IRS releases updates to form 720 (PCORI)

IRS releases updates to form 720 (PCORI)The ACA includes a number of fees that employers are required to pay in order to help support various aspects of healthcare reform. One of those fees, PCORI was just updated by the IRS for 2016. The deadline for these fees to be paid is July 31st, 2016.

What is PCORI and why does it matter to employers?

According to their website, “The Patient-Centered Outcomes Research Institute (PCORI) helps people make informed healthcare decisions, and improves healthcare delivery and outcomes, by producing and promoting high-integrity, evidence-based information that comes from research guided by patients, caregivers, and the broader healthcare community.” Under the ACA, all employer sponsored health plans are subject to PCORI fees.

Why was the PCORI fee created?

The PCORI fees were established under the Affordable Care Act (ACA) to advance comparative clinical effectiveness research. PCORI fees are assessed on issuers of health insurance policies and sponsors of self-insured health plans. The fees are calculated using the average number of lives covered under the policy or plan, and the applicable dollar amount for that policy or plan year.

How much is the 2016 PCORI fee?

$2.17 per life

When are the 2016 PCORI fees due and how do you pay?

For policy and plan years ending on or after October 1, 2015, and before October 1, 2016
Employers and insurers will need to file Internal Revenue Service (IRS) Form 720 and pay the updated PCORI fee by July 31, 2016.

Employers have one month to calculate and send payment to the IRS. This form is relatively simple, but is structured in a way as to cause some confusion about who it applies to.

Give FreedomCare a call to discuss how to calculate and what to do if your clients aren’t compliant.

How to achieve a ‘penalty-free’ workplace

The New York Times recently said: After the enrollment deadline passes on Sunday, every adult without insurance will be subject to a minimum penalty of $325 when filing taxes next year. The fee will rise the following year to $695 per adult, more than seven times the $95 penalty for being uninsured in 2014.”

That story was about the individual mandate penalties, not the business penalties.

By now you probably know that large employers are facing penalties for not providing insurance, and they make the individual penalties look like a bargain. Businesses face penalties of $2000 per full-time employee, and possibly $3000 for each employee who gets an insurance subsidy on an exchange.

How to achieve a penalty-free workplaceThe Times article made it clear that the President and his team were openly pushing the fear of penalties to drive consumers to the exchanges where they can sign up for health insurance. Their goal is to have about nine million individuals enrolled in a plan. Are any of those nine million people employed by you?

If they are, then you owe a $3000 penalty if you failed to offer that person a health plan that is ‘affordable’ under the rules. You will also owe an additional $3000 for every one of your employees who takes the President’s advice and gets insured through the exchange with a subsidy.

But there’s good news. You only owe the full penalty if you fail to offer a plan for the entire year, or if you fail to offer an ‘affordable’ plan that meets the IRS’ tests for affordability.

That's not all, their are plans available that are not only affordable but offer a preventative and wellness plan and a Bronze plan at the same time. The combination creates a ‘penalty-free’ workplace allowing you and your employees peace of mind during tax season.

The preventative and wellness plan is a minimum essential coverage (MEC) plan and fulfills your employees’ requirement to have health insurance. So there’s NO penalty for your employees. But what about you, as their employer?

The offer of the Bronze plan satisfies your requirement to offer a plan. This puts you, and your employees, in the penalty-free zone. So where can you find this combination that keeps you safe?

FreedomCare offers the only guaranteed compliant program available that is low cost and easy to implement. There are thousands of employees around the country with FreedomCare cards right now, and thousands more on the way, and none of them will have their tax refund gobbled up by Uncle Sam as a penalty for not having health insurance. Not only are they penalty-free, but their employers are as well. It’s a win-win-win with FreedomCare.

Start today by making steps to create your own penalty-free workplace.

 

The $38K Question..

Last week we talked alternatives to traditional insurance plans like self-insuring for compliance under the Affordable Care Act. Unfortunately a large portion of employers have chosen to take a different approach…to do nothing. So you may be thinking, what are the consequences if you choose not to do anything?

For employers, the Affordable Care Act presents 2 possible penalties for not complying.

  1. The first is a $2,000 per employee penalty for not supplying a health plan offering 63 Minimum Essential Coverages. For our purposes we will call that Penalty A.
  2. The ACA also imposes a $3,000 per employee penalty if the employer supplies a plan but it does not offer coverage as generous as a Bronze Plan. We will call this one Penalty B.

To determine how much that really is, lets say your company has 200 full-time employees. If just one of those employees is not offered coverage and receives a subsidy or tax credit on the exchange, you are on the hook for Penalty A which equals $240,000! ($2,000 x (200 employees – 80 (the law allows for a deduction of 80))

The $38k Question

You could end up paying this entire amount even if you are offering insurance to the majority of your employees. On top of Penalties A and B, there is a Catch-All Penalty of $100 per employee per day for numerous kinds of violations that do not fall under Penalty A or B.

There are multiple ways to trigger this Catch All Penalty:

  • Your plan excludes people for pre-existing conditions or otherwise discriminates based on health status.
  • Your “Out of Pocket” limits are higher than allowed by the ACA.
  • You incorporate a waiting period of longer than the 90 calendar days without properly enacting and calculating an additional 30 day orientation period.
  • Your plan includes annual or lifetime limits on essential health benefits.
  • You are not properly offering dependent coverage to children up to age 26.
  • You do not properly provide a Summary of Benefits and Coverage.
  • You do not have adequate claims appeal and external review processes.

The Catch All Penalty would apply to every single affected individual as long as the violation exists. This is calculated on top of Penalties A & B. Calculated over an entire year, the Catch All Penalty would cost an employer $36,500 for one employee. Using our example above, if you have 200 employees and you are in violation for the entire year, your penalties would be too outrageous to even contemplate..over $7 Million! So what are the total amount of possible penalties and excise taxes employers could face per employee?

That is the $38k Question.

To make things worse, these penalties are excise taxes and are not tax deductible like health plan contributions would have been. Does it seem like it’s a good idea to choose not to do anything? It’s not to late to mitigate your losses, check out our previous post about Self-Insuring your benefits to begin exploring alternatives to traditional insurance and choosing not to do anything.

Employers face Thousands in Tax Penalties

2015 is here, it’s a new year and as with most new years, we have all made resolutions to get healthy, save more money and other improvements to our lives. Unfortunately, I have some bad news, the dreaded Employer Mandate of the Affordable Care Act is now enforceable and it comes with hefty fines. You or your clients will be feeling the pressure if you haven’t worked to already have your compliant benefits plan in place. The penalties start in the thousands and only go up from there. If you have 70 or more full time employees you could be facing over $6,000 a month in fines alone. The fines aren't just on you either, your employees are also facing them.

Now let’s get to the good news, the fines are enforced each month and you can still mitigate your losses by acting sooner rather than later. If you just stumbled onto our blog or if you still have questions about what really happens during an IRS audit, start here by educating yourself of what the possibilities are.

We sponsored a very informative webinar series with Kaya Bromley of Your Obamacare Advisors in 2014 that was a huge success. Your Obamacare Advisors has archived all of those webinars for you to view at your own convenience. The topics include, "The Lookback Method, want to know what happens if you get it wrong?" "Common Questions about Self-Insuring" and more. If you are an employer, these are a must see or if you have clients who could benefit from these videos, you might want to do yourself a favor and pass them along.

Are you sure your business is safe

So now that you are facing these penalties..what can you expect in 2015? Well here at FreedomCare we will keep you updated with the latest breaking information regarding the Affordable Care Act with facts and opinions brought to you by our team of legal experts, seasoned insurance professionals and more. We will bring you weekly updates along with a series of very exciting Webinars. Stay tuned.