The effective date of the Patient Protection and Affordable Care Act (PPACA) is March 23, 2010, although various provisions have their own effective dates from January 1, 2010, (the small business income tax credit) through 2018. The start of 2013 saw the launch of a number of key provisions, among them Medicare tax increases, limits on Health FSA deferrals and the requirement that W-2 reporting note employer and employee payments for certain health care items in 2012.
But 2014 is the year when most core pieces of PPACA will be put into effect, notably the mandates that employers with 50+ employees provide health insurance and that individuals obtain minimum essential health coverage for themselves and their dependents, whether or not they have access to coverage through their employer.
This LifeHealthPro story is excerpted from:
Equally momentous, beginning Jan. 1, 2014, states are required to have opened a state-run health insurance exchange, or to have partnered with the federal government to open an exchange. In theory, within these exchanges, insurance companies will compete for business on a transparent, level playing field, which should reduce costs and give individuals and small businesses the purchasing power enjoyed by big businesses. However, health reform does many things to increase costs by covering those who are now uninsurable and by increasing mandated benefits. Many predict these factors will far outweigh any efficiencies created by the exchanges and that health insurance prices will increase. If exchanges succeed, they will create the first viable alternative to the group markets for the younger than age sixty-five population.
In short, there’s a lot to track over these next six months. Read on for 15 provisions that will become effective on Jan. 1, 2014.
1. Health Insurance Nondiscrimination Requirements
Code Section 105(h) currently taxes the benefits received by highly compensated employees (HCEs) under discriminatory self-funded health plans. PPACA has extended these nondiscrimination rules to insured plans. It is unclear whether this change imposes tax penalties or is a substantive requirement. Employers with discriminatory insured arrangements, however, will need to consider changing them. Grandfathered plans are exempt from this rule.
This new requirement was originally intended to be effective for plan years beginning on or after September 23, 2010. The effective date was postponed in 2010 until IRS publishes a notice, which has not yet been issued. The provision may not be effective in 2014 but it likely will be.
2. State Health Insurance Exchanges
Each state must establish a health insurance exchange (or HHS will do so) for use by the uninsured and small employers with 100 or fewer employees (although states may set the cap at 50 employees). The exchanges will offer fully insured insurance contracts that provide essential health benefits at different levels of coverage (bronze, silver, gold, and platinum). Employees of small employers who offer health insurance coverage through an exchange may pay their employee premiums for such coverage on a pre-tax basis through the employer’s cafeteria plan.
This LifeHealthPro story is excerpted from:
3. State Health Insurance Exchange Tax 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.
4. Employer Mandate (Pay or Play) Tax Penalties
Employers with fifty or more full-time equivalent (FTE) employees will be required to offer their full-time employees (FTEs) minimum essential health coverage or pay a fine of up to $2,000 per year for each FTE in excess of thirty FTEs if any employee receives a premium tax credit on a state health insurance exchange. If an employer provides minimum essential health coverage to its FTEs, but fails to pay at least 60 percent of its actuarial value or the coverage is considered unaffordable (costs more than 9.5 percent of household income), then the employer must pay a penalty of up to $3,000 per year for each FTE who receives the premium credit on an exchange, but not more than would be owed for the $2,000 per year penalty. An FTE is defined as an employee who is employed for thirty or more hours per week, calculated on a forty-hour work week. This provision also applies to grandfathered plans.
5. Individual Mandate Tax Penalty
Individuals are required to obtain minimum essential health coverage for themselves and their dependents or pay a monthly penalty tax for each month without coverage. The monthly penalty tax is one-twelfth of the greater of the dollar penalty or gross income penalty amounts. The dollar penalty is an amount per individual of:
- $95 for 2014 (capped at $285 per family),
- $325 for 2015 (capped at $975 per family), and
- $695 for 2016 (capped at $2085 per family).
These dollar penalties will be indexed for inflation starting in 2017.
The gross income penalty is a percentage of household income in excess of a specified filing threshold of:
- 1 percent for 2014,
- 2 percent for 2015, and
- 2.5 percent for 2016 and later years.
In no event will the maximum penalty amount exceed the national average premium for bronze-level exchange plans for families of the same size.
Minimum essential coverage includes Medicare, Medicaid, CHIP, TRICARE, individual insurance, grandfathered plans, and eligible employer-sponsored plans. Workers compensation and limited-scope dental or vision benefits are not considered minimum essential health coverage.
6. Automatic Enrollment
Employers with more than 200 employees who maintain one or more health plans must automatically enroll new full-time employees in a health plan. The employer must give affected employees notice of this automatic enrollment procedure and an opportunity to opt out. State wage withholding laws are preempted to the extent that they prevent an employer from instituting this automatic enrollment program. The final effective date was [will be?] established by DOL regulations.