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T R U S T E D A D V I S O R S
Providing Outstanding Client Service
Boston /Cambridge/Newport / Providence / Waltham
www.KahnLitwin.com
Follow KLR on Twitter @KahnLitwinRenza
Hashtag for the webinar #KLRHealthcare
 Health Care Reform Overview
 Small vs. Large Employers
 Tax Credits
 Small Business Health Options Program (SHOP) &
Exchanges
 Small Employer Disclosure Rules
 Employers must move forward with planning to:
◦ Comply with the requirements of the law
◦ Adjust/refine health care strategies to comply with the law and
support business and HR objectives
 Some major concerns for employers and uncertainties
◦ Considerable delegation to Federal Regulators under the Act
◦ Increased regulatory activity by the states
◦ Potential legal challenges to the Act
◦ Unknown cost increases in 2014 and beyond
 Strategic thinking is required now
 The number one concern for small businesses has been
cost
 The number one concern for employees has been access
to affordable health care
 Small business pay on average 18% more for health
insurance than big businesses
 ACA was enacted with the goal of helping small
businesses lower premium cost growth and increasing
access to quality, affordable health insurance
 Before ACA, Small Employers Faced Many Obstacles to
Covering Workers
◦ Too few choices
◦ Higher premiums and unpredictable rate increases
◦ Higher rates for groups with women, older workers & those with
chronic health concerns or high-cost illnesses, in most states
◦ Waiting periods or no coverage for individuals with pre-existing
conditions
 Today, under ACA, insurance companies:
◦ Face limits on administrative spending. Most insurers must now
spend at least 80% of consumers’ premium dollars on actual
medical care
◦ Must disclose and justify proposed rate hikes of 10% or more,
which states, or federal government, may review
 Starting in 2014, insurance companies:
◦ Cannot charge higher rates or deny coverage because of a
chronic or pre-existing condition
◦ Cannot charge higher rates for women, and face limits on
charging additional premiums for older employees
◦ Will pool risks across small groups creating larger pools like large
businesses
◦ Must not have annual dollar limits (cap on benefits)
◦ Must offer plans that provide a core package of “Essential
Health Benefits” equal to typical employer plans in the state
 Starting on January 1, 2014, employers with at least 50
full-time equivalent (FTE) employees must offer all FTE
employees an “affordable” health plan that meets a
“minimum value” standard.
 If less than 50 FTE’s, considered a small employer
◦ Have option of offering health benefits (not mandated)
 Step1: Definition of Employer (Ownership Test)
◦ Defined by IRS Tax Code “Common Control”- Section 414 (b),
(c), (m), (o)
◦ Employers with common owners or who are otherwise related
are aggregated together to determine whether they meet the
threshold number of 50 or more FTE employees
◦ Rules are complicated, consult your tax advisor
 Step 2: Employee Hours or Service
◦ Full Time
 130 hours of service per calendar month is the equivalent of 30 hours a
week on average in any given month
◦ Part-time
 Law does not require employers to offer coverage to part-time
employees
 Must aggregate hours of service to figure out applicable large employer
status (count no more than 120 hours per person) only for part-time
employees
◦ Seasonal
 Seasonal exemption
 If exceed 50 FTE for fewer than 120 days or 4 calendar months, may
qualify for exemption in following year
 Step 3: Measurement dates
◦ Measure previous year January – December
◦ 2013 transition relief - can use 6-12 consecutive months to
determine status only in 2014
 Step 4: Monthly Calculation
30 + Hours
# Full-time
Employees
Aggregate #
hours of
service (PT &
Seasonal)
Divided by
120
# Full-time
Equivalent
Employees
26 full-time 5,640 hours / 120= 47 73 FTEs
Regulatory proposal: only count max 120
hours per part-time employee
 Step 5: Average Over 12 months Applicable Large
Employer: 86 FTEs
2013 Jan Feb March Apr May June July Aug
Sep
t
Oct Nov Dec
Ave
FTEs
FT
130 hrs/ calendar month 26 26 26 31 35 35 38 38 38 38 38 38
FT Seasonal (130 hours per
calendar month) (4 months or
<120 days)
0 0 0 0 10 10 10 10 0 0 0 0
Total of hours worked by all
other employees */120 (includes
seasonal/part-time hours)
47 48 48 51 52 52 52 52 50 48 48 48
# of FTEs 73 74 74 82 97 97 100 100 88 86 86 86 86
Total
86
* Do not count more than 120 hours
for each part-time employee
 Employer is considered an applicable large employer
◦ Subject to employer mandate
◦ Additional reporting requirements
 Employer is considered a small employer
◦ Not subject to employer mandate
◦ Additional reporting requirements
 Since 2010, eligible small businesses can get tax credits
worth up to 35 percent of their premium contribution to
help them pay for health insurance. About 360,000 businesses
and business owners who provide health insurance received
the tax credit in 2011
 Better options through new Health Insurance
Marketplaces: Starting January 1, 2014, the self-employed
and small businesses will have access to a range of affordable
health care options
 If these smaller businesses provide coverage, they may qualify
for the Small Business Health Care Tax Credit to help
offset costs:
◦ Must have average annual wages below $50,000; and
◦ Contribute 50% or more toward employees’ self-only premium costs
◦ Note: The maximum tax credit is available to employers with 10 or
fewer full-time equivalent employees and average annual wages of less
than $25,000
◦ Note: Credit works on a sliding scale, i.e., for each FTE above 10 and
average annual wages above $25,000, the credit is reduced. See IRS
Form 8941
Business
employs less
than 25 full-
time equivalent
employees
Employees’
average annual
wages are less
than $50,000
Business pays
for at least 50%
of employees’
self-only
premium costs
Up to 35% Federal Tax Credit in 2013
and *50% in 2014 if for-profit entity
* SHOP participants only
 Not eligible for
small business
health care tax
credits on the
federal level
 State might have
credits available
Number of
FTE
Employees
10 or
fewer
11 to
24
25 to
49
50 and
above
 Starting January 2014, if a small business, with under 50
employees, chooses to offer coverage, there is a new
streamlined way to do so: Small Business Health Options
Program (SHOP)
 SHOP= Small Business Health Options Program
◦ Part of the new Health Insurance Marketplaces (sometimes called
“Exchanges”)
◦ Spurs competition for customers based on price and quality, rather
than by avoiding risk
◦ Provides “Essential Health Benefits” – same level of benefits and
services that would be covered in most employer-based plans
◦ Helps employers better predict and control health insurance
expenses
◦ Will pool risks for small groups and reduce administrative
complexity, thereby reducing costs
◦ Works with new insurance reforms and tax credits to lower barriers
to offering health insurance that small employers face
 Through a SHOP, smaller employers can:
◦ Offer employees a meaningful choice of qualified health plans from
different private health insurers
◦ Decide which qualified health plans to make available to employees
 SHOP can allow employers to offer a single plan or multiple plans
◦ Employer decides how much to contribute toward premium costs
(credit at 50% if qualified)
◦ Collect employee share of premiums through payroll deduction
 Premium contributions can be made with pre-tax dollars
◦ Get one monthly bill, make one monthly payment to SHOP
◦ Take advantage of enhanced level of Small Business Health Care
Tax Credits
 Which small businesses are eligible?
◦ Businesses with generally 50 or fewer employees (some states may
allow businesses with up to 100 employees)
◦ In 2016, employers with up to 100 employees with be eligible to
participate
◦ Once a business enrolls, it can grow and still remain in SHOP
 When can businesses enroll?
◦ Starting October 1, 2013 for coverage beginning January 1, 2014
◦ Thereafter, throughout the year on a monthly basis
 How can businesses enroll?
◦ Through a broker, OR
◦ Directly through the SHOP. Visit www.healthcare.gov for more
information and to sign-up for alerts
 State-based
 Rhode Island is expected to offer 28 plans
 Shop & Exchanges Act like Expedia or Orbitz for health
insurance
◦ Individual and small firms
◦ Obtain information
◦ Compare and purchase private health insurance
 Individual Mandate
◦ With limited exceptions, ALL individuals must maintain “minimum essential
coverage” or pay a penalty.
 Government provided coverage
 Employer sponsored coverage
 Exchange coverage
 Exemption from mandate
◦ If required contribution to purchase insurance exceeds 8% of household
income
◦ Religious objection
◦ American Indians
◦ Incarcerated individuals
◦ Those with income below the tax filing threshold
◦ Uninsured for less than 3 months of year
 Penalty amount is the higher of a flat dollar amount or
percentage of income.
◦ 2014: $95 or 1% of household income
◦ 2015: $325 or 2% of household income
◦ 2016 and later: $695 or 2.5% of household income
 Summary of Benefits and Coverage Disclosure Rules
 Sample notices drafted by the U.S. Department of Labor
◦ http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf (for when no employer
health plan is offered)
http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf (for employers who offer
a company health plan)
 W-2 Reporting of annual health care costs
◦ Report health care coverage costs on W-2, Box 12, Code DD
◦ Tax year 2013: all employers
 October 1, 2013 deadline to provide written notice to
employees about exchanges
 Beginning 2014, 90-day maximum waiting periods for
otherwise eligible new hires to begin coverage
 Starting in 2014, additional incentives/rewards to provide
workplaces wellness programs will be in place (e.g. max
reward increases to as much as 50% for smoking cessation
programs)
 New information reporting requirements for issuers of health
insurance coverage - applies to employers of any size that
have self-insured health plans. First reports due 2015
 A group health plan cannot discriminate in favor of their
highly-compensated individuals*
 Self-funded*
◦ Penalty: high-compensated individuals taxed for benefit
 Fully-insured*
◦ Penalty: fine per day per individual discriminated against
 Potential impact for management-only plans*
 Individual business evaluations*
 Enforcement temporarily suspended until IRS issues
guidance*
* Does not apply to grandfathered plans
S
 Extension of coverage to children until age 26
 Restrictions on annual and lifetime dollar limits on essential
health benefits, eliminated in 2014
 No pre-existing condition exclusions for children under 19
 Group or individual coverage can not be rescinded except
in certain circumstances.
 Preventative services without cost-sharing*
 No discrimination allowed in favor or highly compensated
individuals*
 Plans report medical loss ratio
* Does not apply to grandfathered plans
 Form 720
 Annual tax of $1 (increase to $2 in second year)
multiplied by average number of covered lives in plan.
 Assessed on health insurers and sponsors of self-funded
plans
◦ Likely passed down to fully-insured plans
 HRA – Employer is considered self-funded
 Health insurers and third party administrators (on behalf
of self-funded plan sponsors) will contribute to a
transitional reinsurance program for exchanges
 Total contributions over 3 years required at $25 billion
◦ Contributions will be determined on a per capita basis
◦ 2014: $5.25 per month ($63) per year
◦ Employers may see this passed down from insurer
 Tax on health insurers, based on net premiums written
 What it means: higher costs for health insurers
 Tax imposed when premiums exceed $10,200 for
individual and $27,500 for family
 40% tax on excess of the annual value of a health plans
cost over threshold above
Norman LeBlanc, CPA, Partner
nleblanc@kahnlitwin.com
Loree Dubois, CPA, Tax Principal
ldubois@kahnlitwin.com
CPE credit – contact Steve Loffredo at: sloffredo@kahnlitwin.com

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Affordable Care Act- Healthcare Act for Small Businesses

  • 1. T R U S T E D A D V I S O R S Providing Outstanding Client Service Boston /Cambridge/Newport / Providence / Waltham www.KahnLitwin.com
  • 2. Follow KLR on Twitter @KahnLitwinRenza Hashtag for the webinar #KLRHealthcare
  • 3.  Health Care Reform Overview  Small vs. Large Employers  Tax Credits  Small Business Health Options Program (SHOP) & Exchanges  Small Employer Disclosure Rules
  • 4.  Employers must move forward with planning to: ◦ Comply with the requirements of the law ◦ Adjust/refine health care strategies to comply with the law and support business and HR objectives  Some major concerns for employers and uncertainties ◦ Considerable delegation to Federal Regulators under the Act ◦ Increased regulatory activity by the states ◦ Potential legal challenges to the Act ◦ Unknown cost increases in 2014 and beyond  Strategic thinking is required now
  • 5.  The number one concern for small businesses has been cost  The number one concern for employees has been access to affordable health care  Small business pay on average 18% more for health insurance than big businesses  ACA was enacted with the goal of helping small businesses lower premium cost growth and increasing access to quality, affordable health insurance
  • 6.  Before ACA, Small Employers Faced Many Obstacles to Covering Workers ◦ Too few choices ◦ Higher premiums and unpredictable rate increases ◦ Higher rates for groups with women, older workers & those with chronic health concerns or high-cost illnesses, in most states ◦ Waiting periods or no coverage for individuals with pre-existing conditions
  • 7.  Today, under ACA, insurance companies: ◦ Face limits on administrative spending. Most insurers must now spend at least 80% of consumers’ premium dollars on actual medical care ◦ Must disclose and justify proposed rate hikes of 10% or more, which states, or federal government, may review
  • 8.  Starting in 2014, insurance companies: ◦ Cannot charge higher rates or deny coverage because of a chronic or pre-existing condition ◦ Cannot charge higher rates for women, and face limits on charging additional premiums for older employees ◦ Will pool risks across small groups creating larger pools like large businesses ◦ Must not have annual dollar limits (cap on benefits) ◦ Must offer plans that provide a core package of “Essential Health Benefits” equal to typical employer plans in the state
  • 9.  Starting on January 1, 2014, employers with at least 50 full-time equivalent (FTE) employees must offer all FTE employees an “affordable” health plan that meets a “minimum value” standard.  If less than 50 FTE’s, considered a small employer ◦ Have option of offering health benefits (not mandated)
  • 10.  Step1: Definition of Employer (Ownership Test) ◦ Defined by IRS Tax Code “Common Control”- Section 414 (b), (c), (m), (o) ◦ Employers with common owners or who are otherwise related are aggregated together to determine whether they meet the threshold number of 50 or more FTE employees ◦ Rules are complicated, consult your tax advisor
  • 11.  Step 2: Employee Hours or Service ◦ Full Time  130 hours of service per calendar month is the equivalent of 30 hours a week on average in any given month ◦ Part-time  Law does not require employers to offer coverage to part-time employees  Must aggregate hours of service to figure out applicable large employer status (count no more than 120 hours per person) only for part-time employees ◦ Seasonal  Seasonal exemption  If exceed 50 FTE for fewer than 120 days or 4 calendar months, may qualify for exemption in following year
  • 12.  Step 3: Measurement dates ◦ Measure previous year January – December ◦ 2013 transition relief - can use 6-12 consecutive months to determine status only in 2014
  • 13.  Step 4: Monthly Calculation 30 + Hours # Full-time Employees Aggregate # hours of service (PT & Seasonal) Divided by 120 # Full-time Equivalent Employees 26 full-time 5,640 hours / 120= 47 73 FTEs Regulatory proposal: only count max 120 hours per part-time employee
  • 14.  Step 5: Average Over 12 months Applicable Large Employer: 86 FTEs 2013 Jan Feb March Apr May June July Aug Sep t Oct Nov Dec Ave FTEs FT 130 hrs/ calendar month 26 26 26 31 35 35 38 38 38 38 38 38 FT Seasonal (130 hours per calendar month) (4 months or <120 days) 0 0 0 0 10 10 10 10 0 0 0 0 Total of hours worked by all other employees */120 (includes seasonal/part-time hours) 47 48 48 51 52 52 52 52 50 48 48 48 # of FTEs 73 74 74 82 97 97 100 100 88 86 86 86 86 Total 86 * Do not count more than 120 hours for each part-time employee
  • 15.  Employer is considered an applicable large employer ◦ Subject to employer mandate ◦ Additional reporting requirements  Employer is considered a small employer ◦ Not subject to employer mandate ◦ Additional reporting requirements
  • 16.  Since 2010, eligible small businesses can get tax credits worth up to 35 percent of their premium contribution to help them pay for health insurance. About 360,000 businesses and business owners who provide health insurance received the tax credit in 2011  Better options through new Health Insurance Marketplaces: Starting January 1, 2014, the self-employed and small businesses will have access to a range of affordable health care options
  • 17.  If these smaller businesses provide coverage, they may qualify for the Small Business Health Care Tax Credit to help offset costs: ◦ Must have average annual wages below $50,000; and ◦ Contribute 50% or more toward employees’ self-only premium costs ◦ Note: The maximum tax credit is available to employers with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000 ◦ Note: Credit works on a sliding scale, i.e., for each FTE above 10 and average annual wages above $25,000, the credit is reduced. See IRS Form 8941
  • 18. Business employs less than 25 full- time equivalent employees Employees’ average annual wages are less than $50,000 Business pays for at least 50% of employees’ self-only premium costs Up to 35% Federal Tax Credit in 2013 and *50% in 2014 if for-profit entity * SHOP participants only
  • 19.  Not eligible for small business health care tax credits on the federal level  State might have credits available Number of FTE Employees 10 or fewer 11 to 24 25 to 49 50 and above
  • 20.  Starting January 2014, if a small business, with under 50 employees, chooses to offer coverage, there is a new streamlined way to do so: Small Business Health Options Program (SHOP)
  • 21.  SHOP= Small Business Health Options Program ◦ Part of the new Health Insurance Marketplaces (sometimes called “Exchanges”) ◦ Spurs competition for customers based on price and quality, rather than by avoiding risk ◦ Provides “Essential Health Benefits” – same level of benefits and services that would be covered in most employer-based plans ◦ Helps employers better predict and control health insurance expenses ◦ Will pool risks for small groups and reduce administrative complexity, thereby reducing costs ◦ Works with new insurance reforms and tax credits to lower barriers to offering health insurance that small employers face
  • 22.  Through a SHOP, smaller employers can: ◦ Offer employees a meaningful choice of qualified health plans from different private health insurers ◦ Decide which qualified health plans to make available to employees  SHOP can allow employers to offer a single plan or multiple plans ◦ Employer decides how much to contribute toward premium costs (credit at 50% if qualified) ◦ Collect employee share of premiums through payroll deduction  Premium contributions can be made with pre-tax dollars ◦ Get one monthly bill, make one monthly payment to SHOP ◦ Take advantage of enhanced level of Small Business Health Care Tax Credits
  • 23.  Which small businesses are eligible? ◦ Businesses with generally 50 or fewer employees (some states may allow businesses with up to 100 employees) ◦ In 2016, employers with up to 100 employees with be eligible to participate ◦ Once a business enrolls, it can grow and still remain in SHOP  When can businesses enroll? ◦ Starting October 1, 2013 for coverage beginning January 1, 2014 ◦ Thereafter, throughout the year on a monthly basis  How can businesses enroll? ◦ Through a broker, OR ◦ Directly through the SHOP. Visit www.healthcare.gov for more information and to sign-up for alerts
  • 24.  State-based  Rhode Island is expected to offer 28 plans  Shop & Exchanges Act like Expedia or Orbitz for health insurance ◦ Individual and small firms ◦ Obtain information ◦ Compare and purchase private health insurance
  • 25.  Individual Mandate ◦ With limited exceptions, ALL individuals must maintain “minimum essential coverage” or pay a penalty.  Government provided coverage  Employer sponsored coverage  Exchange coverage  Exemption from mandate ◦ If required contribution to purchase insurance exceeds 8% of household income ◦ Religious objection ◦ American Indians ◦ Incarcerated individuals ◦ Those with income below the tax filing threshold ◦ Uninsured for less than 3 months of year
  • 26.  Penalty amount is the higher of a flat dollar amount or percentage of income. ◦ 2014: $95 or 1% of household income ◦ 2015: $325 or 2% of household income ◦ 2016 and later: $695 or 2.5% of household income
  • 27.  Summary of Benefits and Coverage Disclosure Rules  Sample notices drafted by the U.S. Department of Labor ◦ http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf (for when no employer health plan is offered) http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf (for employers who offer a company health plan)  W-2 Reporting of annual health care costs ◦ Report health care coverage costs on W-2, Box 12, Code DD ◦ Tax year 2013: all employers  October 1, 2013 deadline to provide written notice to employees about exchanges
  • 28.  Beginning 2014, 90-day maximum waiting periods for otherwise eligible new hires to begin coverage  Starting in 2014, additional incentives/rewards to provide workplaces wellness programs will be in place (e.g. max reward increases to as much as 50% for smoking cessation programs)  New information reporting requirements for issuers of health insurance coverage - applies to employers of any size that have self-insured health plans. First reports due 2015
  • 29.  A group health plan cannot discriminate in favor of their highly-compensated individuals*  Self-funded* ◦ Penalty: high-compensated individuals taxed for benefit  Fully-insured* ◦ Penalty: fine per day per individual discriminated against  Potential impact for management-only plans*  Individual business evaluations*  Enforcement temporarily suspended until IRS issues guidance* * Does not apply to grandfathered plans S
  • 30.  Extension of coverage to children until age 26  Restrictions on annual and lifetime dollar limits on essential health benefits, eliminated in 2014  No pre-existing condition exclusions for children under 19  Group or individual coverage can not be rescinded except in certain circumstances.  Preventative services without cost-sharing*  No discrimination allowed in favor or highly compensated individuals*  Plans report medical loss ratio * Does not apply to grandfathered plans
  • 31.  Form 720  Annual tax of $1 (increase to $2 in second year) multiplied by average number of covered lives in plan.  Assessed on health insurers and sponsors of self-funded plans ◦ Likely passed down to fully-insured plans  HRA – Employer is considered self-funded
  • 32.  Health insurers and third party administrators (on behalf of self-funded plan sponsors) will contribute to a transitional reinsurance program for exchanges  Total contributions over 3 years required at $25 billion ◦ Contributions will be determined on a per capita basis ◦ 2014: $5.25 per month ($63) per year ◦ Employers may see this passed down from insurer
  • 33.  Tax on health insurers, based on net premiums written  What it means: higher costs for health insurers
  • 34.  Tax imposed when premiums exceed $10,200 for individual and $27,500 for family  40% tax on excess of the annual value of a health plans cost over threshold above
  • 35. Norman LeBlanc, CPA, Partner nleblanc@kahnlitwin.com Loree Dubois, CPA, Tax Principal ldubois@kahnlitwin.com CPE credit – contact Steve Loffredo at: sloffredo@kahnlitwin.com