When you google ‘Obama Care’, you will see over 1 billion results. One Billion! As health insurance consultants, we receive multiple updates daily from various insurance carriers and industry sources on ObamaCare. In an effort to assist our clients in understanding this complex new law on health care reform, we have published this newsletter. This newsletter will be released monthly, and highlight topics we believe may be of interest to you or that we feel will benefit you and your employees.
With over one billion articles available, it is impossible to put everything in a simple newsletter format. But we hope you will use this to determine which topics you would like more information on, and how this law will affect you and your group in the future.
Changes for 2013 – Minimal impact for group health plans
The changes mainly impact how physicians are paid and taxes.
- The law will require the Medicaid payment rates to primary care physicians be no less than 100% of Medicare payment rates in 2013 and 2014. It will provide 100% federal taxpayer funding for the incremental costs to States of meeting this payment requirement.
*Medicaid – Federal Healthcare program for people of low income, level set by state and federal guidelines
*Medicare – Federal Healthcare program for people over 65, under 65 and deemed disabled by the Social Security Administration, or under 65 and diagnosed with End Stage Renal Disease
- The law will impose an annual limitation on FSA accounts to $2,500 per year
- The law will impose a 2.3% excise tax on medical device manufacturers. Exempt items include eyeglasses, contact lenses, hearing aids and any device generally purchased at the retail level that is passed on to the consume.
- The law will increase the income threshold for claiming the itemized tax deduction for medical expenses from 7.5% to 10%.
- The law will increase the Medicare Part A hospital insurance tax rate by .9% on some individuals.
*FSA – Flexible Spending Account
*Excise Tax – Taxes on certain items at point of purchase
Other Misc. Provisions:
- The law will require that health insurance plans adopt uniform standards for electronic health information.
- The law will allow states to create a Basic Health Plan for uninsured individuals between 133% – 200% of the federal poverty line in lieu of these individuals received premium subsidies to purchase in the exchanges.
Changes for 2014 – Impact group health plans
- No annual limits on essential health benefits*
- No pre-existing condition exclusions
- 90 day limitation on waiting periods
- Tax on plans to fund temporary reinsurance programs
- Wellness rewards
- Federal Subsidies
- Coverage of clinical trials
- Individual mandate
- Employer Play or Pay
- Exchanges and SHOP (small business option program)
*Essential Health Benefits – Services that must be covered.
- Ambulatory patient services
- Emergency Services
- Maternity and newborn care
- Mental health and substance use disorder
- Prescription drugs
- Rehabilitative services and devices
- Preventative and wellness services and chronic disease management
- Pediatric services, including dental and vision
Many individual plans do not typically cover some of these things today, such as pharmacy, dental and maternity. This expansion will substantially raise costs.
TIP* These regulations and their deadlines are subject to change. For example, a mandate that employers must notify employees of the state’s exchange availability was to take effect March 1, 2013 but has been delayed to late summer or fall of 2013.
Premiums in 2014 will be ‘Modified Community Rated’, which means premiums will not be based on health status, gender or occupation, however, it will be based on geographic location, age and tobacco use. Age rating may vary by 300%, but must be set at one-year bands from 21 to 64. This means insurers could apply a lower tobacco premium surcharge to younger individuals and a higher one for older tobacco users. An example of this rule would be a young smoker might pay a few dollars more each month, while an older smoker could be charged hundreds of dollars more each month.
Play or Pay
Beginning January 1, 2014 employers with 50 or more full time employees (or full time equivalents) are liable for a penalty tax if ‘affordable’ coverage is not offered and an employee receives a federal subsidy through an exchange. To determine if your group has 50 or more full time employees, you divide the hours regularly worked by employees, including part time, by 30. This is the total number of ‘full time equivalent’ employees at your business. If this number is greater than 50, then the empoyer is expected to offer coverage to all of its full time workers. Employees who work at least 30 hours per week will be considered full time. The time period is a minimum of 3 months and max of 12 months to determine if an employee is full time.
- Large business with 50 or more full time employees or full time equivalent employees that do not offer coverage and an employee receives premium assistance to purchase coverage in the exchange, the employer may receive a fine of $2,000 for every full time employee in excess of 30.
- If a large business offers coverage that is not affordable or is inadequate and an employee receives premium assistance for coverage in an exchange, the business may have to pay the lesser of $3,000 for each employee received premium assistance or $2,000 for every full time employee in excess of 30.
- Coverage will be considered affordable if the cost of the health plan does not exceed 9.5% of an employee’s income. Employers are allowed to rely on wages reported on employees’ W-2 forms to determine whether coverage is affordable.
- As long as the employee contribution for single coverage does not exceed 9.5% of the worker’s wages as reported on the W-2 form, the employer will not be subject to the shared responsibility penalty even if the employee gets premium assistance for coverage in the exchange.
Small Employers Exempt – Reporting for 2012 W-2
Businesses that provided for 250 or more Form W-2s in 2011 will be required to comply with the new reporting requirements starting with the 2012 Form W-2. However, smaller businesses will not have to report for 2012, although they have the option of providing the information if they wish to do so.
TIP* It appears that small businesses will not have to report this information on the 2013 Form W-2 either. The IRS has stated that the reporting requirement will apply only on calendar years that begin 6 months after the IRS issues additional guidance for employers. That means the guidance would have had to be issued before July 1, 2012 in order for it to apply to 2013 Form W-2s.
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