New 2014 Small Group Insurance Rating Structure and Taxes

The Patient Protection and Affordable Care Act (ACA) was signed into law on March 23, 2010, with the aim to improve the quality of health care in America and increase access to care for individuals and businesses.  Beginning in 2014, the ACA only allows for rate variance by four factors: age, family composition, geographic location, and tobacco use (California AB 1083 prohibits tobacco use as a rating factor).

• California’s current 9 Geographic Rating Regions expanded to 19
• Member Level Rating
• Each individual will be rated (cap of 3 on children under 21)
• 3:1 ratio will limit rates charged to 64 year-old to 3x those charged to 21 year-olds
• Risk Adjustment Factors (RAF) are no longer used
• Single-year age bands: no rate increases on birthday months, only policy anniversaries

Small Employer Health Care Tax Credit

 Beginning in 2010, ACA provides tax credits to eligible small businesses with no more than 25 employees and average annual wages of less than $50,000, offsetting the employer cost of providing health insurance to employees.

• 2010 to 2013: A tax credit up to 35% of employer costs.
• 2014 to 2016: A tax credit up to 50% of employer costs for those businesses that qualify and purchase coverage from the Covered California Small Business Health Options Program (SHOP).

Taxes & Fees

The following fees/taxes, mandated by the ACA, will be assessed on health insurance carriers (& self-insured employers as noted).  Carriers are integrating these into their rates.

PCORI – Patient Centered Outcomes Research Institute*

Goal: Fund research into the effectiveness of medical treatment
Amount: $2 per member for plan years beginning after 9/30/2013 & ending before 10/1/2014.  Plan years ending 10/1/2014 & after, this fee will be adjusted for inflation
Duration: Plan years ending after 9/30/2012 and ending before 10/1/2019

Reinsurance Tax

Goal: Help reinsure the individual market insurers who cover people with expensive claims. Amount: $63 per member for 2014 / $44 per member for 2015/ 2016-TBD.
Duration:  2014 – 2016

Health Insurer Tax*

Goal: Help fund premium tax credits and cost-sharing subsidies for lower income individuals and families
Amount: Varies based on carrier’s net premium for applicable year.

Duration: On-going

* Applies to self-insured employers also

The Internal Revenue Service has issued guidance for the 2014 fee year on how the IRS and the Treasury Department will administer the definition of a “covered entity” for purposes of the health insurance fee under the Affordable Care Act.

Notice 2014-47 applies only to the 2014 fee year, the IRS cautioned. The notice aims to resolve confusion as to the scope of the exclusions in Section 9010(c)(2) of the Tax Code from the general definition of the term “covered entity.” The notice also clarifies that a controlled group does not have to report for a controlled group member who would not qualify as a covered entity in the 2014 fee year if it were a single-person covered entity.

Section 9010(c)(1) defines the term “covered entity” to mean any entity that provides health insurance for any U.S. health risk during the calendar year in which the fee is due, such as the 2014 fee year. Generally, Section 9010(c)(2) excludes from the definition of a covered entity (a) self-insured employers; (b) governmental entities; (c) certain nonprofit corporations; and (d) non-employer established Section 501(c)(9) entities.

For the 2014 fee year, the IRS and Treasury will not treat any entity as a covered entity if it is excluded from the definition because it qualifies for one of the exclusions under Section 9010(c)(2) for the entire 2013 data year or qualifies for one of the exclusions under Section 9010(c)(2) for the entire 2014 fee year, which began on Jan. 1, 2014.

Since the IRS and the Treasury will not treat such an entity as a covered entity, it should not report its net premiums written for the 2013 data year. In addition, for the 2014 fee year, a controlled group must report net premiums written only for those people who are controlled group members at the end of the day on Dec. 31 of the 2013 data year and who would qualify as a covered entity in the fee year if it were a single-person covered entity.

A controlled group should not report net premiums written for any controlled group member who would not qualify as a covered entity in the 2014 fee year if it were a single-person covered entity. Such an entity will be treated as a member of the controlled group for other purposes, however, such as joint and several liability for the fee amount allocated to the controlled group.

The IRS said it plans to issue additional guidance in the future on the scope of the exclusions in Section 9010(c)(2) from the general definition of the term “covered entity” for fee years after the 2014 fee year.

Any entity that needs to correct a previously submitted Form 8963, “Report of Health Insurance Provider Information,” due to the clarification provided in the new notice should do so by faxing the corrected Form 8963 to (877) 797-0235 no later than Monday, Aug. 18, 2014. The IRS said it cannot process a Form 8963 received after this date.

The IRS said it and the Treasury recognize that entities will not know whether they qualify for one of the exclusions under Section 9010(c)(2) for the entire 2014 fee year until the end of 2014. Entities that reasonably project that they will qualify for an exclusion under Section 9010(c)(2) for the entire 2014 fee year may submit a corrected Form 8963 on or before Aug. 18, 2014, even though the 2014 fee year is not yet over.

Will Employer-Sponsored Health Insurance Survive?

by: Leah Shepherd

Will the link between employment and health insurance survive?

That’s one of the serious questions that a new report from the Employee Benefit Research Institute (EBRI), a nonprofit research organization based in Washington, D.C., raises about the future of employee benefits.

Paul Fronstin, head of the health research and education program at EBRI, noted that the Affordable Care Act “levels the playing field like it’s never been before,” as employees will not necessarily have to depend on getting health coverage through work.

“Employers are just not sure if they’ll be offering coverage in the future,” he added.

In fact, the U.S. Congressional Budget Office estimates that 3 million to 5 million fewer Americans will obtain coverage through their employer each year from 2019 through 2022 than would have been the case without the ACA.

Starting next year, the ACA will require employers with at least 50 full-time employees to offer a minimum level of health coverage to workers, but some employers may prefer to pay a tax penalty instead of paying for the coverage. The need to recruit and retain good talent is what keeps employers offering benefits.

Kathryn Gaglione, a spokesperson for the National Association of Health Underwriters, says, “Offering comprehensive, competitive benefits makes for a more robust workforce and better compensation for individuals trying to support families … Many American business owners understand the benefit to offering employees and their families coverage. Employer-sponsored health plans might change, but they won’t be going anywhere.”

Most employees want and expect health insurance through their employer, especially knowing that it’s much less expensive to receive group coverage that comes with an employer’s premium contribution than to buy individual coverage on a health insurance exchange (with no employer contribution).

Nonetheless, “one could argue workers won’t need their employers any more for health benefits once the law is fully implemented, and health exchanges become a viable option to job-based health benefits,” Fronstin said.

The EBRI report also discusses a widespread lack of financial preparedness for retirement.

Only 17 percent of the lowest-income households would have enough money to cover 100 percent of average day-to-day expenses like housing, food, and transportation, plus the potentially catastrophic expenses like long-term care, compared with 86 percent of the highest-income households, according to EBRI research.

Not everyone is facing a crisis in retirement readiness. “There’s a tremendous amount of variation among U.S. households,” said Jack VanDerhei, EBRI’s research director. “Whether individual circumstances constitute a ‘crisis’ or not will depend on a number of factors. It’s going to depend on your income quartile. It’s going to depend on how many years you’re eligible to participate in a defined contribution plan. It’s going to depend on whether or not you look at long-term care costs.”

Major provisions of the Affordable Care Act (ACA) have been in place since the beginning of 2014, however many employees and small business owners still wonder, “Do I have to buy health insurance in 2015?” and “What is the penalty if I don’t buy health insurance?”

This article answers common questions about the requirement to have health insurance and the penalty for not having health insurance.

 Do I Have to Buy Health Insurance If I’m Uninsured?

Most Americans are required to have health insurance, or pay a tax penalty if they don’t. This ACA rule is called the “Individual Mandate” or “Individual Shared Responsibility Fee” and started in 2014. Coverage can include job-based health insurance, individual health insurance, or insurance through a government program such as Medicaid or Medicare.

 What Is the Penalty If I Don’t Buy Health Insurance?

The penalty for not having “minimum essential coverage” is called the “Individual Shared Responsibility Fee.” This fee is either a flat fee or a percentage of household income, whichever is greater. The penalty increases over the first three years.

 Source: Affordable Care Act 101 

 Example of the Individual Shared Responsibility Fee:

Jean is single and earns an annual income of $40,000/year. Nancy went uninsured in 2014. At tax time, Jean is required to pay an Individual Shared Responsibility Fee. Jean will pay either 1% of income (minus the federal tax filing threshold) or $95, whichever is greater.

Jean’s annual income ($40,000) minus the federal tax filing threshold ($10,000) is $30,000. One percent (1%) of $30,000 is $300.

Since this amount is greater than $95, Jean will pay a $300 fee.

See more Individual Shared Responsibility Fee examples here.

 Does Everyone Who Is Uninsured Have to Pay the Fee?

You may not have to pay the Individual Shared Responsibility Fee if you are uninsured, and:

• Are required to pay more than 8% of your household income for the lowest cost bronze plan.
• Are not a U.S. citizen, a U.S. national, or a resident alien lawfully present in the U.S.
• Had one gap in coverage for less than three consecutive months during the year.
• Won’t file a tax return because your income is below the tax filing threshold. In 2013, the tax filing threshold was $10,000 for individuals and $20,000 for a couple.
• Are unable to qualify for Medicaid because your state has chosen not to expand the program.
• Participate in a healthcare sharing ministry or are a member of a recognized religious sect with objections to health insurance.
• Are a member of a federally recognized Indian tribe.
• Are incarcerated.
• Qualify for a hardship exemption.

If I Owe a Fee for 2014, How Do I Pay It?

If you go uninsured in 2014 and don’t qualify for an exemption, you will have to pay the Individual Shared Responsibility Fee to the IRS on your 2014 tax return. You will most likely need to submit your tax return for 2014 by April 15, 2015.

How Do I Prove I Had Coverage to Avoid Paying the Fee?

If you obtained insurance in 2014, you should receive a notice from your insurance provider by January 31, 2015 that describes your coverage status during the year to use with your tax return.

Small business owners still have questions about how the ACA impacts their business, particularly whether they will be penalized for not offering health insurance.  This article answers common questions small business owners have about their requirement to offer health insurance and ACA reporting requirements.

Is Our Small Business Required to Offer Health Insurance?
 No. If your business has fewer than 50 full-time-equivalent (FTE) employees, then you are not required to offer health insurance under the ACA.

Will Our Small Business Be Penalized for Not Offering Insurance?
No. If your business has fewer than 50 FTE employees, then there are no tax penalties and no “Employer Shared Responsibility Fees” for not offering health insurance.

How Do I Calculate Our FTE Employees?
There are three steps for calculating the number of FTE employees you have: Calculate the number of full-time employees. A full time employee works on average 30 hours per week in a given month. Factor in your part-time employees. To calculate the FTE of part-time employees, add the number of hours worked by part-time employees in a given month. Divide the total number by 120.  Add together the full-time employees and the FTE of the part-time employees. If the sum is over 50, you are an “applicable large employer.” This means that the employer mandate does apply to your business.

FTE_Calculator
Source: Affordable Care Act 101 Guide

What If Our Business Grows to More Than 50 FTE Employees?
Businesses with more than 50 FTE employees who do not provide minimum, affordable health insurance will be required to pay the employer shared responsibility fee if/when an employee purchases individual insurance and receives a premium tax credit.
Medium employers (50-99 FTE employees) will be required to pay in 2016
Large employers (100+ FTE employees) will be required to pay in 2015
The employer shared responsibility fee is equal to the number of full-time employees for the month (minus 80) multiplied by 1/12 of $2,000.Phase in schedule (Source: Affordable Care Act 101 Guide)

What Are the New Health Benefits Reporting Requirements?
Although small businesses are exempt from the employer shared responsibility fees, there are new reporting requirements that may apply, depending on how many employees you have and the type of health benefits you are offering. For example:
New W-2 Reporting Requirements: If you have more than 250 W-2 employees, you must report the cost of employer-sponsored group health coverage on your employee’s W-2 forms.

PCORI/CER Plan Fees: If you offer a Healthcare Reimbursement Plan (HRP) of another self-insured health plan, you are required to pay the Patient-Centered Outcomes Research Institute (PCORI) fees. This is a research fee that is paid on an annual basis and is turned in with a Form 720 .

Today, August 5, 2014, the California Integrated Data Exchange (Cal INDEX), a new not-for-profit organization, announced plans to develop a statewide, next-generation health information exchange (HIE) – a comprehensive collection of electronic patient records that will include clinical data from healthcare providers and health insurers. The result will be one of the largest exchanges of its kind, initially providing physicians and nurses with secure, online access to approximately nine million health information records – or nearly one-fourth of the state’s population. Cal INDEX expects to be operational by the end of 2014.

Cal INDEX was created to address California’s fragmented and complex healthcare system. The inability to share valuable health data can result in incomplete information, affecting everyone in the healthcare system – individuals, providers, employers, and producers – and can lead to poor-quality patient care and waste and inefficiency.

Cal INDEX will allow physicians, nurses, and hospitals throughout the state to share patients’ health information, and it will provide them with the tools to help them give their patients the safest, highest-quality care possible. This means greater satisfaction for your clients:

Advantages for consumers

With Cal INDEX, consumers’ health data will be available to doctors, nurses, and hospitals regardless of what health insurance plan they have or which doctor they see. Participating doctors and nurses can more easily and securely share patients’ health information electronically with other providers and hospitals to help them provide the safest, highest-quality care possible.

Advantages for employers

Cal INDEX will help employers champion a healthier workforce by giving providers and hospitals faster and easier online access to the vital patient health information they need to give patients the best care possible.

Blue Shield of California (Blue Shield) and Anthem Blue Cross co-founded Cal INDEX and will provide funding for its first three years of operation. After three years, participating providers and insurers will provide revenue to Cal INDEX through subscription fees.

All Blue Shield employer groups will participate in Cal INDEX when it launches except Medicare Advantage Prescription Drug (MA-PD), Administrative Services Only (ASO), Federal Employee Plans (FEP), and Federal Employees Health Benefits Plans (FEHBP). These plans will be integrated into Cal INDEX over time.

Learn more
For more detailed information about Cal INDEX, please visit www.calindex.org.

In 2010, the Affordable Care Act created the small business health care tax credits, also known as the small employer health insurance credits. This article provides FAQs to help small businesses understand the health insurance credits in 2014 and beyond.

What Are the Small Employer Health Insurance Credits?

The health insurance credits were created by the Affordable Care Act (ACA) to assist small employers in providing health insurance coverage to employees. As of 2014, the tax credit is worth up to 50 percent of a small employers’ contribution toward employees’ premium costs.

Which Small Employers Are Eligible for the Health Insurance Credits?

To be eligible for the credits, a small employer must meet the following criteria:

• Have fewer than 25 full-time equivalent (FTE) employees
• Pay an average annual wage of less than $50,000 per employee
• Contribute at least half (50 percent) of their full-time employees’ insurance premiums; employers are not required to cover part-time employees or dependents

How Have the Small Employer Health Insurance Credits Changed in 2014?

For tax years beginning in 2014, there are several changes to the health insurance credits:

• To be eligible for the credit small employers must pay premiums on behalf of employees enrolled in a qualified health plan offered through their state’s Small Business Health Options Program (SHOP) Marketplace. One exception is if there are no SHOP Marketplace plans offered in their region.
• The maximum credit increased from up to 35 percent to up to 50 percent of premiums paid. The maximum credit for tax-exempt employers increased from up to 25 percent to up to 35 percent of premiums paid.
• The credit is available for eligible employers for no more than two consecutive taxable years.

Are the Credits Available for Small Employers Who Did Not Owe Tax During the Year?

According to the IRS, if a small employer did not owe tax during the year, the employer may apply the credit back or forward to other tax years. Additionally, since the amount of the health insurance premiums is in excess of the total credit, small employers who are eligible for the credit can still claim a business expense deduction for the premiums that are more than the credit.

Are Tax-Exempt Employers Eligible for Credits?

Yes. According to the IRS, a tax-exempt organization, described in Section 501(c), can be eligible for the credit as long as the organization meets the other eligibility criteria. The credit is refundable so long as it does not exceed the organization’s income tax withholding and Medicare tax liability.

How Does a Small Business Claim a Health Insurance Credit?

According to the IRS, an eligible small employer claims the credit on their annual income tax return by attaching Form 8941, showing their credit calculation. See the draft reporting forms here.

How Does a Tax-Exempt Employer Claim the Credit?

According to the IRS, a tax-exempt employer includes the amount of the credit on line 44f of Form 990-T, with the attached form 8941 showing their credit calculation.

Are There Any Other Options Outside of the SHOP Marketplace for Small Employers?

Yes. Since employers with under 50 FTE employees are not subject to the employer mandate, most small employers are seeing the advantages of individual health insurance and allowing employees to select their own health plan from the Individual Health Insurance Marketplace.

8 Ways to Make the Most Out of Doctor Visits

1. Make a list of all prescriptions

Show your doctor a list of everything you or your loved one is taking — not just what that individual doctor has prescribed. Sometimes one doctor is unaware of what another doctor has prescribed. If you’ve gotten different medications at different pharmacies, the pharmacists can miss active interactions between drugs. And remember that over-the-counter meds and vitamin supplements can also interact with your prescribed drugs. By creating a complete list, and filling them with one pharmacy, you can help to ensure all your medications are working safely together.

2. Check your refill needs

Look through your medicine cabinet and make a note of any refills that will be needed soon. Remember not to let yourself get down to a few tablets before asking for a refill. Last-minute requests make up the largest volume of calls in many doctors’ offices, so having this information going into an appointment can save you and your doctor’s office time on the telephone.

3. If a wheelchair is needed, ask ahead

Many doctors’ offices have a wheelchair to help patients get from their cars to their office. If you are caring for somebody who uses a wheelchair, call ahead to find out if your doctor has one. This can save you the trouble and hassle of bringing your own.

4. Make a list of any questions

Think ahead about any questions you’d like to discuss with your doctor — and don’t just wait until right before your visit. Keep a list on your refrigerator or near your phone, and jot down questions as they pop into your head.

5. Don’t be shy

Don’t be embarrassed to discuss anything with your doctor. Whether it’s a question about sexual function or the price of a drug, you should not be afraid to bring it up. In the interest of your health, you need to be candid. Chances are the doctor has heard the concern before and will make you feel comfortable talking about it.

6. Don’t overlook nurses as a resource

Not all your questions need to be answered by the doctor. Often, a nurse can address your concerns and may have more time to explain. Usually, a nurse will come in to take your blood pressure and pulse rate — before the physician examines you. Start asking those questions on your list. If the nurse doesn’t have an answer, you can follow-up with the doctor.

7. Make sure you go to all appointments

If you are a caregiver, it is very helpful to accompany your loved one to all medical appointments. It is time consuming, but hearing what the doctor has to say first-hand helps avoid confusion or misinterpretation of treatment. Some caregivers find it’s easiest to schedule all doctor appointments on the same weekday. Or ask to be scheduled early morning or late in the day around your work schedule. Your doctor may be more flexible than you think.

8. Ask for a home health care visit

If you are caring for somebody on Medicare, find out if he or she qualifies for home health care and, if so, ask the doctor to prescribe a home health care visit. There is no cost for Medicare home health services if the patient meets the conditions — for example, being homebound and needing skilled nursing care or physical therapy. Your doctor’s office may also help you set up a visit with somebody who will evaluate your home for dangers and will offer suggestions as to how you can improve the safety of the environment. Common household hazards, such as a loose rugs or slippery showers, can cause falls and serious injuries. A home safety review can make you aware of simple fixes to enhance the quality of life and comfort for your loved one.

On Thursday, July 24, 2014, the IRS published highly anticipated drafts of the forms large employers with 50 or more full-time equivalent employees will be required to use for the Code 6056 reporting requirement.  Code 6056 requires applicable large employers to file a transmittal with the IRS (Form 1094-C) and provide a new return to employees (Form 1095-C) in January 2016 for the 2015 calendar year.  This reporting requirement has a triple purpose, as it is designed to allow the IRS to enforce the employer mandate, enforce the individual mandate, and confirm eligibility for premium tax credits for coverage purchased through an Exchange.

This reporting and disclosure requirement is new for employers and may catch some employers off-guard.  For example, the reporting requires collection and disclosure of information including, but not limited to, the following:

• Social Security numbers of employees, spouses and dependents;
• Names and EINs of other employers within the employer’s controlled group of corporations for each month of the calendar year;
• Number of full-time employees for each calendar month;
• Total number of employees (full-time equivalents) for each calendar month;
• Section 4980H transition relief indicators for each calendar month;
• Employee’s share of the lowest-cost monthly premium for self-only, minimum value coverage for each calendar month; and
• Applicable Section 4980H safe harbor for each calendar month.

Please note these forms are in draft form only and are subject to change. The IRS has not yet released instructions for the forms, which should provide the detail necessary to complete some of the more ambiguous cells in the forms. The first transmittal and returns will not be filed until January 2016, but much of the information must be reported for each calendar month of 2015. Ensuring internal time and attendance systems, record management, and payroll systems are capable of producing the required information is critical. Although there is much information left to be released by the IRS concerning the Code 6056 reporting requirement, employers subject to this requirement should begin preparing now.