News & Events

07/14/10 | Explanation of Health Care Tax Credit for Indiana

This is the clearest explanation that I could find on the health care tax credit. This information was put together by 15 attorneys that specialize in interpreting these types of laws. This is very complicated. What was spun as a simple tax credit is very difficult to qualify and understand.  A small business might end up spending more on professional services to get the credit than what the tax credit is worth.  

Who is Eligible for the Credit? To be eligible for the Credit, an employer must be an “eligible small employer” for the year – requiring all 4 criteria to be satisfied:

1. taxable employer or a 501(c) tax-exempt employer (e.g., colleges and universities);

2. fewer than 25 full-time equivalent employees (“FTE”) for the taxable year;

• • FTE: In order to determine the number of FTEs, the employer must divide the total “hours of service” (but not more than 2,080 hours for an employee) of the”employees” by 2,080, and round down to the next lowest whole number.
• • Employees: For this purpose, count employees who perform services for the employer (which is a controlled group concept), excluding (1) partners, soleproprietors, 2% S-corp. owner, and 5% owners (along with any family members),and (2) seasonal employees unless they work more than 120 days during the taxable year (but always count these premiums).
• • Hours of Service: Hours include (1) each hour for which an employee is paid, orentitled to pay, for work performed; and (2) each hour for which an employee is paid, or entitled to pay, for periods the employee did not perform work due to a vacation, holiday, illness, incapacity disability, layoff, jury duty, military duty or leave of absence (maximum 160 hours for a single continuous period). This calculation may be a challenge depending on your pay types and payroll records;therefore, the IRS permits using either an 8 hours/day or 40 hours/week equivalency (which should be considered if it lowers the hours). We recommend reviewing the available options with your payroll department.

3. “average annual wages” for FTEs must be less than $50,000; and

• • Average Annual Wages: The employer divides the total Medicare wages paid by the employer for the “hours of service” during the taxable year by the number o FTEs, rounded down to the nearest $1,000. Unfortunately, this may not simply line up with box 5 of the W-2 because this is only wages attributable to “hours of service.”

4. employer pays “health insurance coverage” through a “qualifying arrangement.”

• • Heath Insurance Coverage: The Notice provides an expansive list of medical care coverage (whether insured or self-funded, which should include HRAsand HSAs), including HMO/PPO, dental, vision, long-term care, nursing home care, specified disease or illness, hospital indemnity, and Medicaresupplemental. The list excludes, among others, accident or disability insurance and worker’s compensation insurance. Importantly, the credit only covers employer paid premiums and does not include employee pre-tax or post-tax payments (e.g., section 125 payments are not eligible). Also, in general, State tax credits or premium subsidies are counted as employer paidpremiums and will not negatively affect the amount of the Credit.

• Qualifying Arrangement: The employer pays a uniform percentage of not less than 50% of the premium cost for the coverage. (Each type of coverage is tested separately for this purpose.) For 2010, the employer only needs to pay an amount equal to at least 50% of the premium for single (employee-only) coverage for each enrolled employee, and all premiums paid in 2010 will count (even if paid prior to the March 23, 2010 enactment date).

What is the Amount of the Credit? The maximum Credit is currently 35% of the employer paid “health insurance coverage” premiums (25% for tax-exempt employers). The maximum Credit is increased to 50% beginning in 2014 but will only be available if the coverage ispurchased through the Exchange. Importantly, the Credit is phased out rather quickly if the employer has more than 10 FTEs or the “average annual wage” exceeds $25,000. The following steps can be taken to calculate the 2010 Credit:

Step 1: Determine that you meet the definition of “eligible small employer” for the year.

Step 2: Determine the employer portion of the premium paid for the year for each “employee” (which includes any State subsidy).

Step 3: Take the lesser of Step 2 amount or the employer’s percentage of average small group market rates set forth in Revenue Ruling 2010-13 (by State) for each “employee” and sum this amount.

Step 4: Multiple Step 3 amount by 35% (25% for a tax-exempt employer).

Step 5: For a tax-exempt employer, enter the smaller of Step 4 amount or the aggregate federal income tax withholding and employer and employee share of Medicare taxes paid/withheld for the year (which will likely require a review of Form 944 and again help from your payroll department). For a taxable employer, enter the amount from Step 4.

Step 6: Reduce Step 5 amount by the sum of: (1) if more than 10 FTEs: (FTE – 10)/15 x Step 5, and (2) if “average annual wages” exceeds $25,000: (“average annual wages” – $25,000)/$25,000 x Step 5. (If negative, then the Credit is zero and stop here.)

Step 7: Reduce Step 6 amount to not exceed the employer’s net premium payments if State credits or subsidies for health insurance are available to the employer (e.g., amount actually paid by the employer excluding the State subsidy).

How is the Credit Claimed? For taxable employers, the Credit is claimed on the employer’s annual income tax return (e.g., Form 1120 and presumably Form 3800) a nonrefundablegeneral business tax credit (which can be carried forward 20 years and may offset AMT). Note that a deduction for the health care costs is not permitted for the amount of the Credit, which should be considered when determining the value of the Credit. For tax-exempt employers, the IRS is still working on how to receive the refundable credit (e.g., likely Form 990-T to offset unrelated business income tax or result in a refund, but for small employersthat may rarely file Form 990-T, a new schedule to Form 990/990-EZ would be preferred). When valuing the Credit for these employers, the loss of the deduction is not a factor but theCredit is limited to the annual employment taxes (federal income tax withholding andemployer and employee share of Medicare tax), which may impact the value of the Credit. Importantly, for all employers, the Credit has no impact on employment tax forms/deposits(e.g., no impact on Form 944 or related deposits), which is a which is a helpful clarification.

07/12/10 | Update on the NAIC’s Role in PPACA Implementation

07/9/10 | Indiana Hospital Compare

The Government website  www.healthcare.gov has just released a free service for comparing hospitals services.

This tool provides a listing of Indiana hospitals,  and 44 quality measures.

This kind of information is cutting edge when it comes to healthcare. Recently companies like Anthem and Unitedhealthcare have released these kinds of tool to their clients. Now everyone can access this type of information to help make informed healthcare decisions.  This is really important because if  you are going to have a surgery you should have the best Doctor and facility to perform that procedure.

One way to reduce healthcare costs is to use the best care aviable . We all know complications leads to higher costs and personal discomfort.

So if you or a loved one is in need of hospital services take advantage of this tool.

http://www.healthcare.gov/compare/index.html

07/7/10 | Indiana HealthCare Reform

As we move through and have a better understanding of this very complicated health care reform it becomes clearer the disconnect from the white house and real life.  This is so complicated and the effects are only going to raise costs.

For Indiana Small group health plans there is very little chance they can be grandfathered in. These small group plans are unable to keep their current plan designs and not do more cost shifting.  Once these groups have to have plans that have the additional coverages force on them this is only going to raise premium.  These are increase that small groups can’t afford. The Reform is giving small groups tax credits but very few groups are going to qualify for those tax credits once  you read the small print.

When the health exchanges open in 2014 no one will be able to afford them without tax subsidies. How can you offer such rich benefit plans and think it will bring down premiums?

The launch of the High Risk Pool plans is a perfect example of how these law makers did not use math. Right now the prediction on the high risk pool plans cost is anywhere from $600-$900 a  month for single coverage and there is a 3-6 month wait until pre x is covered and you have had to go without coverage for 3-6 months. The White House is clueless on the reality of a high risk pool.  First off  very few will be able to afford the plan. The other problem is the waiting period for benefits to kick into place.  This is another huge example of disconnect.

In my experience $900 a month premium is a very real possibility once the exchange goes into effect. When we look at states like Mass and NY where they are already practicing Guaranteed issue type policies we have big problems there. One is a complete lack of carrier competition. They carriers can not make any money in fact most of them lose money operating in those markets. So you end up with one or two carriers that are charging $2,800 a month for a family plan. I am afraid we are on a fast track to see these kinds of premiums.

The next big issue for this month is Medical Loss Ratio (MLR). This law is going to force the carriers to pay 80%-85% of the premiums towards claims or refund a portion of the premium.  We could see private carriers forced out of business on this one. The problem with doing an MLR on a case by case scenario is one group might be health and the other one has huge claims.  At the end of the day the carriers is making a profit because the healthy groups help to offset the sick ones.  Once again the White House with total disconnect to the industry could destroy the private carriers in a very short time period.

There is no doubt that health care and health insurance is a very complicated problem but I am affraid the healthcare reform package is taking us in the wrong direction.

07/2/10 | The Changing Cost of Healthcare in Indiana.

Last week there was an article in the Indianapolis Star called Do your home work or pay the price. http://www.indystar.com/article/20100629/BUSINESS/6270392/1003/BUSINESS 

It was a very interesting article because it address what has been going on in the health care industry here in Indiana and the rest of the country. What we are are seeing is hospital groups buying up smaller medical practices.  Most people would not think this has a big impact on their health care but it does. 

What is going on is a hospital group buys an outpatient treatment center. That out patient treatment center has negotiated their own network discounts with the local and national PPO plans. So if you go in for a procedure that price could be $1,000. With the negotiated network discount that procedure is discounted down to $356. All of the discounts can be different. What we have seen is most hospitals have higher costs for their procedures.  So for the exact same procedure that is discount to $356 at the out patient center could cost $800 at the hospital.

So what is happening is hospitals groups are buying the smaller facilities and applying their negoiated discounts which are much higher. This is increasing the cost of care which add to higher premiums and higher out of pockets for the consumers.

There is a positive side to the larger health care groups buying up the smaller ones.  These pertains to the rural communities and the local hospital. Most of those hospitals have a hard time operating in the black. So instead of those local centers shutting down a larger group can buy them and operate them. This is important because in that local community those resident do not have any other options.

I was happy to see this artical printed by the Indianapolis Star because the general public need to know the cost of care.

07/2/10 | New HHS Website

http://healthfinder.gov/  Was recently launched to help people understand what options they have from a health insurance standpoint. The site also incorporates disease management.

So now every0ne has  a tool that they can use to look at health insurance options. In the past a % of the population has gone uninsured because they did not know their health insurance options. Now one can educate themselves on the private industry options along with gov subsidized options. With the expansion of medicaid more and more people are going to qualify. Right now in Indiana we have a program subsidized program call (SCHIP) State Childrens Health Insurance Plan. There has been little to none marketing of this plan to Hoosiers. Its that a large % of children that are uninsured would qualify for this program if their parents would knew about it. This website will give out  valuable information on subsidized plans.

The site also has a disease management aspect to it. One can go and look and take a mini health assement. With this information one can get tips on living a more healthy life style. There is also information on preventive screenings and when you should have them.

All in All it looks to be a source of information but there are several aspects of it which I don’t care for.

06/25/10 | Avg Group Health Plan in Indiana

This is a interesting view of plan designs. The specific breakdown of industry and co pays is really interesting.

According to the data, transportation and financial services employees are paying more for office visit copays than those employees in the manufacturing, services and wholesale industries. Based on recent 2010 data from Highroads,  an industry leader in employer health care compliance and benefits management.

•79% of transportation employees pay $25 or more in office visit copays

•69% of financial services employees pay $25 or more in office-visit copays

•97% of wholesale employees pay $20 or less in office-visit copays

•87% of services employees pay $20 or less in office-visit copays

•67% of manufacturing employees pay $20 or less in office visit copays

Across all fully insured plans,  the data  shows average monthly 2010 premiums to be as follows:

•Employee only: $380

•Employee plus one: $788

•Employee plus children: $726

•Family: $1,133

Across all fully insured plans,  shows the median of 2010 plan provisions to be as follows:

Plan Provision              Median 

Office Visit Copay              $20 

Specialist Office Visit              $30 

Inpatient Hospital Copay              $250 

ER Copay              $75 

Infertility Treatment Co-insurance              50% 

This dats is a snap shop of what Indiana group health plans look like.

06/25/10 | HHS Releases Final Interim Guidance on Several PPACA Provisions

 HHS Releases Final Interim Guidance on Several PPACA Provisions

On June 22, 2010, the Departments of Health & Human Services, Labor, and Treasury issued new regulations that better define the following PPACA provisions:

• No Pre-Existing Condition Exclusions for Anyone Under Age 19
• No Arbitrary Rescissions of Insurance Coverage
• No Lifetime Dollar Limits on Coverage
• Restricted Annual Dollar Limits on Coverage
• Broader Doctor Choice
• No Higher Out-of-Network Cost-Share for Emergency Department ServicesOn June 22, 2010, the Departments of Health & Human Services, Labor, and Treasury issued new regulations that better define the following PPACA

These are labeled as interim final rules (IFRs), which means final rules may differ. As clarification continues to be provided through the federal government’s rule-making process, we’ll share that information with you. Please continue to look out for e-mail Alerts and information on our Health Care Reform website on these important subjects.

All provisions are effective on the first plan anniversary on or after 9/23/2010

No Pre-Existing Condition Exclusions for Anyone Under Age 19
Plans are prohibited from denying coverage to anyone under the age of 19 based on a pre-existing condition. This ban includes both benefit limitations and coverage denials. These policies apply to all individual market and group health insurance plans. The requirement will be extended to all ages starting in 2014. Grandfathered individual plans are exempt from this requirement.

No Arbitrary Rescissions of Insurance Coverage
Insurers and plans will be prohibited from rescinding coverage – for individuals or groups of people – except in cases involving fraud or an intentional misrepresentation of material facts.

No Lifetime Dollar Limits on Coverage
Insurers and employers are prohibited from imposing lifetime dollar limits in all health plans and insurance policies issued or renewed on or after September 23, 2010.

Restricted Annual Dollar Limits on Coverage
The rules will phase out the use of annual dollar limits on “essential health benefits” over the next three years until 2014 when the Affordable Care Act bans them for most plans. The limits can only apply to essential health benefits; however, the rule does not provide any further detail on the definition of “essential health benefits” beyond that provided in the law.

• Plans issued or renewed beginning September 23, 2010, will be allowed to set annual limits no lower than $750,000
• Beginning September 23, 2011, minimum limit will be raised to $1.25 million
• Beginning September 23, 2012, minimum limit will be raised to $2 million
• Beginning January 1, 2014, all annual dollar limits on coverage of essential health benefits will be prohibited

These limits apply to all employer plans and all new individual market plans. It does not apply to grandfathered individual plans.

Waiver Process/Special Consideration:
The IFRs indicate that the Health & Human Services Secretary will design a process by which employers and insurers may apply for a waiver to delay complying with the restricted annual dollar limit rules if compliance would cause a significant loss of coverage or increase in premiums. The IFRs indicate that limited medical plans  are one example of the type of plan that may apply for a waiver. We await details from the Secretary about the waiver application process.

Broader Doctor Choice
Health plan members are free to designate any available participating primary care physician (PCP) as their provider (e.g., pediatricians for children). Also, plans cannot require a referral for OB-GYN care.
These policies apply to all individual market and group health insurance plans except those that are grandfathered.

No Higher Out-of-Network Cost-Share for Emergency Department Services
Health plans and insurers will not be able to charge higher cost-sharing (copays or coinsurance) or require prior authorization for emergency services that are obtained out of a plan’s network. This policy applies to all individual market and group health plans except those that are grandfathered.

06/22/10 | High-Risk Insurance Pools Cost More

Health care reforms high-risk insurance pools will have difficult choices ahead. The CBO Director Doug Elmendorf laid out the stark choices facing a program. The $5 billion dollars will run out in before 2013. To extend the coverage to 600,000 more Americans would cost $5 -$10 billion more than estimated.

Health and Human Services Secretary Kathleen Sebelius also has the authority to cap enrollment. The Cap would limit the number of Americans that can participate in the program. Another option is to charge 3 times the amount in premium.

The bottom line is someone is going to have to pay for this program.

Right now the biggest problem with the current Indiana High Risk pool (Indiana Comprehensive) is the cost.  Most people are unable to afford the premiums.

06/21/10 | Health Care Reform Impacts Indiana Maternity Coverage

Starting in the fall, all new health plans must cover certain preventive screenings and other services for pregnant women at no additional cost to the patient. Those include folic acid supplements, which reduce the risk of neural tube defects in developing fetuses, and counseling to help pregnant women stop smoking. Medicaid will also begin to cover smoking cessation counseling and drug therapy for pregnant women.

This will have an impact on what we pay in health premium. Its great that there will be additional coverages for pregnancy that is currently excluded from most private individual health plans today. The Health Care Reform is making it mandatory that everyone has this coverage and that it does not add any additional cost to the insured for treatment. This is another aspect of Health Care Reform that has pro and cons. The positive is additional coverage that will not have additional cost for treatment. The negative is the premium will have to go up. The other negative is you will not have choices to opt out of that coverage if you don’t need it. If you are not planning on having any more children it would be nice to have the choice to opt out of that coverage and pay less in premium.