E. Denise Felber, CPA HoganTaylor LLP June 2013 Health Care Reform Impact on Businesses and Individuals 1

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Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Implemented Changes Since March 10, 2010 Random in coverage, purpose and effect: Small Employer Tax Credits Coverage for Unmarried children up to 27 Exclusion for Pre-existing conditions – children under 19 Preventative Care without co-pay Flex Account Reimbursements limited to prescribed meds No Lifetime Limits for Essential Benefits Form W-2 includes the value of health benefits Salary reductions to fund health FSA limited to $2,500 New surtax on investment income (individual & trust) New surtax on earned income 3

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Overview Purpose: access to “qualified health plan which has minimum essential coverage to provide essential health benefits” by

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Overview Qualified Health Plan Policy meets certain certification requirements, provides “an essential health benefits package,” and is offered by an insurer meeting detailed requirements. (Defined by Department of Health and Human Services and with the state insurance exchanges certifying insurance coverage and policies.) 5

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Overview Minimum Essential Coverage Policy that covers at least 60% of the estimated cost of essential medical health benefits, including Employer Policy Policy purchased through exchange, or Coverage under any of these government-sponsored programs: Medicare program Medicaid program Children's Health Insurance Program (CHIP) TRICARE for Life program (Military) Veteran's health care program or Health plan (Peace Corps volunteers) Doesn’t include specialty policies (cancer, accident) 6

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Overview Essential Health Benefits Essential Health Benefits Ambulatory Emergency Hospitalization Maternity & Newborn Mental Health & Substance Abuse Drugs Rehab Lab Preventative, Wellness, & Disease management Pediatric (Medical, Vision and Dental) (Note: Many items are not required to be provided.) 7

Policies Coverage for ESSENTIAL Benefits No Annual or lifetime limits in DOLLARS No Coverage Denial Deductibles capped $2,000 ($4,000 family) Out of pocket lmt-$6,350 ($12,700 family) For other benefits Additional costs for out of network Additional deductibles and out of pocket Annual and lifetime limit allowed Exclusions allowed Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Qualified Health Policies 8

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Premium Variances Allowed: Family coverage vs individual Cost per person covered State rating area Age of participants (max 3 to 1) Tobacco use (max 1.5 to 1) Not allowed: Health status or medical condition Claims experience Receipt of Health care Medical history Genetic information Evidence of insurability Disability Any other item defined by HHS 9

Insurance Exchanges Individual and Group Market for Qualified Plans with Essential Benefits Certification of qualified health policies Assessment of taxpayer’s access to other medical coverages or government subsidies Collects information regarding household Shares information with IRS to verify info Notifies IRS of employers subject to penalty Recertifies taxpayers status annually Collects information regarding job changes Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Insurance Exchanges 10

Subsidies determined by the exchange for individuals: Premium assistance required contribution of income -2% to 9.5% Assistance with Co-payments Requirements: Income – 100% to 400% poverty level(included) Information verified by IRS re: household members, income & ID numbers Proof of citizenship or immigration status Employer can not offer affordable insurance Employer information Can’t be enrolled in other government programs Policy purchased from the state exchange Can’t file married, filing separately Projected average subsidy: $5,000 Estimated qualifying individuals: 20 million taxpayers Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Insurance Exchanges 11

IRS roll: Provide information to exchange to verify information on income tax returns. Collects information from the exchange and employers to identify employers and individuals subject to penalties. Withhold individual penalties from tax refunds Respond to inquiries and protests regarding information provided to the exchange and penalties 16,000 new agents Cost to set up structure to provide assistance by the IRS: $275 million Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – IRS and ACA 12

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer Group Insurance: Source: Tower Watson and Kaiser Family Foundation 13

Employers: Penalties for employers with more than 50 FTE Penalty is based upon full time employees Only full time employees have to be offered insurance Employee count is based upon full time equivalents Full time employee has 30 or more hours per week Small employer group policies available on exchange Cafeteria plans can only reimburse on policies purchased through the exchange Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer 14

Employers’ Penalties: No coverage offered for minimum essential benefits An employee applies and receives premium assistance $2,000 per full time employee Coverage offered for minimum essential benefits that is not affordable Affordable-employee cost is less than 9.5% of wages for single coverage An employee applies and receives premium assistance $3,000 penalty per employee that receives assistance Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer 15

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer Employers will be required to provide detailed reports of insurance offered, employees and their dependents, applicable social security numbers and addresses, cost and months of coverage. At least 70% of full time employees must be covered to avoid discrimination rules. 16

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer Cost Considerations-Penalties 17

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Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer Cost Considerations Workforce Retention or Restructure: Composition of their workforce Wage level and differences, Competition for their employees, Part time labor, Multiple locations (states), Automation Outsourcing Benefit considerations or changes: Large deductible policies with HSA Wellness Programs Future increases in insurance costs Elimination of certain benefits-for example, transplants 19

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer Cost Considerations-Penalties 20

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer Cost Considerations-Penalties 21

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Employer Cost Considerations-Penalties 22

Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act – Individual Considerations-Penalties 23 Penalties For not having Minimum Essential Coverage 3 different computations based upon income, family members and cost of Bronze policy (see example) Exceptions for those covered by governmental plans members of Native American Tribes those in jail members of certain religious groups Exception for those whose income is below the tax return filing thresholds or whose premium cost is more than 8% of household income. CBO estimates 6 million will pay a penalty with total collections of $7 billion. CBO projects 30 million nonelderly will be uninsured in 2016 but the majority will not be subject to the penalty tax.

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