Recent Changes to the Patient Protection and Affordable Care Act (PPACA)
Due to technological problems with healthcare.gov and confusion around cancellations of plans that do not meet the law’s requirements, the Obama administration has made several changes to delay implementation of key elements of the Affordable Care Act including the following (based on information from WebMD and the U.S. Department of the Treasury):
1. Giving consumers an extra week to purchase coverage for 2014. Because of technical glitches affecting Health Insurance Marketplace web sites, the federal government is giving consumers more time to buy coverage that will begin on Jan. 1, 2014. People can now buy coverage as late as Dec. 23, 2013, instead of Dec. 15. This only applies to the federally run Marketplaces. States that run their own Marketplaces may have different deadlines.
2. Giving consumers more time to enroll. The deadline to enroll and avoid a tax penalty was also extended. Previously, consumers had to buy coverage by Feb. 15 to avoid a penalty and that has been extended through the last day of open enrollment on March 31, 2014.
3. Extending the enrollment period for 2015. Americans can now buy coverage for 2015 from Nov. 14, 2014, to Jan. 15, 2015. Previously, the enrollment period was from Oct. 15, 2014, to Dec. 7, 2014. Officials said the change will give insurers more time to set their rates for 2015.
4. Allowing insurers to restart cancelled policies. Many Americans will lose their existing insurance plans because their coverage didn’t meet the new ACA standards. In some cases, alternatives for new coverage may be more expensive and some people may not be allowed to keep their doctors. In Nov. 2013, the Obama administration allowed insurers to restart canceled policies at their discretion if state insurance commissioners allow insurers to do so. This also gives insurers another year to align existing plans with the rules or eliminate them entirely.
5. Delaying employer responsibility provisions. Last summer, the Obama administration delayed the employer responsibility provisions of PPACA for a year. Businesses with more than 50 workers are not required to offer insurance coverage to full-time employees until January 2015 rather than 2014.
In February of this year, the Obama administration further delayed the ACA’s employer mandate. Mid-sized businesses that employ 50 to 99 full-time workers are not required to provide health insurance until 2016, while larger firms that employ 100 or more full-time employees will be subject to the mandate starting in 2015. However, these employers only have to cover at least 70 percent of their workforce starting next year to avoid fines, and have until 2016 to increase this number to 95%.
6. Delaying online enrollment of small employers through Healthcare.gov. The Obama administration also announced a one-year delay in a major element of the new health care law that would allow small businesses to buy insurance online for their employees through the new federal marketplace. The date has now been pushed back to November 2014 for coverage that takes effect in January 2015, according to the Health and Human Services Department. To read more on this click here.
7. Potentially allowing consumer to bypass Marketplaces. The Obama administration is looking at ways to relieve the log-jam of Americans who’ve had trouble buying insurance coverage through the online Marketplaces. One approach could allow consumers who are eligible for subsidies to bypass the Marketplaces and buy coverage directly from insurers and brokers.
8. Clarifying the definition of “full-time employees” and volunteer rules. In response to public feedback received since a draft of the guidelines was proposed in January 2013, the finalized guidance provides clearer definitions of “full-time employees,” which generally include those individuals who work an average of 30 hours per week. The guidance notes “bona fide” volunteers do not count towards the number of full-time employees that determine an organization’s 4980H categorization. Tax code section 4980H addresses the employer shared responsibility requirements regarding health coverage of employers with at least 50 full-time employees.
To read more on these changes to the Affordable Care Act click here.
President Obama signed the $940 billion Patient Protection and Affordable Care Act (PPACA) on March 23, 2010.
Colorado Nonprofit Association has put together an overview of Federal Health Care Reform that outlines specific provisions in the Affordable Care Act that affect nonprofits, both as employers and as service providers.
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act, among other changes, extends access to coverage for the uninsured and prevents the denial of insurance for pre-existing conditions. Some of the key provisions that affect nonprofits include:
Health Insurance Exchanges: Provides a mechanism for individuals and employers to buy health insurance as a part of a larger purchasing pool. Colorado’s health insurance exchange, Connect for Health Colorado will open for enrollment on October 1, 2013.
Currently, employers with 50 employees or fewer are eligible to purchase coverage through Connect for Health Colorado (states may decide to allow larger employers to access exchanges from 2017 onward). Also, individuals with incomes between 133 percent and 400 percent ($24,352 – $73,240) of the Federal Poverty Level (FPL) will be eligible to purchase subsidized coverage as well.
By purchasing coverage through a health insurance exchange, individuals and employers may be eligible for certain tax credits or subsidies [described below]
Small Employer Credit: Provides a tax credit for small employers that pay for their employees’ healthcare costs. The tax credit is a refund for quarterly payments to the IRS for income tax or Medicare withholdings from employees’ wages. To qualify for the credit, nonprofit employers must:
- cover at least 50 percent of employees’ premiums; and
- have 25 employees or fewer; and
- have average wages of less than $50,000 per year.
The credit is 25 percent (35 for-profit credit) of the amount of qualified health costs for nonprofits from 2010 through 2013. In 2014, the credit amount increases to 35 percent (50 percent for-profit credit) but only if the nonprofit purchases coverage through an exchange. The credit amount is reduced by a scale for employers with more than 10 employees or payroll more than $25,000. Click here to view a table from the Congressional Research Service.
For more information, the small business health care tax credit is explained in more detail in an IRS article or the following IRS video.
Update: In March 2013, the IRS announced an 8.7 percent reduction in the amount of the small employer health credit available to small businesses and nonprofits due to sequestration.
Individual Affordability Credit: Provides new sliding scale tax subsidies to individuals and families to limit their heath premium expenditures. Credits are offered to ensure that premiums range from 1.5 percent of income at the lowest tier and 9.5 percent of income at the highest tier. Individuals with incomes between 133 percent and 400 percent ($24,352 – $73,240) of the Federal Poverty Level (FPL) will be eligible to purchase subsidized coverage. Cost-sharing assistance for individuals and families would also be available for those that qualify.
Individual Mandate: Beginning in 2013, all US citizens and legal residents would be required to purchase health insurance through individually purchased coverage, employer-sponsored coverage, or a federal insurance program. The penalty for not maintaining health insurance would be an excise tax of $695 per adult in the household. The per adult penalty will be phased in as follows:
- 2013: $0
- 2014: $95
- 2015: $325
- 2016: $695
The tax in 2014 is $95 or 1 percent of income, whichever is greater. The amount rises until 2016, when it becomes $695 for an individual (up to $2,085 for a family), or 2.5 percent of income, whichever is greater. The tax would be indexed after 2016 and could increase based on inflation. No criminal penalties could be imposed on the failure to pay excise tax. Exemptions provide for financial hardships, religious reasons, and Native Americans.
Medicaid Expansion: In 2013, Colorado passed legislation expanding Medicaid to individuals at 133 percent of the Federal Poverty Level. The federal government will pay 100 percent of the coats of expansion until 2017 and 90 percent thereafter. Colorado’s share of the expansion costs will be funded by a fee on hospitals serving Medicaid patients.
Employer Responsbility: Effective 2014, employers with 50 or more employees would be responsible for either offering health insurance to their employees or paying a fee per employee to help cover the cost of making insurance affordable through the exchange. Employers must pay at least 60 percent of the cost of coverage. For coverage to be affordable, the employee portion cannot exceed 9.5 percent of the employee’s family income. Plans in existence on March 23, 2010 are considered ‘grandfathered plans’ for purposes of the act. The legislation eases the transition into this policy change by exempting the first 30 workers from the payment calculation.
Update: on July 2, 2013, the White House announced that it will delay implementation of these employer responsibility provisions until 2015.
Cadillac Plans: Effective 2018, there is a 40 percent excise tax on high-value plans more than $10,200 for individuals and $27,500 for families. The tax is on the insurer or plan administrator.
Nonprofit Hospitals: Would establish new requirements applicable to nonprofit hospitals. This includes a periodic community needs assessment, financial assistance policy requirements, limitation on charges to patients, collection practices reform, and new reporting and disclosure requirements.
Links to Related Information:
- The IRS’ explanation of the small business tax credit
- Connect for Health Colorado’s tax credit calculator
- National Council of Nonprofits’ FAQs on the Affordable Care Act.
- Small Business Majority’s Health Coverage Guide
- Kaiser Family Foundation’s chart comparing the proposals passed by each house and the final version (PDF)
- Independent Sector’s analyses of the health care reform bill