Healthcare Reform

Financial Liberty Group’s goal is to be our customers’ primary resource for managing challenges and changes resulting from Health Care Reform and rising health care costs. We strive to be your go-to-resource to find the answers you need today and plan for additional changes tomorrow. We look forward to helping you during the months and years ahead.

When the president signed the healthcare bill into law, the clock started to tick on a variety of changes. Whether it is new taxes or new mandated requirements on health insurance purchased in the small group and individual insurance markets, this timeline provided by NFIB offers a quick glance at changes that can be expected in coming years:

2013

Health Insurance coverage must be purchased in a Small Business Health Option Program (SHOP) exchange.
Employers must distribute a Notice of Coverage Options document to new employees within 14 days of the employees’ start date. The Notice of Coverage Options document is a written notice describing an employer’s health insurance offerings and/or exchange availability:
- Informing the employee of the existence of an exchange, description of exchange services, and exchange contact information; and
- Notifying the employee if the employer’s plan is below the minimum value threshold (60 percent actuarial value).

Employers must determine business size, whether they will be considered “large” or “small,” for the requirements of the employer mandate. Penalties will not occur until 2015, but a large employer is defined as an employer who employed an average of at least 50 full-time equivalent (FTE) employees on business days during the preceding calendar year. For 2015, the preceding calendar year is 2014. Size is determined monthly by adding the number of full-time employees to the number of FTE employees.
Full-time employees are individuals who have worked an average of 130 or more monthly hours (30 hours per week).
New counting requirements for part-time and seasonal employees: Part-time and seasonal employees’ hours will be converted into FTE employees for determination of employer size. Total monthly part-time and seasonal hours must be added together and divided by 120. For example, if six employees each work twenty hours per month, they will count as if the firm had one additional FTE employee.
Large employers must determine whether employees are full-time employees: Once a small-business owner has determined their business is “large,” they may track actual monthly hours or utilize a look-back period of 3–12 months to determine whether employees’ average hours exceeded 130 hours per month (30 hours per week).
Filing occurs for a new 3.8 percent tax on investment income for higher-income taxpayers for tax year 2013.
An $8 billion small business health insurance tax will begin on the fully insured market, where the majority of small businesses purchase insurance.
Health insurance exchanges begin offering coverage to qualified individuals and qualified small businesses with no more than 50 employees. Open enrollment for 2014 ends on March 31, 2014. Open enrollment for 2015 will begin on November 15, 2014.
Premium tax credits and subsidies kick in, and the federal government begins subsidizing the purchase of health insurance for individuals with incomes below 400 percent of the federal poverty level.
All individual and small group health insurance policies must provide an Essential Health Benefits package, a comprehensive list of ten broad benefit mandates and services categories.
Individual mandate penalty tax begins. Most individuals without minimum essential coverage by March 31, 2014 are subject to a penalty tax. Individual mandate penalty tax begins at $95 or 1 percent of household income, whichever is greater.
Remaining insurance reforms take effect, and insurers cannot impose coverage restrictions based on pre‐existing conditions. Modified community rating standards go into effect for individual or small business coverage based on geography, age and smoking status. Insurers must offer coverage to anyone. The law also limits out-of-pocket deductibles and cost-sharing.

2014

A temporary small business tax credit became available for two years for certain small businesses that provide qualified health coverage. The rules include:
1. Only firms with 10 or fewer employees receive the full credit. For firms with 11 to 25 employees, the credit is reduced. Firms with more than 25 employees are ineligible for the credit.
2. Only firms that pay their workers an average wage of $25,000 or less are eligible for the full credit. The credit is reduced as the average wage goes up, phasing out at $50,000.
3. Only firms covering 50 percent or more of insurance costs will be eligible.

2015

Employer mandate begins, requiring large businesses to offer health insurance or pay penalties. The penalties are based on the number of full-time employees during the preceding calendar year; whether the firm offers coverage to full-time employees; whether coverage is “affordable” and meets “minimum value;” and whether one or more full-time employees qualify for a federal premium subsidy. A full-time employee qualifies for a subsidy if his or her household income is between 100 and 400 percent of the federal poverty level and the employee’s share of the self-only portion of the premium exceeds 9.5 percent of their taxable income. Taxable income can be found in Box 1 of an employee’s W-2 form. Here are some scenarios:
- More than 50 FTE employees and the business does not offer insurance to the full-time employees, with one or more full-time employees receiving premium subsidies because their income falls between 100 percent and 400 percent of the federal poverty level. The penalty is $2,000 per full-time employee (minus 30 full-time employees).
- More than 50 FTE employees and the business offers insurance with one or more full-time employees receiving premium subsidies because their share of the self-only portion of the premium exceeds 9.5 percent of their income. The penalty is the lesser of $3,000 per subsidized full-time employee or $2,000 per full-time employee (minus 30 full-time employees).
- More than 50 FTE employees and the business offers insurance, with no full-time employees receiving premium subsidies. There is no penalty on the employer. All non-grandfathered and exchange health plans are required to meet federally mandated minimum value standard.
- Fewer than 50 FTE employees: No penalty or requirement to offer insurance. Those who qualify for the small employer tax credit must purchase a plan from the SHOP exchanges. If an employer chooses to offer health insurance, it must cover the Essential Health Benefits package.
Small business health insurance tax rises to $11.3 billion.
Individual mandate tax penalty increases to $325 or 2 percent of income above the filing threshold, whichever is greater.
Open enrollment for coverage in health insurance exchanges for 2015 ends on January 15, 2015.
Small business (SHOP) health insurance exchanges must provide more employer health insurance offering opportunities including:
- Employer choice – allowing employers to choose multiple health insurance plans from which employees may select.
- Employee choice – allowing employers to choose a metallic coverage level from which employees may choose any plan from any insurer within the coverage level.

2016

Large employers must report and verify the offer of affordable and adequate coverage to employees by January 28, 2016 and to the IRS by February 28, 2016 (March 31, 2016 if submitted electronically).
Small business health insurance tax remains $11.3 billion.
Individual mandate tax penalty increases again, to $695 or 2.5 percent of income above the filing threshold, whichever is greater.
Small business (SHOP) health insurance exchanges must open up to businesses with up to 100 employees.
Small group market definition increases to businesses with up to 100 employees, making more businesses subject to the Essential Health Benefits package and all other insurance market reforms.

2017

Brand-name drug tax rises to $3.5 billion.
Small business health insurance tax increases to $13.9 billion.
Individual mandate tax penalty is based on 2016 levels and will rise according to a cost-of-living adjustment.
States and the federal government may allow large employers with 100 or more employees to enter the SHOP exchanges.

2018

Cadillac tax begins on high-cost health insurance plans with an aggregate value that exceeds threshold amounts of $10,200 for individual coverage and $27,500 for family coverage.
Brand-name drug tax rises to $4.2 billion.
Small business health insurance tax rises to $14.3 billion.
Individual mandate tax penalty is based on 2016 levels and will rise according to a cost-of-living adjustment.