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Affordable Care Act... We Have the Answers to Your Questions.


PPACA Timeline

Patient Protection and Affordable Care Act


PPACA Timeline


PPACA Timeline Early Provisions, Effective in 2010:  No more annual or lifetime dollar limits on coverage  For children, no more exclusion of pre-existing conditions  Dependent coverage until Age 26  100% coverage of routine, preventive care


PPACA Timeline Effective in 2011: Medical Loss Ratios (MLR) MLR: The portion of health insurance premiums spent by the insurer on healthcare claims and quality improvement (excluding taxes, commissions, advertising, etc.) For Small Groups: MLR must be at least 80% For Large Groups: MLR must be at least 85%

When a health plan fails to meet the required MLR, the insurance carrier must pay rebates to groups beginning in 2012


PPACA Timeline Effective in 2012: W-2 Reporting Requirements An employee’s W-2 must include the total cost of their group health insurance coverage  Transitional Relief: Not required (until further notice) for employers issuing fewer than 250 Forms W-2  For reporting purposes only, and does not mean that these amounts are taxable


PPACA Timeline Effective in 2013:  Additional Medicare Tax: For earnings above $200,000 ($250,000 for married filing jointly), an additional Medicare tax of 0.9%  Contributions to FSAs (Flexible Spending Accounts) limited to $2,500 per year

 Medicare Expense Deductions: For itemized deductions, threshold increased from 7.5% to 10% of AGI


PPACA Timeline Effective in 2014:  No more exclusion of pre-existing conditions (all ages)  Medicaid expansion (in some states)  Individual mandate  Premium subsidy tax credits  State and Federal health insurance marketplaces

 SHOP Small Employer Marketplace: Delayed until 2015  Employer mandate: Delayed until 2015/2016  New hire waiting period no longer than 90 days


Impact on Individuals


Who are the Uninsured?


Medicaid Expansion


Eligibility for Medicaid or Premium Subsidy


Eligibility for Medicaid or Premium Subsidy


Amount of Premium Subsidy


Individual Mandate Beginning in 2014: Tax Penalty for Being Without Coverage In 2014: Greater of $95 or 1% of household income In 2015: $325 or 2% of household income In 2016: $695 or 2.5% of household income (Maximum penalty equal to average Bronze premium)

Does not apply to:  Undocumented immigrants  People under incarceration  Individuals having a religious exemption  Income below the tax filing threshold ($10,000 in 2013)


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Health Insurance Marketplaces


Impact on Small Groups (Fewer than 50 Employees)


For Small Employers (1 to 24 Employees) Small Employer Tax Credits Available when all 3 of the following conditions are met:  Employer has fewer than 25 full-time employees, including FTEs (full-time equivalents)  Average annual salary (excluding owners) less than $50,000  Employer pays at least 50% of employee premiums * * Tax credit is not available for premiums paid on behalf of owners/proprietors and their immediate family

SHOP Marketplace In 2014: Limited to one health plan option, as sold on the FFM (Federally Facilitated Marketplace)

“Employee Choice” delayed until 2015


Small Employer Tax Credits (1 to 24 Employees)


Small Employer Tax Credits (1 to 24 Employees)


Small Employer Tax Credits


Applicable to NJ Small Employers (1 to 50 Employees)

Eligibility for Small Group Health Plans:  No longer available for Husband/Wife only  No longer available for Owners/Partners only  Coverage no longer available to Independent Contractors

Age-Based Premiums for Small Group Plans:  No medical underwriting  No longer gender-based  Premiums based upon age and number of dependents  Smoker surcharge (up to 50%) may take effect in 2016


Small Group Age-Based Rates


Small Group Age-Based Rates (1 to 50 Employees)


Employer Contribution Methods for Small Groups When health insurance premiums vary according to age, how can the employer make fair and affordable contributions to each employee’s costs?

Method One: Percentage of Premium Employer pays a defined percentage of each employee’s premium (Must be at least 10%, due to NJ SEH guidelines)

Things to consider: -Will employer also contribute toward dependent coverage? -If so, will the same percentage be used?


Employer Contribution Methods for Small Groups Method Two: Fixed Dollar Amount Employer pays a defined amount toward each employee’s premium (Still must satisfy the 10% minimum)

Things to consider: -Will this amount be considered “fair” to older employees? -Will employer offer an increased amount for employees covering dependents? -Will the employer offer this as a “benefits allowance” to all full-time employees (even those waiving coverage?)


Employer Contribution Methods for Small Groups Method Three: Establish “Reference Rates” Averaging the group’s age-based rates, calculate traditional “4-tier” premium amounts: Single, Couple, Parent/Child, and Family

Things to consider: -Not suitable for smaller groups -Not recommended for groups with high employee turnover -With Reference Rates established, employer may use these nominal amounts to contribute based upon percentage or dollar amount (i.e., Method One or Two)


Impact on Large Groups (50+ Employees)


For Large Employers (50+) Employer Mandate (“Play or Pay”): Applicable to employers having 50 or more full-time employees, including FTEs (full-time equivalents) Requirement to offer affordable health insurance coverage meeting the PPACA minimum value standards

Employer penalties have been delayed until:  2015, for groups of 100+ Employees  2016, for most groups of 50-99 Employees


Am I a Large Employer? Counting Employees and FTEs A full-time employee is a person working, on average, 30 or more hours per week Part-time employees are counted on a pro-rata basis, and multiple part-timers add up to FTEs (full-time equivalents) Seasonal or temporary employees working fewer than 120 days per year are excluded Companies with Common Ownership (affiliated companies) must be combined when counting Employees and FTEs


What is the Employer Mandate? A “Large Employer” must offer affordable health insurance, providing a minimum level of coverage, to at least 95% of eligible full-time employees * (* Relaxed to 70% for 2015)

Affordability: The Employee’s share of premium for employee only coverage must be no more than 9.5% of the Employee’s household income There is no employer requirement to pay any part of health insurance premiums for eligible dependents


What are the Employer Penalties? There are two possible employer penalties under the PPACA Employer Mandate:

Penalty One: Employer Not Offering Coverage Annual penalty of $2,000 per full-time employee, less up to 30 full-time employees ($167 PEPM) ďƒź Triggered only if at least one full-time employee receives the individual premium tax credit (subsidy)

Penalty Two: Coverage Offered, but Not Affordable Annual penalty of $3,000 per full-time employee receiving premium subsidy OR Penalty One, whichever is less ďƒź Calculated monthly ($250 per month of employee subsidy)


Will I Pay an Employer Penalty?


Is the Health Plan Affordable? The employee’s cost must be no more than 9.5% of the employee’s household income. Because the employer can only determine the employee’s income, one of three safe harbor methods may be used: Safe Harbor One: W-2 Method Based upon the employee’s W-2 earnings from that employer

Safe Harbor Two: Rate-of-Pay Method For hourly workers, based upon hourly wage x 130 hours per month

Safe Harbor Three: Federal Poverty Level Based upon F.P.L. ($11,670, or $972.50 per month, in 2014)


Is the Health Plan Affordable? % of Federal Poverty Level (FPL) in 2014

Employee’s Annual Income (W-2)

Hourly Rate (40 Hour Week)

Maximum Employee Cost (9.5% of W-2 Income)

100%

$11,670

$5.61 per Hour

$92 per Month

$16,104

$7.74 per Hour

$127 per Month

$17,160

$8.25 per Hour

$135 per Month

200%

$23,340

$11.22 per hour

$184 per Month

250%

$29,175

$14.02 per hour

$230 per Month

300%

$35,010

$16.83 per hour

$277 per Month

350%

$40,845

$19.63 per hour

$323 per Month

400%

$46,680

$22.44 per hour

$369 per Month

(Medicaid-Eligible)

138% (Medicaid-Eligible)

147% (NJ Minimum Wage)


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Affordable Care Act… MacLean Agency has answers.