential Coverage?
As mentioned above, beginning in 2014, all individuals residing in the U.S. must maintain a minimum level of coverage, or risk a shared responsibility payment. A taxpayer would also be responsible for maintaining coverage for a child or other individual claimed as a dependent on the taxpayer’s federal tax return. Spouses who file their taxes jointly are likewise generally responsible for maintaining this minimum level of coverage.

Following are the potential penalties for failure to maintain a minimum essential coverage:

Potential Penalties

Who is exempt from maintaining minimum essential coverage?
The regulations provide for 9 categories of individuals exempt from the requirement to maintain minimum essential coverage; they are:

  1. A member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits.
  2. A member of a recognized health care sharing ministry.
  3. A member of a federally recognized Indian tribe.
  4. An individual whose household income falls below the minimum threshold for filing a tax return.
  5. An individual who experiences a short gap in coverage of less than three consecutive months during the year.
  6. An individual who incurs a hardship, as certified by an Exchange, which makes him/her unable to obtain coverage.
  7. An individual who cannot afford coverage because the premium cost exceeds 8% of the his/her household income.
  8. An individual who is incarcerated (jail, prison, or similar penal institution or correctional facility)
  9. An individual who is not a U.S. Citizen, a U. S. national, nor an alien lawfully present in the U.S.

For other individuals seeking an exemption, the HHS issued proposed regulations relating to the process to be used by Exchanges in conducting eligibility determinations and granting exemptions from the shared responsibility payment.
In an effort to facilitate the maintenance of minimum essential coverage, certain individuals whose income falls between 100 and 400% of the federal poverty level will be entitled to government assistance unless the individual is exempt.

What is Minimum Essential Coverage?
Minimum essential coverage generally includes coverage under:

Employer-sponsored group health plans, whether insured or self-funded, and grandfathered plans, as well as COBRA coverage (if actually elected) and retiree coverage. It also includes group health coverage sponsored by non-profit and for-profit entities, and governmental entities, including local governments.

It should be noted that HIPAA-excepted coverage alone will not qualify as minimum essential coverage; HIPAA-excepted coverage includes:

  • Limited-scope dental benefits, vision benefits, or long term care benefits provided under a separate policy or contract, and are otherwise not an integral part of a group health plan.
  • Other types of limited benefit plans, such as accident-only plans, disability income coverage, liability insurance, workers’ compensation, credit-only insurance, and coverage for on-site medical clinics.
  • Non-coordinated benefits providing specified disease or illness coverage, hospital indemnity insurance, or fixed dollar indemnity insurance that meets certain criteria.
  • Supplemental benefits, such as Medicare supplemental coverage (Medigap or MedSupp).

Government-sponsored plans such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE, and various Veteran’s health programs.

Individual health policies, including a qualified health plan offered by an Exchange.

Other similar types of comprehensive health coverage recognized by HHS as minimum essential coverage.

When does the individual mandate become effective?
The individual shared responsibility provision becomes applicable on January 1, 2014.

EMPLOYER SHARED RESPONSIBILITY REQUIREMENT – DETERMINING AFFORDABLE COVERAGE
Beginning January 1, 2014, a large employer employing 50 or more employees must offer adequate coverage at an affordable rate to its employees, or risk being subject to an excise tax (see CBIZ Health Reform Bulletin, Shared Responsibility Guidance, 1/9/13).

On January 30, 2013, the IRS issued final regulations specifically relating to defining the “affordability” standard. These regulations affirm that affordability is based on the cost of single coverage in the employer’s least expensive plan. While large employers must offer coverage to their full-time employees (those working 30 or more hours per week) and their dependents (children under age 26), the affordability, according to these regulations, is based only on single coverage. This should come as welcome news to employers.

CONCLUSION
While much of this guidance relating to the obligation to maintain a minimum level of coverage would not unduly impact employers, employers will be interested to know the types of plans that qualify as minimum essential coverage. Employers will also likely be pleased to know, at least for now, affordability is based on the cost of single coverage.

About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

Essential Health Benefit Regulations And Tools

Tuesday, February 26th, 2013

Health Care Reform - GuidanceFebruary 25, 2013

In keeping with the on-going march toward Affordable Care Act compliance in 2014, the Department of Health and Human Services has issued several important pieces of guidance recently, including final Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation.

Essential Health Benefits
Non-grandfathered plans in the individual and small group markets, issued both in – and outside of exchanges (“marketplace”) must cover essential health benefit packages (EHBs), beginning in 2014. Self-insured group health plans, health insurance coverage offered in the large group market, and grandfathered health plans are not required to cover the essential health benefits. However, to the extent that self-funded plans and large insured plans offered outside the marketplace offer EHBs, these essential benefits cannot be subject to annual and lifetime limits.

Coverage for the essential health benefits package must cover 10 specific categories of benefits. The 10 categories are:

  1. Ambulatory patient services.
  2. Emergency services.
  3. Hospitalization.
  4. Maternity and newborn care.
  5. Mental health and substance use disorder services, including behavioral health treatment.
  6. Prescription drugs.
  7. Rehabilitative and habilitative services and devices.
  8. Laboratory services.
  9. Preventive and wellness services and chronic disease management.
  10. Pediatric services, including oral and vision care.

Coverage for Mental Health and Substance Abuse Services
Though health plans offered by employers employing fewer than 50 employees are generally not subject to the federal mental health parity laws (Mental Health Parity Act of 1996 (MHPA) and the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), these plans will be required to provide mental health benefits, in accordance with the EHB standards.

Benchmark Plan Designs
States can utilize one of several plan design categories for defining essential benefits (click here for CBIZ Health Reform Bulletin). As of February 25, 2013, twenty-six states have chosen their base-benchmark plans. In states that do not select their own benchmark plan, the default base-benchmark plan will be based on the largest plan and product by enrollment in the State’s small group market.

Additional information on the specific benefits, limits, and prescription drug categories and classes covered by the EHB-benchmark plans, and state-required benefits, is available on the Center for Consumer Information and Insurance Oversight (CCIIO) website.

Cost-Sharing Requirements

DEDUCTIBLES. For plan years beginning on or after January 1, 2014, the final regulations clarify that the annual deductible imposed by plans cannot exceed $2,000 for self-only coverage, or $4,000 for coverage other than self-only. These deductible restrictions only apply to individual and small group health plans, and plans offered through the marketplace. These deductible limits do not apply to large group plans offered outside the marketplace or to self-funded plans.

These regulations, while they reserve the right to make modifications, provide that contributions to flexible medical spending arrangements (FSAs) cannot be used to buy down the deductible levels by the amount available under the FSA.

OUT-OF-POCKET LIMITS. The annual out of pocket limits must match those limits applicable to health savings accounts (HSA). While we do not know the HSA limits for 2014 yet (typically, these figures are available in May or early June), the high-deductible health plan annual out-of-pocket limit for self-only coverage in 2013 is $6,250; $12,500 for family coverage. The out of pocket limits apply to all sized plans; though, with the exception of emergency services, these restrictions only apply to in-network services.

For subsequent years, the deductible and out-of-pocket limits may be adjusted annually to reflect cost increases.

Actuarial Valuation Calculation for determining level of coverage
Non-grandfathered health plans offered to individuals and small employer group markets both in and outside an marketplace must meet the bronze, silver, gold, or platinum actuarial levels of benefits and coverage. A bronze plan is required to have an actuarial value (AV) of 60%; a silver plan, 70%; a gold plan, 80%; and a platinum plan, 90%. Actuarial value refers to a percentage measurement of expected health care costs covered by the plan and used to determine an overall measurement of the plan’s generosity.

The CCIIO has released an updated Actuarial Value Calculator, together with an Actuarial Value Calculator Methodology, for purposes of determining whether a plan’s actuarial value is based on a national standard population.

Determining Minimum Value
Under ACA, a plan fails to provide minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs. Determining minimum value is important to employers, particularly those employing 50 or more full-time equivalent employees, in that if the employer plan fails the minimum value test, or is unaffordable, a shared responsibility tax may be triggered (see CBIZ Health Reform Bulletin, Shared Responsibility Guidance, 1/9/13).
For the purposes of determining whether an employer’s group health plan provides a minimum value of benefits, the plan can utilize a minimum value calculator, a designed-based safe harbor checklist to be established by HHS/IRS, or the plan can seek an appropriate actuarial certification. The CCIIO has released Minimum Value Calculator, together with a Minimum Value Calculator Methodology for purposes of determining a plan’s minimum value.

The final regulations provide that employer contributions to health savings accounts (HSA) and first year contributions to health reimbursement arrangements (HRAs) can count toward meeting a plan’s minimum value.

The final regulations also provide for a plus or minus 2% margin, applicable to AV calculations and MV calculations, as well as to deductibles in the small group market, to allow plans a bit of wiggle room for compliance.

About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation.  The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.  As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

W-2 Reporting of Employer Paid Insurance

Sunday, October 28th, 2012

W-2 ReportingThe Affordable Care Act requires many employers to report the cost of coverage under an employer-sponsored group health plan on employees’ 2012 W-2s.  If you need an earning code for this, please contact your Client Account Manager before processing your final payroll dated in 2012.

All employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement, except as provided in the transition relief described below.  This includes federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families), churches and other religious organizations, and employers that are not subject to the COBRA continuation coverage requirements, but does not include federally recognized Indian tribal governments or, until further guidance, any tribally chartered corporation wholly owned by a federally recognized Indian tribal government.  Those not required in 2012 may choose to voluntarily comply this year and could be required in future years but the IRS will give at least six months of advance notice of any changes to the transition relief.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee whether or not it was pre-tax.  In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions.

The cost of these health care benefits will be reported in Box 12 of the Form W-2, with Code DD.  It is listed for informational purposes only, and is not taxable.

The transition relief applies to the following:

  1. Employers who filed fewer than 250 Forms W-2 for the previous calendar year (employers who filed fewer than 250 W-2s for 2011 tax year) will not be required to report the cost of coverage on the 2012 W-2s.
  2. Multi-employer plans.
  3. Health Reimbursement Arrangements.
  4. Dental and vision plans that are not integrated into another group health plan or that give participants the choice of declining the coverage or electing it and paying an additional premium.
  5. Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements.
  6. Employee assistance programs, on-site medical clinics, or wellness programs for which the employer does not charge a premium under COBRA continuation coverage or similar requirements; and
  7. Employers furnishing W-2s to employees who terminate before the end of a calendar year and request their W-2 before the end of that year.

Employers are not required to create a W-2 for the sole purpose of reporting health coverage.

Click Here for more detailed information on this topic.

 Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Health Care Reform Overview

Thursday, August 2nd, 2012

Health Care ReformHealth care reform legislation has added a number of new taxes and made various other changes which will help finance the reform. The legislation also made several health care related changes which benefit certain taxpayers:

  • A credit to offset part of the costs of health insurance for low to middle income individuals and families.
  • A credit to offset the costs to small businesses which provide health insurance for their employees.

Here is a list of some of the tax related items from the health care reform legislation that were upheld as a result of the Court’s decision:

Provisions Already in Effect

  • Small Business Tax Credit: Small businesses, defined as businesses with 25 or fewer employees and average annual wages of $50,000 or less, are eligible for a credit of up to 50% of nonelective contributions the business makes on behalf of their employees for insurance premiums.
  • Tax on Health Savings Account (HSA) Distributions: Additional tax on distributions from an HSA or an Archer Medical Savings Account (MSA) that are not used for qualified medical expenses is increased to 20% of the disbursed amount.
  • SIMPLE Cafeteria Plans for Small Business: An eligible small employer is provided with a safe harbor from the nondiscrimination requirements for cafeteria plans as well as from the nondiscrimination requirements for specified qualified benefits offered under a cafeteria plan.
  • Adult Dependent Insurance Coverage: If dependent coverage is provided, plans must allow coverage for children up to age 26 regardless of student or marital status.  Employers may exclude the cost of dependent coverage for children under age 27 from an employee’s taxable income.
  • Restrictions on Use of HSA and FSA Funds: Over the counter medications are no longer 213D qualified medical expenses.  This change makes these medications ineligible for FSA, HRA and H.S.A. reimbursement.  Prescribed drugs and insulin are still considered to be 213D qualified eligible expenses.
  • Information Reporting: If your company filed 250 or more W-2s in 2011, then you must report the health insurance premium for each participating employee on 2012 W-2’s.  Companies with fewer than 250 employees will need to comply with this requirement beginning with 2013 W-2 reporting. Premiums for standalone vision and dental plans, Group Term Life, Group Short Term Disability and Group Long Term Disability are not included.  Although the premium for health contributions is reported on the W-2 form, they are not taxable.
  • Preexisting Conditions: Plans may not impose any preexisting condition exclusion for children under age 19.
  • No Lifetime Limits on coverage of ‘Essential Benefits’: (as defined by the Department of Health and Human Services). May only impose restricted annual limits on the dollar value of ‘Essential Benefits’.
  • Preventive Health Services: (as defined by the Department of Health and Human Services) must be covered and no cost sharing requirements may be imposed for these services.
  • Medical Loss Ratio – 80/20 Rule: requires health insurance companies (depending on their size) to spend at least 80 percent of premium dollars on health insurance claims and clinical activities for improved healthcare quality. Insurance companies that do not meet the 80/20 Medical Loss Ratio (MLR) standard must provide their policyholders a rebate for the difference no later than August 1, 2012. (Additional clarification provided below.)

Effective in 2013

  • Additional Hospital Insurance Tax on High-Income Taxpayers: Starting in 2013, high-income individuals will pay an additional 0.9 percentage points on earned income over $200,000 ($250,000 if married). Currently, the Medicare payroll tax is 2.9% on all wages — with the worker and employer each paying 1.45%.
  • Medicare Tax on Investment Income: Imposes a tax on individuals equal to 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified AGI exceeds a threshold amount.
  • Medical Care Itemized Deduction Threshold: Threshold for the itemized deduction for unreimbursed medical expenses is increased from 7.5% of adjusted gross income (AGI) to 10% of AGI for regular income tax purposes. (Effective 2013 generally, 2017 for certain taxpayers).
  • Health Flexible Spending Arrangements: Beginning with 2013 plan years, the maximum for Flex Spending Account (FSA) pretax salary deferral is $2500.  Be sure to amend your FSA plan at renewal time accordingly.

Effective in 2014

  • Premium-Assistance Credit: Refundable tax credits that eligible taxpayers can use to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through a state health benefit exchange.
  • Reporting Requirements: Requires insurers (including employers who self-insure) that provide minimum essential coverage to any individual during a calendar year to report certain health insurance coverage information to both the covered individual and to the IRS.
  • Cafeteria Plans: A qualified health plan offered through a health insurance exchange is a qualified benefit under a cafeteria plan of a qualified employer.
  • Employer Responsibility: An “applicable large employer” that does not offer coverage for all its full-time employees; offers minimum essential coverage that is unaffordable; or offers minimum essential coverage that consists of a plan under which the plan’s share of the total allowed cost of benefits is less than 60%; is required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee.If a large employer does not offer qualified affordable coverage then an employee can go to the exchange.  If the employee gets a subsidy then the employer must pay a $250 a month tax penalty (not deductible) for each employee receiving coverage through the exchange that gets a subsidy not to exceed the aggregate penalty for not offering coverage.

    Any large group employer not offering coverage and having at least 1 employee obtaining coverage through an exchange with a subsidy must pay a $166 per month tax penalty (not deductible) to the government (this equates to a $2,000 Annual penalty).

    In 2014, small employers of fewer than 50 employees have no penalties.  If they offer coverage that is affordable and qualified (no more than 9.5% of pay for employee coverage and at least a bronze level coverage) then the employee is not eligible to buy coverage through the exchange.

Additional Details You Should Know About:

Medical Loss Ratio (MLR) Rebate Distribution
If you receive a MLR distribution, you will be required to develop a plan to distribute the rebates that your insurance carrier declares.  As of today, HealthPartners is the only local carrier to announce they will be issuing an MLR rebate and only to a very small subset of their clients.  HealthPartners has already contacted those affected.

For future reference, if you receive an MLR rebate, the method of allocating the rebate has been provided in Health and Human Services interim regulations, and directs insurers to distribute the entire rebate to the group policyholder.  The group policyholder is required to use the portion of the rebates attributable to the amount of premiums paid by the subscribers for the benefit of the subscribers, insuring that enrollees in such plans receive the benefit of the rebates.

Three methods of distribution are allowed:

  1. to reduce the subscribers portion of the annual premium for the subsequent policy year for all subscribers covered under the group health policy in the subsequent year; or
  2. to reduce subscribers portion of the annual premium for subsequent policy year for only those subscribers covered by the group health policy in the year for which the rebate was based; or
  3. to provide a cash refund only to subscribers that were covered by the group health policy on which the rebate is based.

All three options are acceptable.  The most administratively simple process is to issue a premium reduction in the subsequent year for those participating in the plan in the subsequent year.

If you are currently covered by HealthPartners, an MLR rebate may be announced in the near future.  Otherwise, it is unlikely this provision will apply to you this year.

Summary of Benefits (SBC’s)/Uniform Glossary (UG)
Watch for the Summary of Benefits and Coverage (SBC) and Uniform Glossary that your insurance carrier has developed, and include those new documents in Open Enrollment packets for 2013. These new documents must be provided to employees at least 30 days prior to renewal (or as early as reasonably possible) for plans renewing after 9/23/12.  SBC’s will also be required for HRA’s and Flexible Spending Accounts.

Patient Centered Outcomes Research
Determine if your plan is subject to a “PCOR” fee (Patient Centered Outcomes Research) also known as “CER” (Comparative Effectiveness Research).

This fee applies to insured plans (fee paid by the insurer) and self-insured plans (fee paid by the plan sponsor). Self-insured plans include HRAs.  For plan/policy years ending on or after October 1, 2012 and before October 1, 2013, the fee is $1, multiplied by the average number of covered lives (including dependents). The fee is increased to $2 for plan years ending on or after October 1, 2013 and may be further increased on or after October 1, 2014. Your TPA will have additional information.

Health Insurance Exchange
Prepare to notify employees of the availability of Health Insurance Exchanges by March of 2013.  (While this notification will be required, at this time we are waiting for additional guidance regarding the availability of the health exchange in Minnesota, since Minnesota has not passed a specific Exchange bill yet.)

Links to More Information
PPACA timeline for implementation
Impact to Individuals
Impact to Small Companies
Impact to Large Companies

Article Contributors:

Gary Helm
Bearence Management Group
651.379.7906 Direct
Email Gary

John Cleveland
The Cleveland Company, Inc.
952.885.2701 Direct
Email John

PCS Tax and Support Departments

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Large Businesses and the Affordable Care Act

Monday, July 23rd, 2012

Health Care Reform LargeThe Affordable Care Act was enacted on March 23, 2010.  It contains some tax provisions that are in effect and more that will be implemented during the next several years.

What is considered a large business?

You are generally considered a large business if you have more than 50 employees.

Do I have to provide health insurance to my employees?

The law does not require employers to provide health insurance.  Starting in 2014, large businesses (those with 50 or more full-time workers) that do not provide adequate health insurance will be required to pay an assessment if their employees receive premium tax credits to buy their own insurance.  These assessments will offset part of the cost of these tax credits.  The assessment for a large employer that does not offer coverage will be $2,000 per full-time employee beyond the company’s first 30 workers.

 Do I have to report the cost of insurance on my employees’ W-2 forms?

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD.  Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.  The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable.  This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers.

Here are two great resources for more information:

The Health Care Law and You

Affordable Care Act Tax Provisions

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Small Businesses and the Affordable Care Act

Monday, July 23rd, 2012

Health Care ReformYou know the value of providing health insurance to your employees but it can be a real challenge for small businesses. On average, small businesses pay about 18% more than large firms for the same health insurance policy because small businesses lack the purchasing power that larger employers have. The Affordable Care Act provides tax credits, and soon, the ability to shop for insurance in Exchanges that may help close the gap.

Top Things to Know for Small Businesses

  • For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.
  • If you have up to 25 employees, pay average annual wages below $50,000 per employee, and provide health insurance, you may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset the cost of your insurance.
  • Employer-based plans that provide health insurance to retirees ages 55-64 can now get financial help through the Early Retiree Reinsurance Program. This program is designed to lower the cost of premiums for all employees and reduce employer health costs.
  • Starting in 2014, the maximum small business tax credit increases to 50% for qualifying businesses, (35% for non-profits).
  • In 2014, small businesses with generally fewer than 100 employees can shop in an Affordable Insurance Exchange, which are designed to make buying health coverage easier and more affordable.
  • Exchanges will offer a plans that meet certain benefits and cost standards and can help you look for and compare private health plans, get answers to questions about your health coverage options, determine tax credit or health program eligibility, and will allow you to enroll in a health plan that meets your needs.
  • Employers with fewer than 50 employees are exempt from new employer responsibility policies.

Here are two great resources for more information:

Health Care Law and You

Affordable Care Act Tax Provisions

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Individuals and the Affordable Care Act

Friday, July 20th, 2012

Health CoverageOne of the goals of the Affordable Care Act is to help improve care and lower costs for healthy individuals as well as people with health conditions.

Healthy Individuals

Even if you’re healthy now, sooner or later there will come a time when you will need health insurance.  Lack of coverage can result in large financial setbacks and worrying about the cost of your care is the last thing you want to do when faced with injury or illness.  Expanding your options for health insurance and making them more affordable is one of the main objectives of the Affordable Care Act.

Top Things to Know for Healthy Individuals

Individuals with Health Conditions

If you have a health condition, you know how important having health insurance is and how expensive it can be.  Worrying about where to get coverage and the cost of your care is the last thing you want to do when you are dealing with chronic illness.

Top Things to Know for Individuals with Health Conditions

Here are two great resources for more information:

Health Care Law Overview

Affordable Care Act Tax Provisions

From grants to new services and programs, find out how the Affordable Care Act is affecting you where you live:  http://www.healthcare.gov/law/resources/index.html

Article By:

PCS Client Services Team

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.