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Accounting implications of the patient protection and affordable care act

Accounting implications of the patient protection and affordable care act. Presented by Christopher Doolittle. Presentation outline. PPACA information reporting requirements Current Delayed Budgeting for reform PCORI Fee Transitional Reinsurance Fee Employer mandate – “ pay or play ”.

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Accounting implications of the patient protection and affordable care act

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  1. Accounting implications of the patient protection and affordable care act Presented by Christopher Doolittle

  2. Presentation outline • PPACA information reporting requirements • Current • Delayed • Budgeting for reform • PCORI Fee • Transitional Reinsurance Fee • Employer mandate – “pay or play”

  3. FORECAST THE IMPACT

  4. Impact of PPACA • Budget changes due to PPACA • Employer mandate • Company has forecasted health care cost will be $4,500,000 (pre-tax) • Employer has 895 covered lives • PCORI fee will be (895 X $1) $895 (pre-tax) • Transitional Reinsurance fee will be (895 X$63) $56,385 (pre-tax) • After tax cost = $2,962,232 ($4,557,280 x 65%)

  5. Impact of PPACA • Budget changes due to PPACA (continued) • None of these costs would have been in budget if PPACA was not enacted • Above costs do not take into account resource commitments to comply with new regulations

  6. REPORTING REQUIREMENTS W-2 REPORTING CURRENTLY IN EFFECT ADDITIONAL REPORTING REQUIREMENTS EXCHANGE NOTICE 2014 2015 2016 CURRENT

  7. REPORTING REQUIREMENTS EXCHANGE NOTICE 10/1/2013 W-2 REPORTING ADDITIONAL REPORTING REQUIREMENTS 2014 2015 2016 CURRENT

  8. www.dol.gov/ebsa/healthreform

  9. FORECAST THE IMPACT

  10. REPORTING REQUIREMENTS ADDITIONAL REPORTING REQUIREMENTS 2015 W-2s W-2 REPORTING EXCHANGE NOTICE 2014 2015 2016 CURRENT

  11. INTERNAL REVENUE CODE §6056 & §6066 REPORTING REQUIREMENTS • Additional information to be reported • Disclosure of insurer’s name • Insurer’s address • Insurer’s identification number • Portion of premium paid by employer • If plan is a qualified health plan in a small group market

  12. BUDGET FOR FEES PCORI Fee Transitional Reinsurance Fee Employer Mandate July 31, 2013

  13. PCORI Fee • $1 per covered life for plan years • Ending on or after October 1, 2012, & on or before September 30, 2013 • $2 per covered life for plan years • Ending on or after October 1, 2013, & on or before September 30, 2014 • Increasing amount in later plan years

  14. Remitting pcori fee • IRS Form 720, Quarterly Federal Excise Tax Return • Due July 31, 2013 for plans ending between October 1, 2012 & December 31, 2012 • Other plans will be due July 31, 2014

  15. Covered Lives • A covered life is anyone covered by employer’s insurance plan • Self-funded plans • Actual count method • Snapshot count method • Snapshot factor method • Form 5500 method • Fully insured plans • Actual count method • Snapshot count method • NAIC member months method • State form method

  16. BUDGET FOR FEES Transitional Reinsurance Fee PCORI Fee Employer Mandate Nov/Dec 2014/Jan 2015

  17. Transitional reinsurance fee remittance • Enrollment counts must be reported to U.S. Department of Health and Human Services (HHS) • Counts due by November 15 of each year through 2016 • Notice will be issued by HHS (December 15) • Fee due within 30 days of notice (January 15) • Fee may be paid through third-party claims administrator

  18. Transitional Reinsurance fee impact • Budget for covered lives • 250 X $63 = $ 15,750 • 500 X $63 = $ 31,500 • 1,000 X $63 = $ 63,000 • 1,500 X $63 = $ 94,500 • 2,000 X $63 = $126,000

  19. BUDGET FOR FEES Employer Mandate Transitional Reinsurance Fee PCORI Fee January 1, 2015

  20. New premium rates • New premium rates need to be analyzed to determine budget impact • No gender-based rating • Standardized 3:1 ratio maximum age rating • Younger workforces could see higher premiums • Older workforces could see lower premiums

  21. Employer Mandate • §4980H – Applicable employers must provide minimum essential coverage • Large employers – 50 or more full-time equivalents • Nondeductible penalties for not offering minimum essential coverage • $2,000 penalty for each employee • Excluding first 30 • Nondeductible penalties for not offering “affordable” minimum essential coverage • $3,000 penalty for each employee

  22. Penalty Calculation • Example • An employer with 50 employees does not provide minimum essential coverage • At least one of these employees becomes certified to employer as having enrolled in a qualified health plan, i.e., gets health insurance from an exchange • Employer will be subject to $2,000 penalty per employee • Excluding first 30 employees • $2,000 X (50-30) = $40,000 nondeductible penalty • Employer offers minimum essential coverage, but it is not affordable • Ten employees become certified • Employer will be subject to $3,000 penalty per employee certified • $3,000 X 10 = $30,000 nondeductible penalty

  23. PAY OR PLAY

  24. Pay or Play - example • Example: $40,000 penalty • Employer-paid health care costs • Assuming 35% tax rate • $40,000/(1-.35) = $61,538 breakeven • If health care costs exceed breakeven, paying penalty could be advantageous

  25. FORECAST THE IMPACT

  26. Thank you FOR MORE INFORMATION// For a complete list of our offices and subsidiaries, visit bkd.com or contact: Christopher Doolittle// Senior Managercdoolittle@bkd.com // 501.372.1040

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