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Affordable Care Act Update Rev 10/07/2013 Your Presenter: Jerry Rhinehart, CIC, CLU, ChFC, RHU

Affordable Care Act Update Rev 10/07/2013 Your Presenter: Jerry Rhinehart, CIC, CLU, ChFC, RHU Panama City, FL.

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Affordable Care Act Update Rev 10/07/2013 Your Presenter: Jerry Rhinehart, CIC, CLU, ChFC, RHU

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  1. Affordable Care Act Update Rev 10/07/2013 Your Presenter: Jerry Rhinehart, CIC, CLU, ChFC, RHU Panama City, FL

  2. 93 TOTAL provisions will be enacted over the 10 year time span that will impact: every US citizen, health insurance coverage, health insurance companies, pharmaceutical companies, employers, Medicare, Medicaid, taxes (21 major), substantial regulations for hospital & physicians, … and even required posting of nutritional content at your favorite fast food restaurant.

  3. Health Insurance Premiums and Cost-Sharing Subsidies (2014) • Provides refundable and advanceable tax credits and cost sharing subsidies to eligible individuals. Premium subsidies are available to families with incomes between 133-400% of the federal poverty level (FPL) to purchase insurance through the Exchanges, while cost sharing subsidies are available to those with incomes up to 250% of the poverty level.

  4. Understanding Health Insurance Subsidies (2014) Required to show proof of a QHP- but no financial assistance of any form 400% FPL _ _400% FPL Required to show proof of a QHP- and eligible for advanced premium tax credits 250% FPL _ _250% FPL Required to show proof of a QHP- and eligible for advanced premium tax credits and cost-sharing reductions 133% FPL _ _133% FPL Eligible for Medicaid – little or no cost 100% FPL _ _100% FPL 2013: CMS

  5. Those Having (and Not Having) Health Insurance 2011: KFF.org – State Health Facts

  6. Introduction to Key ACA Terms MLR (Medical Loss Ratio – 80% Small Group and Individual – 85% Large Group) (eff 01-01-2011) NOTE: The MLR requirement does NOT apply to ERISA plans - fully or partially self-funded.

  7. Introduction to Key ACA Terms MLR (Medical Loss Ratio – 80% Small Group and Individual – 85% Large Group) (eff 01-01-2011) FPL (Federal Poverty Level – 133% - 400%) (eff 01- 01-2014) (NOTE: Box #1 on the Employees W-2)

  8. Introduction to Key ACA Terms Federal Poverty Level (FPL) – National Incomes (Gross) except for Hawaii and Alaska – 2012-2013 Source: http://www.familiesusa.org/resources/tools-for-advocates/guides/ federal-poverty-guidelines.html NOTE: Median Household Income for US in 2011 - $50,054 U.S. Census Bureau – http://www.census.gov/prod/2011pubs/p60-239.pdf Median Income for NC: $45,236 (2012)

  9. Health Reform Implementation Timeline 2013  Insurance Reforms (CO-OP; enhanced use of e-filing)  Employer Notice Requirements –(03-01-13) Requires employers to provide written notice informing employees about the Exchange and potential eligibility for premium credits. (Released 06/2013 – one for coverage / one for no coverage)

  10. Search: Jones Day aca exchange notification

  11. Search: Jones Day aca exchange notification

  12. Health Reform Implementation Timeline 2013 •  Insurance Reforms (CO-OP; enhanced use of e-filing) • Employer Notice Requirements –(03-01-13) Requires employers to provide written notice informing employees about the Exchange and potential eligibility for premium credits. (Released 06/2013 – one for coverage / one for no coverage) • Tax Change

  13. Key Provisions of Tax Changes (2013) New or revised taxes to help pay for NHCR -Increase threshold for the itemized deduction for un-reimbursed medical expenses from 7½% to 10% of AGI -Increase the Medicare Part A tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200K (individual) and $250K (married/ filing jointly). 3.8% assessment on unearned income (high income tax payers) -Max ‘EE contribution to FSA for medical - $2,500 per year -Excise tax (2.3%) on medical devices (hip replacement, x- ray machine, etc. – numerous exceptions exists) -Eliminated ‘ER deduction for retiree Medicare Part D

  14. Health Reform Implementation Timeline 2014  Individual and Employer Requirements

  15. Individual and Employer Requirements (2014) Require U.S. citizens and legal immigrants to have qualified health coverage -For Individuals: Phased-in tax penalty -For Large Employers: Possible penalties to “Large ‘ER” (50 or more FTEs – 30 hrs) -Complex rules and variables exist This was the “individual mandate” litigation ruled upon by the SCOTUS in June of 2012

  16. Individual Non-Compliance - ACA (2014) •  Those who fall under the “requirement” but fail to carry at least the “Bronze” plans will be subject to a penalty: (the greater of…) • $95 per year in 2014, $325 in 2015, $695 in 2016 (half that amount for children under age 18), up to maximum of three times those penalty amounts per family, OR, • 1% of income above the tax filing threshold in 2014, 2% in 2015, and 2½% in 2016

  17. Individual Non-Compliance - ACA (2014) What are the Potential Financial Penalties to Individuals who do NOT carry insurance? - Family of Four (includes 2 children under age 18) $100K Taxable -

  18. Employer Responsibility / Penalties (2014) Large Employer (50+ EEs) (* Delayed until 2015) -Full time employees (30 hrs) - Part time employees Small Employer (1 to 49 EEs)

  19. Employer Responsibility / Penalties (2014) Possible financial penalties for an ‘ERs that DOES NOT offer coverage * -If ANY FTE receives premium assistance (due to FPL) from the government (and through the Exchange) the ‘ER will face an annual fee of $2,000 imposed on every full-time ‘EE (excluding the 1st 30 ‘EEs). Penalties are pro-rated monthly. - EXAMPLE …

  20. Employer Responsibility / Penalties (2014) For Employers That DO NOT Offer Coverage *  “Shared Responsibility Payment”

  21. Employer Responsibility / Penalties (2014) Possible financial penalties for an ‘ERs that DOES offer coverage * -If ANY FTE receives premium assistance (due to FPL) from the government (and through the Exchange) the ‘ER will face an annual fee of the lesser of $2,000 imposed on every full-time ‘EE (excluding the 1st 30 ‘EEs), OR $3,000 for each FTE that receives a premium subsidy. Penalties are pro- rated monthly. - EXAMPLE …

  22. Employer Responsibility / Penalties (2014) For Employers That DO Offer Coverage *

  23. Employer Responsibility / Penalties (2014) Joe’s Burgers & Shakes * - 3 locations - 40 FTEs - 20 PTEs 20 PTEs at 24 hrs per week (1920 hrs / month) 1920 ÷ 120 = 16 PTEs + 40 FTEs = - Joe is now considered a “LARGE EMPLOYER” 20 PTE x 24 hrs x 4 = 1920 hrs / 120 (minimum FTE work hrs in a calendar month) = 16 EEs 56

  24. Employer Responsibility / Penalties (2014) Joe’s Burgers & Shakes – Coverage NOT Offered 

  25. Employer Responsibility / Penalties (2014) Joe’s Burgers & Shakes – Coverage IS Offered

  26. Employer Responsibility / Penalties (2014) How Do Employers Determine Full-Time Status? Google: Towers Watson health care bulletin 7943 -Guidance on Safe-Harbor methods to determine Full-Time Employee status - Variable-Hour employees - Seasonal Employees

  27. Employer Responsibility / Penalties (2014) Consider this Potential Scenario for the Uninformed Business Owner in 2014 (Delayed until 2015)  Mountain Top Resort - Golf Course, Lodge & Spa - 49 FETs - Provides NO Qualified Health Plan to its EEs - So … it pays no ACA “shared responsibility payment” - But business improves … so, they hire a new FTE (#50) for the entire year. Look what it will cost as mandated by the ACA if only ONE FTE receives a subsidy: - $2,000 x 20 (50 – 30) = $40,000

  28. Employer Responsibility / Penalties (2014) FPL and how it will work in 2014 (and later) -Premium assistance for those individuals earning less than 400% of FPL. Currently (2013 numbers), this is income at $45,980 for an individual and $94,200 for a family of four. -The premium assistance will INCREASE to eligible individuals / families as the percentage of FPL goes DOWN. The CBO’s estimates of the average individual subsidy: 05/2010 was $3,970; 10/2012 was revised to $4,780; 02/2013 was revised to now be $5,510

  29. Employer Responsibility / Penalties (2014) In terms of calculating potential penalties, part-time employees (and their hours) are only used to see if an employer is a “large employer”. -Penalties (if any) are ONLY calculated on FTEs -No penalties on part-time employee, even if that part-time employee received Premium Assistance. - If no FTE receives Premium Assistance (only part-time) the employer will have no possibility of a penalty.

  30. Employer Responsibility / Penalties (2014) In 2014, Employers (50 + FTE) must decide … * -Whether to offer medical coverage or potentially face a financial penalty; -If coverage is provided to employees … is it considered “affordable” enough to avoid a potential financial penalty? NOTE:The FPL issue is actually a multiple part question / test: 1) Is the ‘EE under 400% FPL?; 2) Does the ‘ER provide a plan that pays least 60% of the health expenses (for the typical population); 3) Is the ‘EEs required premium contribution “unaffordable” - meaning …does it exceed 9.5%* of the employee’s income for self-only coverage?

  31. QHP Premium Paid by the Employee – Is It Affordable? - Sarah’s annual salary is $40,000. Her husband’s salary with another ‘ER is also $40,000. They have two children under age 18. They would be eligible for premium assistance due to the FPL rule. Sarah’s ‘ER provides her a QHP. - Sarah’s QHP covers all family members. The annual cost of the self-only portion is $4,800 annually ($400 per month). - The ‘ER pays 90% of Sarah’s premium ($360 per month) and Sarah pays the remaining 10% ($40 per month). She pays 100% of the family member’s premium. - 9.5% of Sarah’s annual income (40,000 x 9.5%) is $3,800. That works out to be $316.66 per month. Thus the ‘EE required premium is considered “affordable”. Sarah is NOT eligible for any premium assistance.

  32. Employer Responsibility / Penalties (2014) Maximum Premium Payment Under ACA

  33. ACA Subsidy – ER’ and EE’ Rules Jimmy – Bartender for Beach Grill (has 15 EEs) Jimmy is single - his W-2 shows $34,000 (@300% FPL)  Scenario #1 - Beach Grill provides NO QHP  Jimmy can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them for not providing a QHP.

  34. ACA Subsidy – ER’ and EE’ Rules Jimmy – Bartender for Beach Grill (has 15 EEs) Jimmy is single - his W-2 shows $34,000 (@300% FPL)  Scenario #2 - Beach Grill provides a plan of health that is classified as a ‘Mini-Med’ ($50,000 annual limits)  This plan of insurance is NOT a QHP. Jimmy can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them for not providing a QHP.

  35. ACA Subsidy – ER’ and EE’ Rules Jimmy – Bartender for Beach Grill (has 15 EEs) Jimmy is single - his W-2 shows $34,000 (@300% FPL)  Scenario #3 – ER provides a Bronze Plan (QHP) and pays 70% of Jimmy’s premium. What Jimmy has to pay works to be 15% of his income.  Jimmy’s premium is ‘unaffordable’. He can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them when Jimmy receives a subsidy.

  36. ACA Subsidy – ER’ and EE’ Rules Jimmy – Bartender for Beach Grill (has 15 EEs) Jimmy is single - his W-2 shows $34,000 (@300% FPL)  Scenario #4 – Beach Grill provides a Bronze Plan (QHP) and pays 90% of Jimmy’s premium. What Jimmy has to pay works to be 8% of his income. But Jimmy wants a Gold plan… one that will pay more of covered claims.  The premium is considered ‘affordable’. Jimmy is NOT eligible for a subsidy since the employer’s plan is both a QHP and is ‘affordable’. If he wants a broader plan he will pay the FULL cost. Beach Grill will have no ACA penalty - even if they were to have 50+ EEs.

  37. Health Reform Implementation Timeline 2014  Individual and Employer Requirements  Insurance Reforms

  38. Key Provisions of Insurance Reform (2014) Create state-based Health Benefit Exchanges (Marketplace) & SHOP QUESTIONS: What is an Exchange? Who will operate it? What will it physically look like? What if a state says “NO”? (which 27 states – including North Carolina – have done so)

  39. States Health Insurance Marketplace Decisions, May 10, 2013 VT WA ME ND MT NH MN OR MA NY WI SD ID RI MI CT PA WY NJ IA DE OH NE NV IN IL MD CO UT* WV VA CA DC KS MO KY NC TN OK SC AZ AR NM GA AL MS AK TX LA FL HI State-based Marketplace (16 states and DC) Partnership Marketplace (7 states) Federally-facilitated Marketplace (27 states) * In Utah, the federal government will run the marketplace for individuals while the state will run the small business, or SHOP, marketplace.

  40. Health Insurance Marketplace (2014)  Goal of PPACA: 1) provide health care to millions of uninsured Americans, and, 2) making that coverage more affordable. - Introduce managed retail competition into the marketplace and encourage better pricing and quality coverage - Easier “comparison” shopping - Offer choices in standard benefit plans and levels of coverage - Clear communication regarding plans and rates

  41. Health Insurance Marketplace (2014) PPACA – Four Levels (“Tiers”) of Coverage: Note: Insurance carriers can sell in or out of the Marketplace. The PPACA will allow states the option to require additional “state specific mandates”. Additionally, insurance carriers (and agents) may find a niche sales area in the FSA, supplemental accident, critical illness, or similar products.

  42. http://www.zanebenefits.com/blog/bid/315824/North-Carolina-Health-Insurance-Exchange-Update-Health-Plan-Rates-Previewhttp://www.zanebenefits.com/blog/bid/315824/North-Carolina-Health-Insurance-Exchange-Update-Health-Plan-Rates-Preview Only three insurance carriers, Blue Cross Blue Shield, Coventry and FirstCarolinaCare Insurance Co. in Pinehurst, will participate in the individual exchange for 2014.

  43. http://www.forbes.com/sites/theapothecary/2013/09/25/double-down-obamacare-will-increase-avg-individual-market-insurance-premiums-by-99-for-men-62-for-women/http://www.forbes.com/sites/theapothecary/2013/09/25/double-down-obamacare-will-increase-avg-individual-market-insurance-premiums-by-99-for-men-62-for-women/

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