ACA Employer Fees

So now we are well into 2014 and several fees are showing up. What are they all for and how long will we be paying them? There are four new fees. Here’s the scoop.



Health Insurance Industry Fee also known as the Health Insurance Tax (HIT)

This fee is to help off-set the cost-generating provisions of the PPACA. It is an annual fee which will be from 1.9% to 2.3% in 2014 and increasing to 2.8% to 3.7% by 2023. Self-insured plans do not pay this fee. It is for fully-insured plans only.


Reinsurance Assessment Fee

This fee is to fund a three-year reinsurance program designed to reimburse companies that insure high-cost patients through the individual health insurance market. This fee is $5.25 per covered person per month. That means each employee and their dependents will be assessed the $5.25 each. This fee is subject to change in 2015 and 2016. Self-insured and fully-insured plans are charged.


Patient-Centered Outcomes Research Institute Fee (PCORI)

This fee is to fund research by the PCORI that will compare different medical treatments and interventions to determine what treatments are most effective. The non-profit institute was established by the PPACA. The fee is $1 annually per average number of covered lives for plan years ending between October 1, 2012 and September 30, 2013. The fee increases to $2 per average number of covered lives for plan years ending between October 1, 2013 and September 30, 2014. Thereafter the fee is based on increases in the projected per capita amount of the National Health Expenditures. This fee will not apply to policies that begin after September 30, 2019. This fee applies to self-insured and fully-insured plans.





Federally Facilitated Exchange User Fee – NOT APPLICABLE TO WASHINGTON

This fee is used to pay for access to exchanges facilitated by the federal government. The fee is 3.5% of the premium. If your state has its own exchange, this fee does not apply.

Large Employer Ideas for the Adventurous

OK. For you, the large employer with more than 100 employees that has said, “What can I do?  Can you get insurance for my employees for less than $2000/year? I will just pay the penalty.  I have no choice.” Here’s something that just might work for you. Let’s start by reviewing the rules.

Affordability Penalty Refresher

Under the Affordable Care Act (ACA), employer-provided coverage is considered "unaffordable" if it (1) costs more than 9.5 percent of the employee's W-2 wages, or (2) doesn’t cover an average of 60 percent of the employee's medical expenses. Once the ACA employer mandate takes effect, if an employer with the equivalent of 50 [updated to 100] or more full-time workers does not provide affordable coverage to full-time workers (based on a 30-hour work week), those workers can shop for insurance through a public exchange and may qualify for a federal premium subsidy or tax credit.  An employer would face a penalty of $3,000 per each full-time worker who receives a subsidy/credit.

As described below, the affordability penalty is separate from the "pay or play" employer mandate to provide health coverage or pay a penalty of $2,000 per each full-time employee.

Update:

For Midsize Firms, Employer Mandate Delayed Until 2016

In February 2014, the Obama administration announced it was again relaxing the employer mandate under the Affordable Care Act. According to a Treasury department final rule and related fact sheet and Q&A on Employer Shared Responsibility Under the Affordable Care Act:

• For employers with the equivalent of 50 to 99 full-time employees (based on a 30-hour work week), the employer mandate will not take effect until 2016.

• For employers with 100 or more full-time equivalent workers, offering coverage to 70 percent of their full-time employees will be counted as fulfilling the employer mandate in 2015. This is a transitional measure and, by 2016, large employers will need to provide
coverage to 95 percent of their full-time workers.

Now, what does that mean for you? Let’s summarize. If you are required to offer a plan and
choose Pay instead of Play, you will pay a non-deductible fine of $2,000 per person. There are some exceptions but let’s keep it simple for our example. If you choose Play but offer health insurance that is either unaffordable or doesn’t meet the ACA standards, you will be fined $3,000 only for those employees that receive a subsidy through the Exchange. So if you offer a good plan, how many of your employees will go to the Exchange and get a subsidy? Probably a lot less than everyone if you had to pay the fine for no coverage. The penalty would be lower than the penalty associated with not offering any health plan at all (the “play or pay” employer mandate’s $2,000 penalty times every full-time employee).

If I have your attention, then let’s look at how we can do this. These aren’t your safe bets. These are “out of the box” ideas. We can look at (1) plans that offer less than the 60% actuarial value threshold under ACA. If an employee accepts this plan, they will meet the individual mandate and therefore will not have the tax penalty. Another option would be (2) to offer two options: a rich plan that meets all the requirements and a lean plan like the first option. Employees make their choice and you have no penalties. Another strategy would be (3) to offer a qualified plan that doesn’t meet the affordability requirement. The employee pays a larger portion of the premium. The employer is still liable for the penalty only for those employees granted a premium subsidy or tax credit.

Should we talk about your specific employees and come up with some ideas?

News on Capitol Hill

Last week I attended a conference in Washington DC with nearly 1,000 other health insurance agents from every state in the nation to advocate with our representatives on Capitol Hill for solutions to the Affordable Care Act.  It was a new experience for me.  I currently serve as a board member on the Washington State Association of Health Underwriters.  Replace underwriters with insurance agents to better understand who we are!

Many of the agents live in states with the federal exchange.  Since Washington's Exchange (wahealthplanfinder.org) is actually doing much better than the rest, that issue was not my top concern.  My concern is for the small businesses of Washington -- you that want to treat your employees right but struggle with the increasing costs of premiums and added fees from Obamacare.

I, along with one or more of my fellow agents, met with Cathy McMorris Rodgers, and then aides from the offices of Derek Kilmer, Patty Murray, and David Reichert.  Each visit was quite different depending on the political affiliation of the person.  We presented the situation facing businesses from our perspective.  All our representatives appeared interested in hearing how their constituents were doing with healthcare reform.  I presented the plight of the small business owner.  I emphasized the demands of including all the seasonal workers with over 120 days and the increased burden of including every employee with more than 30 hours a week. 

Here are a few of the bills currently under discussion that we encouraged our representatives to co-sponsor.  We emphasized the burden that healthcare reform is placing on small employers and its contribution to  our nation's current economic uncertainty and limited job growth.  I hope we got their attention.

S 24 and HR 2988 - Forty is Full Time Act.  We may not get them to change to 40 but we pushed for a compromise of at least 35.

S 24 and HR 763, bipartisan legislation to eliminate the new national premium tax that is projected to add an average of $500 in costs to a typical family policy in 2014 and is slated to steadily increase each year.  This is part of the new fees you have already seen.  It's called the HIT tax.  Have you felt the blow?

HR 2995, a bipartisan bill to eliminate the new law's $2000 deductible cap for small businesses.  In the past we have often proposed to you, our small group clients, a large deductible with an HRA or some other means to help employees with the increased deductible while keeping the premiums at a more reasonable rate.  The deductible cap as well as the out-of-pocket max of $6,350 have contributed to the increased premiums with few options.

The experience of being on Capitol Hill was enlightening.  I will continue to advocate for the changes you would like to see.  Thank you for your loyalty to Benefit Partners.  We are working hard to help you on the benefits side so you can accomplish all your goals. 

The five things you might have missed in ObamaCare

1.  Even though we no longer have pre-existing conditions, you cannot buy insurance just when you need it.

This is the biggest misunderstanding I hear from people.  Everyone thinks they figured out how to work the system and only buy insurance if something big comes up.  Wrong!  Each year there is an open enrollment period.  This year it is October 1, 2013 through March 31, 2014.  Next year it will be from November 15, 2014 through February 15, 2015.  The effective date is January 1.  If you have a Qualifying Event, you can enroll within 30 days of that event.  A Qualifying Event would be divorce, birth, death, or loss of other coverage.  A big medical diagnosis would not be a qualifying event.  Sorry to burst your bubble.  Get more info and details on Qualifying Events on our website here.

2.  The penalty in 2014 is the GREATER of $95 a person or 1% of your household income. 

This is another big misconception.  If you make $10,000/year, your penalty of 1% would be $100.  At that income level, you qualify for Medicaid – free healthcare.  Everyone will be paying more than $95/year if you don’t qualify for Medicaid.  Do the math.

3.  You must use the WA Health Plan Finder (the Exchange) to receive a subsidy.

As difficult as it is, the Exchange works.  You must apply through the website to get a subsidy.  Do you qualify for a subsidy?  If your household of four has an income of less than $92,500, you will qualify for a subsidy of some size.

4.  An employer with less than 50 employees is not required to offer insurance.  If the employer does, there are rules that apply.

No longer can you exclude anyone working more than 30 hours.  Probationary periods cannot exceed 90 days.  Seasonal workers must work less than 120 days.  All requirements start at renewal in 2014.

5.  An employer with 50 or more employees is mandated to offer insurance to all full-time employees as of 1-1-2014.  The penalty of $2,000 per employee has been waived for 2014. 

The definition of a full-time employee has changed.  If you have seasonal or part-time employees (under 30 hours), you must count their hours and divide by 120.  Add the full-time-equivalent employees to your full-time number to reach the number of full-time employees.  If that number is 50 or higher, you are required to offer benefits. 

Healthcare Reform: National Risk Pool

Do you know someone with a pre-existing medical condition who has been uninsured for six months or more? Now there is help.

The Patient Protection and Affordable Care Act (PPACA), signed by President Obama on March 23, 2010, creates a temporary national high-risk pool to provide health coverage to people with pre-existing medical conditions who have been uninsured for six months. This high-risk pool, officially known as the Pre-existing Condition Insurance Plan, is being implemented relatively quickly and will provide temporary coverage until the broader coverage provisions take effect in January 2014. The health reform law establishes basic requirements for the high-risk pool program.

States can operate their own high-risk pool or have the federal government carry out the program. Washington State has chosen to operate a plan for the US Dept of Health and Human Services through a subsidiary of the Washington State Health Insurance Pool (WSHIP). You can get information at www.wship.org/PCIP-WA or call us.

Healthcare Reform: Health Care Tax Credit

In April you probably received a postcard from the IRS announcing the Small Business Health Care Tax Credit. Whether you have a taxable (for-profit) firm or tax-exempt firm, you may be eligible for the tax credit if you meet all three of the following criteria:
Owners and family members are not counted.

1. Your firm must cover at least 50 percent of the cost of healthcare coverage for the single employee rate.

2. Your firm must have less than the equivalent of 25 full-time workers.

3. Your firm must pay average annual wages of less than $50,000.

Your credit is worth up to 35 percent of your premium costs in 2010 and will increase to 50 percent in 2014. The credit is less for tax-exempt employers. The credit phases out for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time employees.

Both small businesses and tax-exempt organizations will use the new Form 8941 to calculate the small business health care tax credit. Small businesses will include the amount of the credit as part of the general business credit on its income tax return. Tax-exempt organizations will claim the credit on a Form 990-T which will be revised for the 2011 filing.

Healthcare Reform: Grandfathering

A health plan in existence on March 23, 2010 may be eligible for "grandfathered" status. Changes in benefits or other plan terms may result in the loss of that status. Many of the requirements of health care reform will apply to your plan whether or not you maintain grandfathered status.

All plans will have the following changes:
•Elimination of lifetime limits on essential benefits
•Phase-out of annual limits on essential benefits by 2014
•Eligibility for dependents up to age 26
•Elimination of pre-existing limitations for children under 19
•Elimination of all pre-existing limitations by 2014
•Limitation of benefit waiting periods to 90 days or less

Grandfathered plans will not have these requirements:
•Choice between PCPs and Pediatricians
•Direct access (no referral) to OB/GYN
•Covered emergency services without referral
•Preventive care and immunizations without cost sharing
•Essential benefits in 2014
•Cost share and deductible limits in 2014

Note that nearly all plans comply with the first three points.

Most health plans will not remain grandfathered. These plans will be subject to severe on-going restrictions on future benefit changes. Many carriers have announced that they will not be offering grandfathered plans.