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Health Care Reform
Summary of Provisions Under the Patient
Protection and Affordable Care Act (PPACA)
Presented March 2013
By Allegiance Benefit Advisors Inc.
Allegiance Benefit Advisors Inc.
495 Purchase Street, Swansea, MA 02777-5023
Phone/Fax (774) 565-2002 • [email protected]
PPACA Background
The Patient Protection and Affordable Care Act (PPACA) is aimed primarily at
decreasing the number of uninsured Americans and reducing the overall
costs of health care. It provides a number of mechanisms—including
mandates, subsidies, and tax credits—to employers and individuals in order
to increase the coverage rate.
PPACA together with the Health Care and Education Reconciliation Act
represents the most significant regulatory overhaul of the U.S. healthcare
system since the passage of Medicare and Medicaid in 1965.
Event
Date
The Patient Protection and Affordable Care Act (PPACA) was
signed into law
3/23/10
First set of major changes takes effect
9/23/10
Supreme Court Upholds the Law
6/27/12
Obama Administration begins second term
1/20/13
Allegiance Benefit Advisors Inc.
Health Reform Timeline
2010
2011
2012
• Small business tax credit
• Temporary high risk pool
• Early retiree reinsurance program
(ERRP)
• Adult child coverage until age 26
• No pre-existing conditions for kids
until age 19
• Rescissions prohibited except for fraud
or non payment
• Lifetime dollar limits prohibited
• Annual dollar limits restricted
• Preventive services with no cost
sharing
• Pediatricians as PCPs, direct access to
OB/GYNs
• ER coverage as in-network, no prior
authorization
• Initial appeals review standards
• Medicare Part D rebate for
beneficiaries in the gap
• Online consumer information at
healthcare.gov
• Minimum medical loss ratio (MLR):
85% for large group; 80% for small
group and individual
• Annual rate review process
• Appeals ombudsmen and process
documentation
• HSAs/HRAs/FSAs: limitations for OTC
medications
• Increase penalty for non-qualified HSA
withdrawals
• Small business wellness grants
• Annual fee on pharmaceutical
manufacturers begins
• Discounts in Medicare Part D “donut
hole”
• Non discrimination rules apply to
insured plans (implementation
delayed until regulations are released)
• Auto-enrollment for Groups with 200+
FTEs (implementation delayed until
regulations released)
• Uniform explanation of coverage and
standard definitions
• Appeals provision fully implemented
• 60 day advance notice of material
modification
• Accountable Care Organization
requirements
• Quality bonus begins for Medicare
Advantage plans
• Comparative effectiveness fee ($1 per
member/year)
• Administrative simplification begins
• 1st medical loss ratio rebates to be
paid by August
Allegiance Benefit Advisors Inc.
Health Reform Timeline
2013
• Employee notification of access to
Exchanges
• FSA contributions limited to $2,500
• High earner tax begins
• Employers to report value of
employer- sponsored health benefits
on W2s
• Annual fee on medical device sales
begins
• Deduction for expenses allocable to
the Part D subsidy for “qualified
prescription drug plans” eliminated
• Comparative effectiveness fee
increases to $2 per member/year
• ICD-10 code adoption
2014
• Health benefit exchanges
• Individual & employer mandates
• Tax credits and subsidies for
individuals and small employers
• OOP limits must comply with OOP
limits for HSA qualified plans
• Deductible caps cannot exceed $2k
for individual and $4k for family
• Guaranteed issue and renewal rules
• No annual limits
• No pre-existing condition exclusions
• Rating restrictions
• Standardized essential health benefits
• Waiting period limits
• Mandatory coverage for clinical trials
• Annual insurance industry tax
• Coverage for all adult children until
age 26 including those that have
employer coverage (formerly not
covered for grandfathered plans)
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2015+
• States can open Exchange to all
employers (2017) and CHIP eligibles
(2015)
• High-value plan excise tax begins
(2018)
• Insurance industry tax through 2018
• Medicare Part D “Donut hole” closed
by 2020
2013
2013
Define
Employee notification of access to Exchanges
The Department of Labor (DOL) has announced that employers will not be
held to the March 1 deadline. The DOL has yet to issue a model notice, FAQs
or guidance about the employer notice requirement. The DOL acknowledged
that it would be premature to issue a notice in March because specific
exchange information is not yet available. As a result, the upcoming guidance
on the provision is expected to reflect a more realistic compliance date.
Employers to report value of employer- sponsored
health benefits on W2s
Employers required to file 250 or more W-2 forms will be responsible for
reporting to employees the total cost of their group health benefit plan
coverage. This requirement is informational only and does not mean that
employer-provided coverage will be subject to income tax. This requirement
is effective with the 2012 W-2 forms distributed to employees in January
2013.
FSA contributions limited to $2,500
Individuals can save up to $2,500 per year (the Department of Health and
Human Services will adjust the amount to inflation) in their flexible spending
accounts.
The PPACA taxes single individuals with yearly income greater than $200,000
from self-employment or wages by 0.9 percent. For married couples, an
income of $250,000 for those filing jointly or $125,000 for a married person
filing separately would also be taxed.
High earner tax begins
An additional tax of 3.8 percent applies to net investment income or an
adjusted gross income that exceeds $200,000, whichever is less. For married
couples, either the net investment income or an adjusted gross income that
exceeds $250,000 for those filing jointly or $125,000 for a married person
filing separately would also be taxed.
Comparative effectiveness fee increases to $2 per
member/year
Revenue from this tax will fund research to determine the effectiveness of
various forms of medical treatment. Effective for plan years that began on
and after October 2, 2011, insurers and self-insured group health plans must
pay a $1 tax per participant. The fee increases to $2 per participant in 2013,
then to an amount indexed to national health expenditures for future years.
The comparative effectiveness fee phases out by 2019.
Allegiance Benefit Advisors Inc.
.
2014
Define
2014
On January 1, 2014, states are required to establish health care exchanges
where individuals and small employers can evaluate and purchase health
insurance. In 2017, states may allow large employers (more than 100
employees) to purchase insurance through exchanges.
Health benefit exchanges
The PPACA requires all U.S. citizens and legal residents to have minimum
essential coverage in 2014. People who do not have coverage will be taxed
monthly on their annual incomes taxes. There are a few exceptions to the
penalty.
If employers do not offer health insurance benefits to full-time employees,
the PPACA directs the Internal Revenue Service to tax them. The tax is
$2,000 each year for each full-time employee over the first 30 employees.
Individual & employer mandates
If an employer offers health insurance to full-time employees, but an
employee still qualifies for premium assistance from the federal government
and can buy more affordable insurance on a state exchange, the employer
will still be taxed.
The tax will be lesser of $3,000 for each employee receiving premium
assistance or $2,000 per employee for each full-time employee over the first
30 employees.
Deductible caps cannot exceed $2k for individual and
$4k for family & OOP limits must comply with OOP
limits for HSA qualified plans
Allegiance Benefit Advisors Inc.
Individual Mandate in Reform
Under health care reform law, all people must have minimum essential coverage beginning January 1, 2014.
People have "minimum essential coverage" if they have a:

Government-sponsored plan
 Employer-sponsored plan
 Individual plan
People can choose to buy health insurance on or off state insurance exchanges that will open in 2014. Some people can also get
federal premium assistance on an exchange.
If a person cannot keep minimum essential coverage, the Internal Revenue Service will collect a tax penalty from him or her. The
monthly tax penalty is described as 1/12th of the greater of:




For 2014: $95 per uninsured adult in the household (capped at $285 per household) or one percent of the household income
over the filing threshold.
For 2015: $325 per uninsured adult in the household (capped at $975 per household) or two percent of the household income
over the filing threshold.
For 2016: $695 per uninsured adult in the household (capped at $2,085 per household) or 2.5 percent of the household income
over the filing threshold
The penalty will be half of the amount for people under age 18.
There are a few exceptions to the penalty, including:
 Religious reasons
 Not present in the United States
 In prison
 Not able to pay for coverage that is more than eight percent of the household income
 An income that is below 100 percent of the poverty Level
 Having a hardship waiver
 Not covered for less than three months during the year
Allegiance Benefit Advisors Inc.
PPACA subsidies provide to people
buying health insurance
Eligibility rules enacted under PPACA give states the option of extending coverage in Medicaid to most people
with incomes under 138% of poverty. For people with somewhat higher incomes (up to 400% of poverty),
PPACA provides tax credits that reduce premium costs. People with incomes up to 250% of poverty also are
eligible for reduced cost sharing (e.g., coverage with lower deductibles and copayments) paid for by the federal
government. The premium tax credits and cost-sharing assistance will begin in 2014.
Who is eligible for premium tax credits?
Citizens and legal residents in families with incomes between 100% and 400% of poverty who purchase
coverage through a health insurance exchange are eligible for a tax credit to reduce the cost of coverage.
People offered coverage through an employer if:
• the employer plan does not have an actuarial value of at least 60%
• the person’s share of the premium for employer-sponsored insurance exceeds 9.5% of income.
People eligible for public coverage are not eligible for premium assistance in exchanges.
In states without expanded Medicaid coverage, people with incomes less than 100% of poverty will not be eligible for exchange
subsidies
Allegiance Benefit Advisors Inc.
PPACA subsidies: Tax Credit Amounts
The amount of the tax credit that a person can receive is based on the premium for the second
lowest cost (silver) plan in the exchange area where the person is eligible to purchase coverage. A
silver plan is a plan that provides the essential benefits4 and has an actuarial value of 70%. (In
PPACA, a 70% actuarial value means that on average the plan pays 70% of the cost of covered
benefits for a standard population of enrollees.)
The amount of the tax credit varies with income such that the premium a person would have to
pay for the second lowest cost silver plan would not exceed a specified percentage of their
income (adjusted for family size), as follows:
Income Level
Premium as a Percent of Income
Up to 133% FPL
2% of income
133-150% FPL
3 – 4% of income
150-200% FPL
4 – 6.3% of income
200-250% FPL
6.3 – 8.05% of income
250-300% FPL
8.05 – 9.5% of income
300-400% FPL
9.5% of income
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Subsidy Amounts
Not yet available
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Employer Mandate
Businesses with 50 or more full-time employees or full-time equivalents face potential employer mandate
penalties. In this context, a full-time employee is one who works 120 hours per month or more. In counting
toward 50, each 120 hours per month of part-time labor comprises an FTE.
If an owner has several different businesses, the full-timers and FTEs in those separate businesses may be
added together aggregated to determine whether the employee count is 50 or more. The decision on whether
to combine an owner’s businesses in this way rests with the Internal Revenue Service.
Employer Offers Coverage
Employer Does Not Offer Coverage
If an employer offers health insurance to full-time
employees, but an employee still qualifies for
premium assistance from the federal government
and can buy more affordable insurance on a state
exchange, the employer will still be taxed.
If an employer does not offer health insurance
benefits to full-time employees, the PPACA directs
the Internal Revenue Service to tax them. The tax
is $2,000 each year for each full-time employee
over the first 30 employees.
The tax will be lesser of $3,000 for each employee
receiving premium assistance or $2,000 per
employee for each full-time employee over the
first 30 employees.
Allegiance Benefit Advisors Inc.
Exchanges
•
By October 1, 2013, Exchanges must be operational in each state to begin Open
Enrollment for the 2014 plan year. The Exchange will make it easier for small
businesses with fewer than 50 employees and individual consumers to compare
plan offerings and buy health insurance.
–
–
–
–
Each state must establish an individual and a small business Exchange. States may choose to
establish a single Exchange that serves both markets.
Exchange governing boards must be publicly accountable, transparent and have technically
competent leadership among other rules regulated by the Department of Health and Human
Services.
Any plan offered on an Exchange must be a Qualified Health Plan (QHP) - an insurance plan certified
by the Exchange through which it’s offered. And, all plans must provide essential health benefits.
Plans will be available within a level of cost sharing that best fits the needs of those individuals and
small business seeking a plan on the Exchange. The cost share levels are also referred to as the
Actuarial Value, and are distinguished by metal levels.
Plan Level
Actuarial Value
Platinum
90%
Gold
80%
Silver
70%
Bronze
60%
Allegiance Benefit Advisors Inc.
Premium Assistance Tax Credit
Citizens and legal residents in families with incomes between 100% and 400% of
poverty level who purchase coverage through a health insurance exchange are eligible
for a tax credit to reduce the cost of coverage. People eligible for public coverage are
not eligible for premium assistance in exchanges.
People offered coverage through an employer are also not eligible for premium tax
credits unless the employer plan does not have an actuarial value of at least 60% or
unless the person’s share of the premium for employer-sponsored insurance exceeds
9.5% of income. People who meet these thresholds for unaffordable employersponsored insurance are eligible to enroll in a health insurance exchange and may
receive tax credits to reduce the cost of coverage purchased through the exchange.
Allegiance Benefit Advisors Inc.
Exchange Timeline
Allegiance Benefit Advisors Inc.
Small Business Tax Credit
Assistance for Those With Fewer Than 25 Employees
Beginning in 2010, tax credits were available for small employers
providing health insurance to their workers. Eligibility for this
assistance is Limited to:
• Firms with fewer than 25 employees
• Average annual employee compensation does not exceed $50,000
• Available to a “for-profit” business up to 35% of the employer’s cost
of health insurance if the employer provides more than 50% of the
employees’ premium expenses
• Available to small “not-for-profit” business up to 25% of the
employer’s cost of insurance and offsets any payroll taxes that
employees incur
• These subsidies will increase in 2014 to 50% and 35% for the “forprofit” and “not-for-profit” businesses, respectively.
Allegiance Benefit Advisors Inc.
Decision Making Resources
•
•
•
•
Is my Firm Subject to the Employer Mandate?
Do I have to Offer Health Insurance?
What is my Financial Exposure?
How Do I Communicate Changes to
Employees?
• Am I Eligible for Tax Credit
Allegiance Benefit Advisors Inc.
We Can Help
Allegiance Benefit Advisors Inc.
495 Purchase Street, Swansea, MA 02777-5023
Phone/Fax (774) 565-2002 • [email protected]