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Healthcare Reform Timeline

The Patient Protection and Affordable Care Act (PPACA)

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 the insurance purchased in the small group and individual insurance markets, this timeline provides a quick glance at changes that have already occurred and changes that can be expected in coming years.    

2010

  • A temporary small business tax credit became available for six years for certain small businesses that provide qualified health coverage. The rules include:

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. ·       

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. ·       

Only firms covering 50 percent or more of insurance costs will be eligible. Beginning in 2014, if firms qualify for the tax credit, insurance coverage must be purchased in a Small Business Health Options Program (SHOP) exchange.

  • On July 1st, a 10 percent excise tax was imposed on certain on indoor tanning services.
  • In June, early insurance reforms began. Temporary high-risk pools were created for uninsured adults with pre-existing conditions. For plans that began in late September, there were prohibitions on lifetime and annual benefit spending limits, non-group plans were not allowed to cancel coverage, plans cover most preventive care, and dependents were allowed to remain on their parents’ policies until age 26.

2011

  • Manufacturers and importers of brand-name drugs began paying a $2.5 billion tax.
  • The prohibition of purchases of over-the-counter medications from consumer-driven accounts began.
  • The penalty for using Health Savings Accounts (HSAs) for non-qualified purchases doubled to 20 percent.

2012

  • Businesses would have been required to send additional Form 1099s for every business-to-business transaction of $600 or more, but this provision was repealed in 2011. Previous Form 1099 reporting requirements still exist.
  • Manufacturers and importers of brand-name drugs tax rose to $2.8 billion.
  • Employers were required to provide a Summary of Benefits and Coverage (SBC) to employees during open enrollment season. Health insurance plans (in the case of fully insured products) and health insurance plan sponsors (in the case of self-insured products) designed the summaries, but employers were required to distribute the summaries to employees.

2013

  • Employers must determine size – whether they will be considered “large” or “small” – for the requirements of the employer mandate. Penalties will not occur until 2014, 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 2014, the preceding calendar year is 2013. 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 30 hours per week (130 total monthly hours).
  • New counting requirements for part-time employees: Part-time employees’ hours will be converted into FTE employees for determination of employer size and penalty liability. For example, if six employees each work five hours per week, they will count as if the firm had one additional FTE employee.
  • Employers must determine whether employees are full-time employees: Employers may measure monthly hours or utilize a look-back period of 3-12 months to determine whether average employee hours exceeded 30 hours per week (130 hours per month).
  • Employers must notify each employee at the time of hiring written notice of 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 60 percent actuarial value.
  • Medicare payroll tax on wages and self-employment income in excess of $200,000 ($250,000 joint) will increase by 0.9 percent.
  • Medicare investment tax imposes a new 3.8 percent tax on investment income for higher-income taxpayers.
  • Flexible Spending Accounts will be limited to a maximum of $2,500 annual contribution.
  • Employers will be required to report the cost of employee health benefits on W-2s for tax year 2012 (both employer and employee contribution). Until the IRS issues additional regulations, employers that file less than 250 Form W-2s will not be required to report this information.
  • The threshold at which medical expenses, as a percentage of income, are deductible increases to 10 percent, from 7.5 percent.
  • An annual 2.3 percent excise tax on medical devices begins.

2014

  • An $8 billion small business health insurance tax will fall on the fully insured market, where the majority of small businesses purchase insurance.
  • Health insurance exchanges open to individuals and small businesses with up to 100 employees, although states may limit the small employer definition to no more than 50 employees until 2016.
  • Premium credits kick in, and the federal government begins subsidizing the purchase of health insurance for individuals with incomes up to 400 percent of the federal poverty level.
  • All individual and small group health insurance policies must provide an essential health benefits package that will be defined by federal and state officials.
  • Individual mandate tax begins. Most individuals without minimum essential coverage are subject to a tax. Individual mandate tax penalty begins at $95 or 1 percent of household income, whichever is greater.
  • Employer mandate begins, requiring growing firms to provide 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 government subsidy. A full-time employee qualifies for a subsidy if his or her household income is between 138 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 income. 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 138 percent and 400 percent of the federal poverty level. The penalty is $2,000 per full-time employee (minus the first 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 the first 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 levels of coverage.
  • 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 exchange. If an employer chooses to offer health insurance, it must cover the essential health benefits package.
  • 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 family coverage based on geography, age and smoking status. Insurers must offer coverage to anyone. The law also limits out-of-pocket cost-sharing, and small group and individual market insurance plans must include government defined essential health benefits and multiple coverage levels.

2015

  • Small business health insurance tax rises to $11.3 billion.
  • Individual mandate tax penalty increases to $325 or 2 percent of income, whichever is greater. 

2016

  • Small business health insurance tax remains $11.3 billion.
  • Individual mandate tax penalty increases again, to $695 or 2.5 percent of income, whichever is greater.
  • Small business (SHOP) health insurance exchanges must open up to businesses with up to 100 employees.

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 may allow large employers to enter the exchange.

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.

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PCB Insurance Services, LLC

7600 Monterey Road, Suite 140
Gilroy, CA 95020
Main office: 408-847-1000

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