21st Century Cures Act Passed
On Tuesday The 21st Century Cures Act Passed and signed by President Obama. The ‘Act” has numerous components but the the greatest impact on small business is the HRA ( health reimbursement arrangement) component.
The Cures Act allows small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRA). This provision will go into effect on January 1, 2017.
The IRS previously limited Employer reimbursement of individual premiums in light of the requirements of the Patient Protection and Affordable Care Act (ACA). For many years, employers had been permitted to reimburse premiums paid for individual coverage on a tax-favored basis, and many smaller employers adopted this type of an arrangement instead of sponsoring a group health plan. However, these “employer payment plans” are often unable to meet all of the ACA requirements that took effect in 2014, and in a series of Notices and frequently asked questions (FAQs) the IRS made it clear that an employer may not either directly pay premiums for individual policies or reimburse employees for individual premiums on either an after-tax or pre-tax basis. This was the case whether payment or reimbursement is done through an HRA, a Section 125 plan, a Section 105 plan, or another mechanism.
Who is eligible?
The Cures Act now allows employers with less than 50 FT employees (under ACA counting methods) who do not offer group health plans to use QSE HRAs that are fully employer funded to reimburse employees for the purchase of individual health care.
What are the funding limits?
The reimbursement cannot exceed $4,950 annually for single coverage, and $10,000 annually for family coverage. The amount is prorated by month for individuals who are not covered by the arrangement for the entire year. Practically speaking, the monthly limit for single coverage reimbursement is $412, and the monthly limit for family coverage reimbursement is $833. The limits will be updated annually.
Impact on Individual Subsidy Eligibility?
For any month an individual is covered by a QSE HRA/individual policy arrangement, their subsidy eligibility would be reduced by the dollar amount provided for the month through the QSE HRA if the QSE HRA provides “unaffordable” coverage under ACA standards.
Employees applying for coverage on federal or state health insurance exchanges will need to disclose the amount that the employer is making available via the HRA. That amount will be used by the exchange in calculating whether an employee’s household income exceeds ACA affordability thresholds (2017 – 9.69 % of household income), as well as determining subsidy amounts for those that meet the eligibility requirements. Those employees eligible for a subsidy will have their monthly amount reduced by the monthly HRA amount available through their employer.
If the QSE HRA provides affordable coverage, individuals would lose subsidy eligibility entirely. Caution should be taken to fully education employees on this impact.
COBRA and ERISA Implications?
QSE HRAs are not subject to COBRA or ERISA.
Annual Notice Requirement?
The new QSE HRA benefit has an annual notice requirement for employers who wish to implement it. Written notice must be provided to eligible employees no later than 90 days prior to the beginning of the benefit year that contains the following:
- A statement to the employee that it is their responsibility to provide the federal or state health insurance exchange with the amount being provided in HRA funds, as this amount will be used by the exchange when calculating need based premium assistance.
- A statement that if the employee is not covered by minimum essential coverage for any month of the tax year, they could be subject to a penalty under the Individual Mandate provisions of the ACA.
Failure to provide this notice will result in a penalty to the employer of $50 per applicable employee, up to a $2,500 maximum per calendar year. Transition relief is available for plans starting in the first quarter 2017 – they will have until April 1, 2017 to provide notices to employees.
Record-keeping, IRS Reporting?
Because QSE HRAs can only provide reimbursement for documented healthcare expense, employers with QSE HRAs should have a method in place to obtain and retain receipts or confirmation for the premiums that are paid with the account. Employers sponsoring QSE HRAs would be subject to ACA related reporting with Form 1095-B as the sponsor of MEC. Money provided through a QSE HRA must be reported on an employee’s W-2 under the aggregate cost of employer-sponsored coverage. It is unclear if the existing safe harbor on reporting the aggregate cost of employer-sponsored coverage for employers with fewer than 250 W-2s would apply, as arguably many of the small employers eligible to offer QSE HRA’s would have fewer than 250 W-2s.
Individual Premium Reimbursement Prohibitions
Outside of the exception for small employers using QSE HRAs for reimbursement of individual premiums, all of the prior prohibitions from IRS Notice 2015-17 remain. There is no method for an employer with 50 or more full time employees to reimburse individual premiums, or for small employers with a group health plan to reimburse individual premiums. There is no mechanism for employers of any size to allow employees to use pre-tax dollars to purchase individual premiums. Reimbursing individual premiums in a non-compliant manner will subject an employer to a penalty of $100 a day per individual they provide reimbursement to, with the potential for other penalties based on the mechanism of the non-compliant reimbursement.
For analysis if this works for your small business? Please contact our payroll and reimbursement team on your HR/Payroll/Compliance needs at Millennium Medical Solutions Corp (855)667-4621 for immediate answers.
Health Exchange Marketplace Top Ten List
The Health Exchange also known as The Health Marketplace or Obamacare Exchanges are set to open in less than 12 hours. Are you ready or aye you like most asking What is an Exchange? Starting Oct 1 you can enroll until March 31, 2014, though you’ll generally need to sign up by Dec. 15 of this year, to be covered as of Jan. 1. You can find your state’s marketplace at healthcare.gov. The prices for the marketplace plans are likely to be similar to those sold privately. A plan that is also available on the exchange may be eligible for subsidies. Heres an easy top 10 list of what you need to know.
10. Locate your State Exchange
Look up your state’s exchange here and Healthcare.gov. Some states are running their own exchange, others are running it through the federal government see www.healthcare.gov. For NY Tri-State the sites are:
NYS – http://info.nystateofhealth.ny.gov See rates here
NJ – https://www.healthcare.gov/how-do-i-choose-marketplace-insurance
CT – https://www.accesshealthct.com See rates here
9. Individual Mandate Penalty
For 2014, the annual penalty is $95 or 1% of your income, whichever is greater. The penalty will increase over the first three years. Coverage can include employer-provided insurance, individual health insurance, Medicare or Medicaid.
|Health Insurance Individual Penalty for Not Having Insurance|
Pay the greater of the two amounts
|Year||Percentage of Income||Set Dollar Amount|
|2014||1%||$95 & $285/family max|
|2015||2%||$325 & $975/family max|
|2016||2.5%||$695 & $2,085/family max|
8. Individual Subsidies
Individuals who do not have affordable minimum essential coverage from their employer will be eligible for tax credit subsidies for their health insurance purchase on a state exchange if their income is below 400 percent of federal poverty level.
If you make under $45,960 or your family makes under $94,200, you could get a real break on health insurance costs More low-income people will also be eligible for free coverage under Medicaid For those eligible, the subsidies will cap the amount you pay for your exchange policy at between 2% and 9.5% of your income (on a sliding scale, based on your income). To find out how much you would pay, estimate your income for this year and plug it into any health subsidy calculator. You can also see estimate subsidies with these “health subsidy charts”.
7. Small Business Subsidy – SHOP Exchange
A key change is that the small business health care tax credits will only be available ONLY through the SHOP Exchange marketplace in 2014. Small businesses with 25 or fewer employees who receive less than $50,000 a year in wages may be eligible for tax credits if they purchase the plan through the SHOP marketplace. These credits will cover up to 50% of the employer’s cost (35% for non-profits) for the first two years of coverage. Click here to read more about the small business health care tax credits.
6. Your income
not your assets, such as your house, stocks or retirement accounts – will count toward determining whether you can get tax credits. When you buy your plan, you estimate your income for next year, and your tax credit is based on that estimate. The next year, your tax returns will be checked by the IRS and compared against your estimate.
5. Pre-Existing Conditions Eliminated
Your insurer generally can’t drop you, as long as you keep up with your insurance premiums and don’t lie on your application. Generally, people will be able to enroll in or change plans once a year during the annual open enrollment period. This first year, open enrollment on the exchanges will run for six months, from Oct. 1 through March of next year. But in subsequent years the time period will be shorter, running from October 15 to December 7.
4. Essential Health Benefits Covered
Each plan covers 10 “essential health benefits,” which include prescription drugs, emergency and hospital care, doctor visits, maternity and mental health services, rehabilitation and lab services, among others. In addition, recommended preventive services, such as mammograms, must be covered without any out-of-pocket costs to you. More info here.
3. Ninety-Day Maximum Waiting Period
Group health plans and health insurance issuers may not impose waiting periods of more than ninety days before coverage becomes effective. This also applies to grandfathered plans.
2. Annual or Lifetime Limits
Group health plans, including grandfathered plans, may no longer include more than restricted annual or any lifetime dollar limits on essential health benefits for participants. Limits may exist in and after 2014 for non-essential benefits.
1. Not Everyone is Eligible
- Immigrants who are in the country illegally will be barred from buying insurance on the exchanges. However, legal immigrants are permitted to use the marketplaces and may qualify for subsidies if their income is no more than 400 percent of the federal poverty level (about $46,000 for an individual and $94,200 for a family of four).
- members of certain religious groups and Native American tribes
- incarcerated individuals
- people whose incomes are so low they don’t have to file taxes (currently $9,500 for individuals and $19,000 for married couples)
There has been a lot of news about individual Obamacare provisions getting delayed – Obamacare Employer mandate Delayed. Some people may assume that means the health law is being slowly dismantled, or put off for an additional several years. .The Affordable Care Act is an extremely complicated law with a lot of moving parts, but ultimately, the biggest provisions are still moving forward. There will likely be more hiccups along the way. As the enrollment period opens for Obamacare’s new exchanges, industry experts predict there will probably be other issues that need to be ironed out — but that doesn’t mean the whole law is collapsing
Don’t be. These are the common questions that we are working through with our clients daily. Am I better off going SHOP Exchange vs. Individual for my business? Am I better off going off Exchanges or onto Private Exchanges? Whats my minimum employer contribution? Do I have to cover employee and dependents? Is dental and vision included? What happens to my Healthy NY when it shuts down Jan 1, 2014? What employer notices must I be posting?
Please contact our team at Millennium Medical Solutions Corp if you have additional questions regarding how SHOP Exchanges and Individual Exchanges can benefit you Stay tuned to our site for updates as more information gets released. Sign up for latest news updates.
Looking for Affordable Health Insurance? You can use this SINGLE PAGE form to get affordable health insurance quotes outside exchange and save money. If you are above 64 years, then use this link to Get FREE Medicare quotes from the most trusted carriers.
- Click Above
Federal government health care site: www.healthcare.gov
Kaiser Health Reform Subsidy Calculator:http://healthreform.kff.org/subsidycalculator.aspx
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At 10 AM today the Supreme Court in a 5-4 decision upheld the Patient Protection and Affordable Health Care Act’s individual mandate as constitutional.
The text of the opinion, in National Federation of Business vs. Sebelius, Case Number 11-393, is available here.
Imposition of a tax “leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice,” Roberts says. “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
According to Footnote 11, which is on page 44 of the slip opinion: Those subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing that they may not lawfully do is buy health insurance and not pay the resulting tax.With this decision finalized, New York State (and the rest of the country) can now move forward with implementing the law. We embrace the much-needed clarity and looking forward to working with our clients moving ahead.Millennium Medical Solutions Corp will be planning health care seminars to review the decision and overview to help understand the impact on employers, plan benefits, and providers. We welcome your suggestions on specific topics or questions you want us to focus on. Please join us!
Our office will continue to monitor events and inform our members of any other important news.
Imndiv Mandatae requirement_flowchart_3
Individual Mandate Penalty Chart
The same analogy would hold true with auto insurance where only the risky drivers would only participate making it impossible to afford coverage. Just imagine buying a health plan on the way to the hospital? Coining this as "ambulance-care" would be more fitting than "ObamaCare".
After 3 days of Health Care Reform Supreme Court Hearings, a central components debated is the constitutionality of forcing an individual to purchase health insurance. Certainly it would be costly if one could just opt out at any time and then come back in you would be left with a high risk pool.
The same analogy would hold true with auto insurance where only the risky drivers would only participate making it impossible to afford coverage. Just imagine buying a health plan on the way to the hospital? Coining this alternative as “ambulance-care” would be more fitting than “ObamaCare”.
Of course there are Individual Mandate penalties. So how does the penalty work?
In 2014, the penalty for being without health insurance is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater.
In 2015, the penalty for being without health insurance is $325 per adult and $162.50 per child (up to $975 for a family) or 2.0% of family income, whichever is greater.
In 2016, the penalty for being without health insurance is $695 per adult and $347.50 per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater.
As of now, there are no known method to enforcing the penalty if you don’t buy insurance and you don’t pay the penalty. In fact, the law specifically states that no criminal action or liens can be imposed on you but I am certain that will change. I would also think that if a large numbers of people continue to choose not to enroll and the cost of premiums increase, the chance to revise the low penalties and increased enforcement are inevitable.
In conclusion, the Supreme Court ruling set for June is worth watching but only for legal wonks. With average health insurance single rates costing $600/month wouldnt you pay the penalty and just opt out?