By Phil Larson
2015 will bring about new math for the Affordable Care Act (ACA) also called Obamacare. These new numbers are meant to reflect changes over time, and should be monitored closely for communications, administration, training and other compliance needs of your organization.
This is not all of them, but many important mathematical changes will occur in 2015 including:
New Employer Mandate Affordability Calculation: The employer mandate is a complicated set of rules for certain defined large employers. These rules involve the offer of the correct form of health plan coverage for certain full-time employees at certain times. The rules do not technically "require" health plan coverage, instead, employers may find themselves subject to an excise tax if they (1) do not offer health plan coverage , (2) offered the wrong coverage or (3) missed a certain amount of their full-time employees (or dependent children) provided other conditions are met. One condition to offering the right coverage is that it must be affordable. Affordability for the Employer Mandate is based on on single coverage, for the lowest plan offered. The test for 2014 was 9.5% of income. The test for 2015 will be 9.56%. [Please note, the safe harbor regulations tied to this change also need to be amended to reflect the new number in order for it to apply.]
New Employer Mandate Penalty Calculation: If a large employer finds themselves subject to the employer mandate rule described above, then they need to calculate their excise tax. This tax will be a monthly calculation on either of one or two formulas. The first formula is for a large employer that does not provide health plan coverage for its full-time employees, the second formula is for a large employer that does but either missed a few or failed under the affordability test (described above) or another test related to minimum value. The first test is basically a $2,000 times each full-time employee calculation. The second test is a $3,000 times each full-time employee that receives a premium tax subsidy (described below). These penalty amounts are expected to change respectively in 2015 to $2,120 and $3,180.
New Individual Mandate Affordability Calculation: Separate than the employer mandate above, there is another rule under the ACA for individuals and their responsibility to obtain minimum essential coverage or pay an fine on their tax return. There are several rules tied to this requirement but one is that it will not apply if the coverage available to them is not "affordable" per the individual mandate rule. The test for 2014 was 8.0% of income but will change to 8.05% in 2015.
New Patient Centered Outcomes Research Institute (PCORI) and Transitional Reinsurance Program (TRP) Fee Numbers: The PCORI fee is an IRS fee and the TRP fee is an HHS fee based on the number of covered lives in a given health program. The PCORI fee will last for 7 years and the TRP fee will last for 3 years, both fees can adjust annually. The PCORI fee is expected to raise with national health expenditure numbers. As originally planned, the TRP fee will be lowered to $44 per covered life for 2015 and expected to be even lower in 2016.
New Out of Pocket Limits for Health Plans: Health plans must maintain a cap on participant out of pocket expenses for in-network qualified medical expenses. Two separate limits exist for this, one for so called High Deductible Health Plans (HDHPs) used with HSAs and one under the Affordable Care Act. Please see separate blog post on this ACA issue for 2015 changes. Please note, many HSA rules can change annually but the blog item is specific to the ACA out of pocket limit for 2015. There is also a separate limit for some stand alone pediatric dental that is tied to essential health benefit requirements. The 2015 dental rule will be $350 for one child and $700 for two or more, but these numbers can vary with some states.
New Plan Deductible Maximums: These rules set the maximum deductible a health plan may use in the individual markets (this originally included small group markets but it was later repealed). These numbers are indexed to inflation and subject to change each year. The 2015 numbers are expected to be $2,050 for self-only coverage and $4,100 for coverage with two or more.
New FSA Maximum Amount: The ACA also imposed a new limit on the maximum amount an individual may use under the employer's health flexible spending account (commonly called HFSAs or FSAs). The original amount of $2,500 is subject to federal adjustment each year. I do not believe the numbers have been released yet for 2015 but this number could change. [Update: New inflation indexed numbers were posted 10/31/14 to be $2,550 in 2015. This is an allowed amount and not required to be at this amount.]
New Premium Tax Subsidy Income Calculation: Certain individuals who meet federal eligibility requirements may also get a premium tax subsidy for health plan premiums on the exchange. [There are some competing federal cases on whether or not the exchange must be state run in order to qualify but as of now, all exchanges are eligible for premium tax subsidies]. One element of this eligibility is tied to household income, with subsidies allowing people to obtain health insurance with caps at a percentage of household income. The subsidy amount is based on the second-lowest-cost (silver) plan offered through a state health benefit exchange. The lower the income, the lower the cap on the premium they must pay, with the lowest cap set at 2.01% of household income. If a person makes more than 400% of the federal poverty line, they are not eligible for federal tax subsidies.
The maximum income limit was tied to the 9.5% rule above (to be 9.56% in 2015). Accordingly, the new rules for 2015 allow increases for various income points up to the maximum 9.56% percentage cap. The 2015 subsidy calculations will use the following premium caps for household income as a percentage of the federal poverty line:
Less than 133%---2.01%
At least 133% but less than 150%---3.02% to 4.02%
At least 150% but less than 200%---4.02% to 6.34%
At least 200% but less than 250%---6.34% to 8.10%
At least 250% but less than 300%---8.10% to 9.56%
At least 300% but not more than 400%---9.56%
It will be important for organizations to understand that these rules, and the math used by them, can change yearly. If you need assistance with any of these or the ACA generally, please contact Kinney & Larson.
2015 will bring about new math for the Affordable Care Act (ACA) also called Obamacare. These new numbers are meant to reflect changes over time, and should be monitored closely for communications, administration, training and other compliance needs of your organization.
This is not all of them, but many important mathematical changes will occur in 2015 including:
New Employer Mandate Affordability Calculation: The employer mandate is a complicated set of rules for certain defined large employers. These rules involve the offer of the correct form of health plan coverage for certain full-time employees at certain times. The rules do not technically "require" health plan coverage, instead, employers may find themselves subject to an excise tax if they (1) do not offer health plan coverage , (2) offered the wrong coverage or (3) missed a certain amount of their full-time employees (or dependent children) provided other conditions are met. One condition to offering the right coverage is that it must be affordable. Affordability for the Employer Mandate is based on on single coverage, for the lowest plan offered. The test for 2014 was 9.5% of income. The test for 2015 will be 9.56%. [Please note, the safe harbor regulations tied to this change also need to be amended to reflect the new number in order for it to apply.]
New Employer Mandate Penalty Calculation: If a large employer finds themselves subject to the employer mandate rule described above, then they need to calculate their excise tax. This tax will be a monthly calculation on either of one or two formulas. The first formula is for a large employer that does not provide health plan coverage for its full-time employees, the second formula is for a large employer that does but either missed a few or failed under the affordability test (described above) or another test related to minimum value. The first test is basically a $2,000 times each full-time employee calculation. The second test is a $3,000 times each full-time employee that receives a premium tax subsidy (described below). These penalty amounts are expected to change respectively in 2015 to $2,120 and $3,180.
New Individual Mandate Affordability Calculation: Separate than the employer mandate above, there is another rule under the ACA for individuals and their responsibility to obtain minimum essential coverage or pay an fine on their tax return. There are several rules tied to this requirement but one is that it will not apply if the coverage available to them is not "affordable" per the individual mandate rule. The test for 2014 was 8.0% of income but will change to 8.05% in 2015.
New Patient Centered Outcomes Research Institute (PCORI) and Transitional Reinsurance Program (TRP) Fee Numbers: The PCORI fee is an IRS fee and the TRP fee is an HHS fee based on the number of covered lives in a given health program. The PCORI fee will last for 7 years and the TRP fee will last for 3 years, both fees can adjust annually. The PCORI fee is expected to raise with national health expenditure numbers. As originally planned, the TRP fee will be lowered to $44 per covered life for 2015 and expected to be even lower in 2016.
New Out of Pocket Limits for Health Plans: Health plans must maintain a cap on participant out of pocket expenses for in-network qualified medical expenses. Two separate limits exist for this, one for so called High Deductible Health Plans (HDHPs) used with HSAs and one under the Affordable Care Act. Please see separate blog post on this ACA issue for 2015 changes. Please note, many HSA rules can change annually but the blog item is specific to the ACA out of pocket limit for 2015. There is also a separate limit for some stand alone pediatric dental that is tied to essential health benefit requirements. The 2015 dental rule will be $350 for one child and $700 for two or more, but these numbers can vary with some states.
New Plan Deductible Maximums: These rules set the maximum deductible a health plan may use in the individual markets (this originally included small group markets but it was later repealed). These numbers are indexed to inflation and subject to change each year. The 2015 numbers are expected to be $2,050 for self-only coverage and $4,100 for coverage with two or more.
New FSA Maximum Amount: The ACA also imposed a new limit on the maximum amount an individual may use under the employer's health flexible spending account (commonly called HFSAs or FSAs). The original amount of $2,500 is subject to federal adjustment each year. I do not believe the numbers have been released yet for 2015 but this number could change. [Update: New inflation indexed numbers were posted 10/31/14 to be $2,550 in 2015. This is an allowed amount and not required to be at this amount.]
New Premium Tax Subsidy Income Calculation: Certain individuals who meet federal eligibility requirements may also get a premium tax subsidy for health plan premiums on the exchange. [There are some competing federal cases on whether or not the exchange must be state run in order to qualify but as of now, all exchanges are eligible for premium tax subsidies]. One element of this eligibility is tied to household income, with subsidies allowing people to obtain health insurance with caps at a percentage of household income. The subsidy amount is based on the second-lowest-cost (silver) plan offered through a state health benefit exchange. The lower the income, the lower the cap on the premium they must pay, with the lowest cap set at 2.01% of household income. If a person makes more than 400% of the federal poverty line, they are not eligible for federal tax subsidies.
The maximum income limit was tied to the 9.5% rule above (to be 9.56% in 2015). Accordingly, the new rules for 2015 allow increases for various income points up to the maximum 9.56% percentage cap. The 2015 subsidy calculations will use the following premium caps for household income as a percentage of the federal poverty line:
Less than 133%---2.01%
At least 133% but less than 150%---3.02% to 4.02%
At least 150% but less than 200%---4.02% to 6.34%
At least 200% but less than 250%---6.34% to 8.10%
At least 250% but less than 300%---8.10% to 9.56%
At least 300% but not more than 400%---9.56%
It will be important for organizations to understand that these rules, and the math used by them, can change yearly. If you need assistance with any of these or the ACA generally, please contact Kinney & Larson.
