Small Group and the Affordable Care Act - Do I really need to comply? NO!!!

You know how things kind of ruminate in the back of your mind for awhile before you "suddenly" have a realization? That's what happened to me a last week.

If your company is less than 50 employees (combining Full Time and Full Time Equivalents), then you are considered a "Small Group" under the definition set out by the Affordable Care Act. While everyone is talking about 30 hours this, Bronze, Silver, Gold, Platinum medal plans that, penalties for not offering minimum coverage and cost, etc. The reality is that you will not be subjected to the employer mandate and therefore will not face any penalties if you do not comply with that mandate such as not offering coverage, not making it "affordable", or not offering compliant coverage (Note that there are other items which you must comply with such as providing a Summary of Benefits of Coverage to each employee).

To be straight, I'm not talking about plan designs or things outside of your control. I'm talking about changing the amount you contribute to your employee's premium, number of hours they are required to work before they are considered full time, etc.

You don't have to offer a plan that meets one of the Medal plans even though the probability of a plan being available that doesn't meet the guidelines is close to zero. You don't have to offer coverage to dependents (BTW, spouses are, by ACA definition, NOT dependents). Of course you may not be able to

You don't have to make sure that the employee only pays no more than 9.5% of their income towards employee only coverage on your lowest compliant plan to meet "Safe Harbor." As a matter of fact, it's probably NOT in your best interest to do this. You may harm your employees unknowingly. For example, if you do offer a "Bronze" level plan and meet the "Safe Harbor" of the above for the employee and offer coverage to their dependents, then your employee is NOT ELIGIBLE FOR A SUBSIDY. If you have lower income employees, this could be bad as a plan within the individual/family exchange may be less expensive and cover more than the plan you offer. For higher income employees who are close to or over the 400% Federal Poverty Level for income, this doesn't impact them much.

What does this mean? It means you have more flexibility that you know. If you have 5 or more employees (for Illinois at least - every state is different, in New York, only employers with over 50 employees are allowed to look at the following plans), and your workforce is younger and healthy, then you may want to explore a "level funded benefit" plan. This is partially self-funding. In the eyes of the government, it is considered self funded and not subject to some of the restrictions of the ACA. In the eyes of your employees, it looks and works exactly like a fully insured plan except with the possibility of receiving money back after your plan year if claims were less than expected.

Also, if your agent hasn't mentioned that you can do an early renewal (this means renewing this year, then renewing again on 12/1/2013) to push off the reforms (including changes in plan designs) until the end of 2014, call and ask them about it.

In general, work with your agent, roll up your sleeves and see what works best for your business first, then employees (understanding that without happy employees, your business will go down the drain).

Family Health Premiums reach $15,745 this year and how much you'll need to pay in 2014

I was reading USA Today this morning and an article listed two surveys stating that the average cost of coverage for a family is $15,745/year (http://usat.ly/PiBDpC) with employees paying $4,300/year of that cost. This translates into a 4% increase from last year, but with salary increases flat, the average family just lost buying power.

That said, let's see how the Affordable Care Act will impact the employee's portion of the cost of insurance in 2014. Here are the actual percent payouts based upon family income:

• 150% - 200% of Federal Poverty Level (FPL) equals people paying up to 6.3% of their income on health insurance. 
• 201% - 250% of FPL equals 8.05% of their income on health insurance. 
• 250% - 400% FPL equals 9.5% of their income on health insurance.

Let's see how this stacks up with the $4,300/year the average family pays towards their health insurance (assuming a family of 4).
In 2012, the FPL is $23,050 for a family of four.
150% of FPL = $34,575/year of income with a maximum spent on health insurance being $2,178.23.
200% of FPL = $46,100/year of income with a maximum spent on health insurance being $3,711.05.
250% of FPL = $57,625/year of income with a maximum spent on health insurance being $5,474.38.

What this means, especially in the Chicagoland area, is that you won't notice a change in your premium when health reform occurs. What health reform gives you is an opportunity of purchasing your own coverage and NOT being depended upon your employer. It will be interesting to see how many employees leave to start their own businesses or become consultants.

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Again, the Affordable Care Act is not what it is hyped to be. There will be no "free healthcare" for the majority of Americans. Most likely, they will be paying the same or a little bit more for their coverage than what they are paying now. The best part of health reform is that anyone can obtain a plan (guaranteed issue), with no pre-existing conditions (everything is covered from day one - as long as the insurance plan covers the conditions), and a person cannot be charged an extra premium other than if they are a smoker (community rating).

Compliance Questions -HSAs and Health FSAs - Eligibility Issues     

August 23, 2012

One of my employees just enrolled in a High Deductible Health Plan ("HDHP") and is now eligible to contribute to a Health Savings Account ("HSA").  A few months ago, his spouse enrolled in a general- purpose Health Flexible Spending Account ("Health FSA").  She enrolled the whole family, including her spouse. If the spouse never submits claims for her husband, is he still eligible to contribute to an HSA?

No.

Individuals who are covered by traditional, general-purpose Health FSA are not eligible for HSA contributions. This rule applies whether the individual is the participant in the Health FSA or simply someone whose expenses can be reimbursed-both are considered "covered." Thus, an employee's spouse will not be eligible for HSA contributions if the spouse's qualified medical expenses can be paid or reimbursed under the general purpose Health FSA in which the employee participates, as provided in Revenue Ruling 2004-45 and IRS Notice 2005-86. Nothing in the guidance limits this principle to spouses, so adult children and other individuals (e.g., domestic partners) who have HDHP coverage-and thus might otherwise be able to make contributions to their own HSAs-will not be eligible to make HSA contributions if they are also covered by a family member's general-purpose Health FSA. 

A family member's eligibility may be preserved if the Health FSA excludes him or her from coverage. But at the present time, it is unusual for a Health FSA to restrict coverage, for example, solely to the covered employee or solely to the covered employee and children (but not the spouse). Most of these arrangements allow benefits for any eligible tax dependent. Plan documents and administrative procedures would need to be redesigned in order to facilitate such an "employee-only" or "employee-plus-children (but not spouse)" coverage option. It is not sufficient for an individual to simply promise not to request reimbursement (even if the promise is kept and no claims are ever submitted).

In general, an individual who is covered by a general-purpose Health FSA will be ineligible for HSA contributions for the individual's entire period of coverage under the Health FSA -even after the individual has completely exhausted his or her Health FSA.

Although an individual generally will not be eligible to contribute to an HSA for the entire period of coverage under a general-purpose Health FSA even if the Health FSA account balance has been exhausted, an individual with a $0 balance at plan year-end under a general-purpose Health FSA with a grace period can disregard that Health FSA coverage and be HSA-eligible during the grace period, as provided in IRS Notice 2007-22. This rule requires that the $0 balance be determined on a cash basis and taking into account the uniform coverage rule. Cash basis means the balance as of the relevant date, without taking into account expenses that have not been reimbursed as of that date. Thus, pending claims, claims submitted, claims received, or claims under review that have not been paid as of a date are not taken into account. 

Written by:

Larry Grudzien

Attorney-At-Law

Larry Grudzien, Attorney at Law | 708 South Kenilworth Ave. | Oak Park | IL | 60304

New HSA Guidelines for 2013

Here are some highlights for 2013.

Annual:	2013	2012
Minimum Individual Deductible	$1,250	$1,200
Minimum Family Deductible	$2,500	$2,400
Maximum Individual Out-of-Pocket (in network)	$6,250	$6,050
Maximum Family Out-of-Pocket (in network)	$12,500	$12,100
Maximum HSA Individual Contribution	$3,250	$3,100
Maximum HSA Family Contribution	$6,450	$6,250

1. Maximum contributions are $3250 for an individual (up $150) and $6450 for a family (up $200). Person’s aged 55 years old and older can add an additional $1000/year as a catch up contribution (no change).
   
   
2. Minimum Deductibles are the same. The minimum deductible for an individual plan is $1,250 and for a family it is $2,500.
   
   
3. Catch up contributions for those 55 years old and older is still $1,000/year.
   
   
4. Maximum out of pocket has changed. The maximum out of pocket (including deductible) on an individual plan is now $6250 (up $200) and for a family it is $12,500 (up $400).

Items that haven’t changed, but are beneficial to know.

• You can put the full amount in immediately without waiting (This even applies to new hires or a person starting an HSA qualified health plan in the middle of a calendar year).
  
  
• You can put the maximum contribution into your HSA account, regardless of your deductible.

• A person can choose to accumulate HSA qualified expenses over the course of years (instead of taking the expenses out of the HSA account at the time of service). Every year they need to fill out a Form 8889 and carry the balances forward. At 65 years old, they can then take a distribution equal to the total amount of expenses incurred tax free.

• An individual can take a one-time distribution from their IRA to fund their HSA account.

• As always, you have until April 15^th (or when you file your taxes) to contribute to your HSA savings account for last year.

Check with your accountant for more information on how this would specifically apply to you.

Here is a link to the original IRS announcement: http://www.irs.gov/pub/irs-drop/rp-12-26.pdf.

Copyright 2012 Robert C Slayton