Sactoking's ACA Q&A Thread

[MovingTarget]

Sactoking, this thread is great, btw.

My question: How does the mandate affect part time vs. full time employees and the employer's contribution? I ask because a lot of companies tend to employ a large part-time work force working just shy of 40 hours to get around various labor regulations.

 

[sactoking]

Sactoking, this thread is great, btw.

My question: How does the mandate affect part time vs. full time employees and the employer's contribution? I ask because a lot of companies tend to employ a large part-time work force working just shy of 40 hours to get around various labor regulations.

When you say "affects employer's contribution" what do you mean exactly? Are you referring to the potential penalty, or perhaps the employer's contribution for insurance and the affordability test, or maybe whether an employer has to comply with ACA at all? Your question seems a bit vague to me (or, at least, I just don't understand).

 

[MovingTarget]

When you say "affects employer's contribution" what do you mean exactly? Are you referring to the potential penalty, or perhaps the employer's contribution for insurance and the affordability test, or maybe whether an employer has to comply with ACA at all? Your question seems a bit vague to me (or, at least, I just don't understand).

Perhaps I should have specified. I was asking because you may have employee A working a full 40 hr work week (or more), and employee B working just below 40 hours per week (say anywhere from 32-39 hours per week). I would like to understand how the mandate in the ACA would affect these two types of employees.

Are employers required to offer the same level of coverage to their part-time employees as their full-time employees?

If they are, are the penalties for not offering the coverage the same as for a full-time employee?

 

[sactoking]

Perhaps I should have specified. I was asking because you may have employee A working a full 40 hr work week (or more), and employee B working just below 40 hours per week (say anywhere from 32-39 hours per week). I would like to understand how the mandate in the ACA would affect these two types of employees.

Are employers required to offer the same level of coverage to their part-time employees as their full-time employees?

If they are, are the penalties for not offering the coverage the same as for a full-time employee?

Got it. I'll have to do a bit of research but this is what I know off the top of my head.

The individual mandate affects everyone. Individuals have to have insurance regardless of whether it is supplied by the employer or not. If your employer does not offer insurance to part-timers then you'll have to use the individual exchange or open market.

The penalties for employers are all based on "full-time equivalent" (FTE) employees. If a company has 100 full-timers and 100 part-timers, of which 50 are 1/2 time and 50 are 3/4 time then it has 100 + (50 x 3/4) + (50 x 1/2) = 162.5 FTE employees.

 

[EagleKeeper]

1) What is the difference from the Modified AGI vs the AGI that is on the tax return

2) How is the determination/verification that one had coverage. I have heard of a check box on the tax forms. I know in Mass (having done tax returns for relatives), they have a ID code provided by the insurers. Is this going to happen for the Feds; or are the Feds checking some Medical Insurance database to verify coverage?

3) Regarding #2, supposedly there is a 3 month grace period on not being covered. What is to stop someone from getting coverage for a month and then dropping it for 3.

4) Auto insurance is fairly well regulated on a state by state basis to protect the consumer from poor carriers. Are the insurances coming via the exchanges intended to have similar protection for the consumer. Protect against weak coverage/discounts that use the same verbiage as the legit providers.

 

[sactoking]

1) What is the difference from the Modified AGI vs the AGI that is on the tax return

Section 1004 of the ACA amends IRC to remove references to "modified gross" income and replace them with "modified adjusted gross" income. The definition of MAGI is "adjusted gross income plus any amount excluded from gross income under IRC section 911 and any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax."

2) How is the determination/verification that one had coverage. I have heard of a check box on the tax forms. I know in Mass (having done tax returns for relatives), they have a ID code provided by the insurers. Is this going to happen for the Feds; or are the Feds checking some Medical Insurance database to verify coverage?

Insurers will be required to issue a form similar to a 1099 to each policyholder indicating the months that the person was insured. The forms will be attached to the 1040 filing as proof of coverage when the tax return is filed.

3) Regarding #2, supposedly there is a 3 month grace period on not being covered. What is to stop someone from getting coverage for a month and then dropping it for 3.

Section 1501(e)(4)(B)(iii) stipulates that if there is more than one "grace period" lapse in a calendar year only the first such lapse will be forgiven.

4) Auto insurance is fairly well regulated on a state by state basis to protect the consumer from poor carriers. Are the insurances coming via the exchanges intended to have similar protection for the consumer. Protect against weak coverage/discounts that use the same verbiage as the legit providers.

Any exchange-offered product will have to meed the essential health benefits mandated by the ACA as well as the minimum quality standards set forth by the exchange. Beyond that the solvency of the insurers will remain subject to the state and NAIC solvency requirements and consumer protections will be as good or as bad as your state's enforcement allows.

 

[dmcowen674]

Given the level of discourse so far on the Affordable Care Act I debated doing this but I am going to give it a shot. If the thread devolves into partisan bickering I will ask to have it locked.

I am a state insurance regulator charged with implementing various provisions of the Affordable Care Act.

This is sticky-worthy. Making it a sticky.

Trolls - keep out or you (the troll) and your posts will be removed from this thread.

Administrator Idontcare

Wow, other than Perk's tribute to our fallen soldiers, a sticky in P&N is rare.

Even rarer is someone being so forth coming on their job and their personal involvement in current political policy.

Congrats :thumbsup:

Which state are you implementing in?

 

[dmcowen674]

Originally Posted by chucky2
Ok, two more questions:

1.) What again is this 8% amount that is being thrown around? How does that apply (lets keep the current example).

One of the provisions of the mandate is an exclusion for anyone who cannot find "affordable" health insurance; the 8% refers to that.

If the least expensive plan offered by your employer, after your employer's subsidy, is more than (I think) 9.5% of your MAGI then you may opt out of your employer's plan(s) and be eligible for the individual exchange. Once you are eligible for the exchange if the least expensive plan offered on the exchange, after government subsidy, is more than 8% of your MAGI then you are exempt from the mandate. NOTE: This must be calculated using the individual premium amounts regardless of your family status.

Example: You have a MAGI of $40,000 and your out-of-pocket premium costs on your employers lest expensive plan are $4,000.

Your employer's plan is not "affordable" to you since you would be required to spend 10% of your MAGI; you may opt out and be eligible for the individual exchange and subsidy.

The subsidy depends on a few other factors, but let's just say the person is 40 and lives in a medium-cost area; their subsidy would be $700 per year. If the cost of the least expensive plan on the Exchange minus the $700 subsidy is more than $3,200 ($40,000 x 8%) the person would be excluded from the mandate.

Interesting note: If your employer's plan is too expensive and you qualify for an individual subsidy the federal government will send a bill to your employer for the cost of the subsidy.

Policy issuance will vary state-to-state but the basic premise is it will be quasi-immediate.

Since there can be no pre-existing conditions exclusions and the only rate band factors will be age and smoking status a policy should be available almost immediately. You will still be able to be rated by health within the age/smoker rate band and that is where state rules may affect things.

Two possible scenarios are that insurers will be required to bind coverage at an "average" rate and do a retro billing if the risk is higher or they may be required to bind coverage at the highest rate in the band an issue a premium credit if the risk is lower.

Very cool, this is probably the most informed post I've ever seen on this.

Obamacare defines "affordable" unlike the definition of rich not set in stone, poor is.

It will also spank employers into either properly caring for their employees or shaming them in the open for all to see that they consider their employees to be dirt and don't deserve good affordable healthcare so they are hit with a subsidy penalty by the Government.

Awesome

 

[sactoking]

Removed by poster.

 

[dmcowen674]

Originally Posted by dmcowen674
Which state are you implementing in?

Nevada. Other than the states that already have an exchange running, like Massachusetts and Utah, we're one of, if not the, states furthest along in implementing our exchange.

Thanks to people like you. :thumbsup:

Mad props

 

[woolfe9999]

Awesome that you've chosen to do this Sacktoking! Facts>opinions and we have too much of the latter and not enough of the former on P&N.

 

[EagleKeeper]

Insurers will be required to issue a form similar to a 1099 to each policyholder indicating the months that the person was insured. The forms will be attached to the 1040 filing as proof of coverage when the tax return is filed.

I am guessing that the tax forms will modified similar to what Mass has to continue to allow eFiling.

 

[manimal]

Sactoking should get elite for this or elite does not mean what it should.


mad respect~!

 

[sactoking]

I am guessing that the tax forms will modified similar to what Mass has to continue to allow eFiling.

I'm not familiar with the Massachusetts tax form changes, but I could see a company like Automated Data Processing coming up with a digital clearinghouse like they have for W-2 forms.

 

[DCal430]

One of the provisions of the mandate is an exclusion for anyone who cannot find "affordable" health insurance; the 8% refers to that. If the least expensive plan offered by your employer, after your employer's subsidy, is more than (I think) 9.5% of your MAGI then you may opt out of your employer's plan(s) and be eligible for the individual exchange. Once you are eligible for the exchange if the least expensive plan offered on the exchange, after government subsidy, is more than 8% of your MAGI then you are exempt from the mandate. NOTE: This must be calculated using the individual premium amounts regardless of your family status.

Example: You have a MAGI of $40,000 and your out-of-pocket premium costs on your employers lest expensive plan are $4,000. Your employer's plan is not "affordable" to you since you would be required to spend 10% of your MAGI; you may opt out and be eligible for the individual exchange and subsidy. The subsidy depends on a few other factors, but let's just say the person is 40 and lives in a medium-cost area; their subsidy would be $700 per year. If the cost of the least expensive plan on the Exchange minus the $700 subsidy is more than $3,200 ($40,000 x 8%) the person would be excluded from the mandate.

Interesting note: If your employer's plan is too expensive and you qualify for an individual subsidy the federal government will send a bill to your employer for the cost of the subsidy.


Policy issuance will vary state-to-state but the basic premise is it will be quasi-immediate. Since there can be no pre-existing conditions exclusions and the only rate band factors will be age and smoking status a policy should be available almost immediately. You will still be able to be rated by health within the age/smoker rate band and that is where state rules may affect things. Two possible scenarios are that insurers will be required to bind coverage at an "average" rate and do a retro billing if the risk is higher or they may be required to bind coverage at. The the highest rate in the band an issue a premium credit if the risk is lower.

From what I read the subsidy for a family of 4 making 44k a year would be around 4000 a year. the subsidy formula will always make it so they pay no more than 3% of their income for a SILVER plan. The subsidy increases as premiums increase and is unbounded.

 

[EagleKeeper]

Sliding off topic, but this will be critical; given that the Feds will have to implement this within a year.

Insurers will be required to issue a form similar to a 1099 to each policyholder indicating the months that the person was insured. The forms will be attached to the 1040 filing as proof of coverage when the tax return is filed.

I am guessing that the tax forms will modified similar to what Mass has to continue to allow eFiling.

I'm not familiar with the Massachusetts tax form changes, but I could see a company like Automated Data Processing coming up with a digital clearinghouse like they have for W-2 forms.

For the Mass state returns; the taxpayer and each dependent has to check that they were covered, enter the tax id of the insurer and the assigned policy id # for the person. the primary starts at -01 and the others are listed as -02 to -nn. this information comes from a sheet (like you stated) that would act like a 1099.

I expect that the Feds will implement a similar system where you verify that the person has coverage as you enter dependent info for eFiling.

And many people that shortcut will check that the primary taxpayer has insurance and forget about the confirmation of the dependents .

the tax S/w will have to be beefed up to detect such a discrepancy and verify that the mistake is legit.

 

[sactoking]

From what I read the subsidy for a family of 4 making 44k a year would be around 4000 a year. the subsidy formula will always make it so they pay no more than 3% of their income for a SILVER plan. The subsidy increases as premiums increase and is unbounded.

This is partially correct. The subsidy is based on the individual/family's income as well as the cost of the second-lowest priced Silver plan on their state's exchange and is expressed as a percentage of income.

A family below 133% of the Federal Poverty Line will pay not more than 2% of their income on the second-lowest price Silver plan. Once income exceeds 133% of the FPL the subsidy decreases to not more than 3% of income. From 133% of FPL to 300% of FPL a sliding scale is applied with the subsidy decreasing to not more than 9.5% of income at 300% of FPL. The subsidy of not more than 9.5% of income is flat up to 400% of FPL, where it disappears completely.

The subsidy calculation has three interesting effects:
1) It makes plan level (Bronze/Silver/Gold/Platinum) and plan choice more important. By locking the subsidy to a specific level and choice you can attempt to try to get free coverage by going with a Bronze plan, so those who can't afford even the subsidized premiums should be able to have some form of insurance.
2) It builds in a medical inflation peg. Presumably as premiums increase the subsidy will also increase.
3) Your state can, if it so chooses, manipulate the subsidy and the exchange by dictating the quality of the Silver plans relative to the other tiers. Make the Silver plans much better than Bronze and only slightly worse than Gold and you encourage people to have a Silver or better plan; make the Silver plans slightly better that Bronze and much worse than Gold and you encourage people to have a Silver or worse plan.

 

[sactoking]

Sliding off topic, but this will be critical; given that the Feds will have to implement this within a year.



For the Mass state returns; the taxpayer and each dependent has to check that they were covered, enter the tax id of the insurer and the assigned policy id # for the person. the primary starts at -01 and the others are listed as -02 to -nn. this information comes from a sheet (like you stated) that would act like a 1099.

I expect that the Feds will implement a similar system where you verify that the person has coverage as you enter dependent info for eFiling.

And many people that shortcut will check that the primary taxpayer has insurance and forget about the confirmation of the dependents .

the tax S/w will have to be beefed up to detect such a discrepancy and verify that the mistake is legit.

When I return to the office I will try to remember to ask the health actuaries if they have heard anything about a final or interim final rule for this.

Edited: Worst case I am going to the Atlanta NAIC meeting in August and there will be a day-long panel on the first day covering ACA issues. If nobody in my office knows the answer (which they might not as it's a federal tax issue and not directly related to state implementation) I should be able to speak with someone at the panel from CCIIO.

Edit 2:There was an article on Bloomberg today about the IRS enforcing the ACA provisions. The actual content was virtually nonexistent but the tone was that the IRS does not yet know how it will confirm compliance with and enforce the penalty for the mandate.
http://www.businessweek.com/articles/2012-07-05/policing-obamacare-americas-newest-tax

 

[SNC]

Q: Do employers incur penalties for not offering insurance?
A: If the employer has <25 employees and the average wage is <$50,000 then the employer receives a tax credit to offer insurance on the SHOP Exchange.
If the employer has <50 employees the employer is exempt from the ACA mandate.

I'm confused. If a business that has less than 50 employees it is exempt from the ACA.
How then can there be a less than 25 classification? Or am I reading that wrong?

And is there any language in there that has the potential to fine business that remove workers from their employ to duck below the next level down?

As others have said, thanks for doing this!

 

[sactoking]

I'm confused. If a business that has less than 50 employees it is exempt from the ACA.
How then can there be a less than 25 classification? Or am I reading that wrong?

And is there any language in there that has the potential to fine business that remove workers from their employ to duck below the next level down?

As others have said, thanks for doing this!

The <25 category is a subset of the <50 category.

It is assumed that prices in the small group/employer exchange will be lower than in the individual exchange. Any company with <50 employees is exempt from the mandate and its employees may buy on the individual exchange, but the government wants to encourage "micro-groups" to be on the SHOP exchange instead of the individual one, so they offer a tax incentive to employers with <25 employees.

An employer with <25 employees is still exempt from the employer mandate, but they just get an incentive that employers with 25-50 employees do not.

I don't know of any specific language or penalties for employers that try to duck the mandate by removing employees from the payrolls. The two ways most commonly used today are by converting employees to contractors or by converting employees to leased employees through a staffing agency. The contractor route is still tenuous as the tests for control still stand and attempts to game the system will still be subject to federal and state labor laws. Going the staffing agency route is also a problem since staffing agencies (aka employee-leasing organizations) are usually pretty heavily regulated and health benefits offered by a leasing orgainzation might be subject to the existing Multiple Employer Welfare Arrangement (MEWA) provisions of the Employee Retirement Income Security Act (ERISA).

 

[DCal430]

Will those on Medicare be required to sign up for part B, or some supplimental insurance. thanks

 

[sactoking]

Will those on Medicare be required to sign up for part B, or some supplimental insurance. thanks

Per Section 1501(f)(1)(A)(i) only Medicare Part A will be required to meet the Minimum Essential Coverage (mandate).

 

[DCal430]

Per Section 1501(f)(1)(A)(i) only Medicare Part A will be required to meet the Minimum Essential Coverage (mandate).

Doesn't sound good to me, Medicare part A has no preventative care or outpatient care. See a doctor for some pains could cost someone on part A, over a 1000 dollars if you include the cost of test. Here people who only have Part A, will pay around 300 dollars just for a check up.

 

[sactoking]

A request I received via PM:

I was wondering if you could add a portion about the "cadillac plan fines" much talked about. These are the excellent health care plans at very low cost to employees that the ACA feels should be fined out of existence unless you get an exemption from a the administration.

What affect does the ACA have for someone with such a plan.

The ACA defines a "Cadillac" plan as one with individual premiums in excess of $10,200 annually ($850/month) or family premiums in excess of $27,500 annually (~$2,292/month) before the employer pays any portion, for calendar year 2018. These plans often have very low deductibles and copay/coinsurance as a result of the high premiums.

Congress believes that these "Cadillac" plans encourage over-use of medical care since the patient is out-of-pocket very little (employers who offer "Cadillac" plans often pay 90+% of the monthly premium) and that this over-use drives up medical costs for everybody.

As a result, the ACA has enacted a funding provision (Section 9001(a)) which taxes these plans. The tax is 40% of the premium in excess of the "Cadillac" definition.

Example: A single person with an annual, before subsidy, premium of $15,000 will trigger a "Cadillac" tax of $1,920 [($15,000 - $10,200) x 40%].

If the "Cadillac" tax is trigger solely by the premiums (like in my example) then the tax must be paid by the insurance company. If the "Cadillac" tax is triggered by HSA/MSA contributions made by the employer then the tax must be paid by the employer. If the employer self-insures (which most large employers do) and uses a TPA to administer the plan then the tax must be paid by the TPA.

Two notes:
1) There is a built-in escalator to the Cadillac threshold whereby if the federal BCBS plan premium increases by more then 55% between 2010 and 2018 then the "Cadillac" threshold is automatically bumped up to compensate; and
2) After 2018 the "Cadillac" threshold is pegged to IRC4980(I)(1)(f)(iii) COLA in $50 increments.

 

[sactoking]

Another question via PM:

Is Dental part of the ACA?

Assuming it is, if my employer pays $9,728 a year for an employee + spouse plan, and I pay $570 a year for the plan (for a total of about $10,300), is this a family plan or not? The selections have always been employee, employee+1, and employee+family so it is a bit confusing.

Dental and vision are contemplated by the ACA but the rules are not finalized. We do know that pediatric dental will be required under the ACA but we do not know if it will be considered an Essential Health Benefit. Outside of that we do not know if pediatric vision or adult dental and vision will be required or an EHB. It should be possible to purchase standalone dental and vision on the exchange, but again we don't have any preliminary rules for that yet.

Concerning the "Cadillac" tax, under the ACA a "family plan" is considered anything other than a "self-only" plan. In other words, two or more people constitute a family, regardless of composition.

Edited: Pediatric dental and vision will be required under the ACA. Also, insurers offering on the individual exchange must offer a child-only health product. Many insurers dropped child-only coverage recently when the preexisting conditions/no underwriting requirements kicked in September 23, 2010.