Posted 8/12/2013 12:00 am
Updated 12 months ago
Accounting for information reporting requirements in the Patient Protection and Affordable Care Act (PPACA), while considering the budget effects, requires consistent discipline. Companies should continue dedicating the necessary resources to bring regulatory change into focus.
PPACA created new information reporting requirements for insurers, self-insuring employers, government agencies and other health coverage providers. Among the new rules: Employers filing more than 250 Forms W-2 must disclose the total cost of health insurance paid on each W-2.
PPACA further mandates insurers, other coverage providers and applicable large employers to report health insurance coverage information to the Internal Revenue Service and provide a written statement to covered individuals. This additional requirement was been delayed until 2015 by IRS Notice 2013-45.
One obligation not delayed by government action is the exchange notice required to be issued to employees by Oct. 1. PPACA requires applicable employers to notify employees of the existence of the exchange, an employee’s potential eligibility for a premium tax credit or cost reduction benefits and potential loss of employer contributions to health benefits if an employee enrolls in an exchange. Model notices are available on the U.S. Department of Labor’s website.
In general, applicable employers have one or more employees engaged in, or producing goods for, interstate commerce and have $500,000 or more in annual sales volume. “Applicable employers” also include hospitals; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools and institutions of higher education; and federal, state and local government agencies.
Budgeting for Reform
Budgets will be impacted by these reforms. For companies with fewer than 50 full-time employees, PPACA set in place new rules about how premiums must be calculated. These new rules could significantly change premium rates for those whose health plans were not in place before the law was passed or those who have made significant plan changes. Under these new rating rules, some employers will see their premiums increase and others’ rates will drop. In general, companies with younger workforces can anticipate paying higher premiums, while companies with older workforces can anticipate paying lower premiums.
For companies with 50 or more full-time employees, health care reform can drive changes to the cost of health insurance while also posing the threat of nondeductible penalties (albeit delayed until 2015). The penalty for not providing affordable minimum essential coverage is $2,000 for each employee, excluding the first 30. For example, an employer with 50 employees that does not provide health insurance could face a $40,000 penalty (50 employees less 30 employee exemption multiplied by $2,000).
All companies should consider contacting their insurance carrier/consultant and forecasting the future cost of health care while considering the effect of new costs on their bottom line and business operations.
PPACA also established two fees affecting the current and future health insurance market: the Patient-Centered Outcomes Research Institute (PCORI) Fee and Transitional Reinsurance Fee.
The PCORI fee is assessed on self-insured and fully insured health plans to fund PCORI, which was established to conduct and promote clinical effectiveness research. The fee — paid by the health insurance carrier for fully insured plans and by the plan sponsor (typically employers) for self-insured plans — is $1 per covered life (employees, spouses, dependents) for plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2013; $2 per covered life for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014; and an increased amount each year thereafter through plan years ending before Oct. 1, 2019. The tax-deductible fee must be reported on IRS Form 720, Quarterly Federal Excise Tax Return, and paid no later than July 31 for plan years ending during the last quarter of 2012.
The Transitional Reinsurance Fee, running through 2014-2016, will be assessed on self-insured and fully insured health plans to fund reinsurance payments to health insurance issuers that cover high-risk individuals in the individual market. Like the PCORI fee, the transitional reinsurance fee for fully insured plans is paid by the health insurance carrier, and the fee for self-insured health plans is paid by the plan sponsor (typically employers). The tax-deductible transitional reinsurance fee for 2014 will be $63 per covered life, with the amount decreasing thereafter through 2016. For a company with 300 covered lives, the fee would be $18,900.
Plan sponsors and insurers must report their enrollment counts by Nov. 15 of each year through 2016 to the U.S. Department of Health and Human Services (HHS). HHS will provide a notice of fee liability by Dec. 15, and the plan sponsor or insurer will have 30 days to remit the transitional reinsurance fee to HHS. Self-insured employers can delegate payment responsibility to a third-party claims administrator.