Massachusetts Individual Health Mandate Penalties for Tax Year 2012 Over $2500 per Family

January 9th, 2012 | No Comments |
Category: CDHC, Compliance and Regulatory, Health Care Reform, State Legislation, Taxes, Uncategorized
 Personal Income Tax

Technical Information Release 12- 2

  Massachusetts

Department of

Revenue

Individual Mandate Penalties for Tax Year 2012

Pursuant to G.L. c. 111M, § 2, the Department of Revenue is issuing this Technical Information Release to announce the penalty schedule for individuals who fail to comply in 2012 with the requirements under the Massachusetts Health Care Reform Act (the Act). See St. 2006, c. 58, as amended. The Act requires most adults 18 and over with access to affordable health insurance to obtain it. In 2012, individuals must be enrolled in health insurance policies that meet minimum creditable coverage standards defined in regulations adopted by the Commonwealth Health Insurance Connector Authority (the Connector). Individuals who are deemed able to afford health insurance but fail to comply are subject to penalties for each month of non-compliance in the tax year (provided that there is no penalty in the case of a lapse in coverage of 63 consecutive days or less). The penalties, which will be imposed through the individual’s personal income tax return, shall not exceed 50% of the minimum monthly insurance premium for which an individual would have qualified through the Connector.[1] 

These penalties apply only to adults who are deemed able to afford health insurance. On an annual basis, the Connector establishes separate standards that determine whether individuals, married couples and families can afford health insurance, based on their incomes and affordable health insurance premiums. Those who are not deemed able to afford health insurance pursuant to these standards will not be penalized. Individuals also have the opportunity to file appeals with the Connector asserting that hardship prevented them from purchasing health insurance (and, thus, that they should not be subject to tax penalties).[2]

 

For 2012:

  • Individuals with incomes up to 150% of the Federal Poverty Level are not subject to any penalty for non-compliance, as those at this income level are not required to pay an enrollee premium for Commonwealth Care health insurance. 

 

  • Penalties for individuals with incomes from 150.1 to 300% of the Federal Poverty Level will be half of the lowest priced Commonwealth Care enrollee premium that could be charged to an individual at the corresponding income level, based on the Connector’s Commonwealth Care enrollee premiums as of January 1, 2012.

 

  • Penalties for individuals with incomes greater than 300% of the Federal Poverty Level will be:

 

  • ages 18-26: half of the lowest priced individual Commonwealth Choice Young Adult Plan premium without drug coverage; and 
  • ages 27 and above: half of the lowest priced individual Commonwealth Choice Bronze premium with drug coverage, based on the Connector’s prices for these plans as of January 1, 2012.

 

  • The Department anticipates issuing an updated penalty schedule for tax year 2013.

 

  • Penalties for married couples who do not comply with the individual mandate rules (with or without children) will equal the sum of individual penalties for each spouse.

 

Penalties for 2012
IndividualIncome

Category*

 150.1-200% FPL 200.1-250% FPL 250.1-300% FPL Above 300% FPLAge 18-26 Above 300% FPL

Age 27+
Penalty $19/month$228/year $38/month$456/year $58/month$696/year $83/month$996/year $105/month$1,260/year

* Compare individual’s annual family household income to chart immediately below to determine applicable Federal Poverty Level (FPL).

** Yearly penalty amounts listed above based on non-compliance for entire year.

 Federal Poverty Level – Annual Income Standards

Family Size 150% FPL 200% FPL 250% FPL 300% FPL
1 $16,344 $21,780 $27,228 $32,676
2 $22,068 $29,424 $36,780 $44,136
3 $27,804 $37,068 $46,332 $55,596
4 $33,528 $44,700 $55,884 $67,056
5 $39,264 $52,344 $65,436 $78,516
6 $44,988 $59,988 $74,976 $89,976
7 $50,724 $67,620 $84,528 $101,436
8 $56,448 $75,264 $94,080 $112,896
For each additional person add +$5,736 +$7,644 +$9,552 +11,460

 

This Schedule reflects the Federal Poverty Level standards for 2011 and will be updated when the 2012 Federal Poverty Level standards are published in 2012.

no comments >

HSA Contributions Changes and the Last Month Rule

January 5th, 2012 | No Comments |
Category: Cafeteria Plans, Compliance and Regulatory, HSA, Health Savings Accounts, Taxes, Uncategorized

Q. How much can an individual contribute if she’s HSA eligible all year but changes from self-only to family coverage after her May 18, 2011, wedding?

 A. This individual can take one of two approaches. 

General Rule: “Sum of the Monthly Contribution Limits Rule.” Accountholders’ annual HSA contributions are pro-rated based on the number of months they are HSA eligible under each contract type during the year. When this individual is enrolled in a self-only contract, she can contribute $254.17 per month (the statutory maximum annual contribution of $3,050 divided by 12 months). During the months that she is enrolled on a family contract, she can contribute $512.50 per month (the $6,150 statutory maximum annual contribution divided by 12 months). In this case, her month-by-month maximum contribution is as follows:

 Month Maximum Contribution
January $254.17
February $254.17
March $254.17
April $254.17
May $254.17
June $512.50
July $512.50
August $512.50
September $512.50
October $512.50
November $512.50
December $512.50
Total $4,858.33

 

 

Special Rule: “Last-Month Rule.” This special rule (which comes with a testing period requirement noted below) permits the individual to make a full year’s family contribution as long as she is enrolled in a family contract as of Dec. 1, 2011, regardless of when during the first 11 months of 2011 she is married and switches to a family contract. If she takes this approach, she must remain eligible through the end of the following 12-month “testing period.” The testing period ends on December 31 of the following year (2012 in the above example). If she loses HSA eligibility any time before December 31, 2012, she must include any contributions for months during which they were not eligible, except for the last-month rule, in her taxable income in the year she loses eligibility. In addition, excess contributions are subject to a 10% additional tax that year. Accountholders incur this penalty regardless of age.

If she loses HSA eligibility during the testing period, she must include in her 2012 taxable income any contribution she made in 2011 that is in excess of the pro-rated contribution maximum. Her maximum contribution would be $4,858.33, and any amount above that figure would be included in her 2012 taxable income, and she would pay an additional 10% tax on the excess contribution as well.

no comments >

US Appeals Court Rules Health-Care Law Is Constitutional

November 8th, 2011 | No Comments |
Category: CDHC, Compliance and Regulatory, Health Care Reform, Uncategorized
By Brent Kendall

Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–A federal appeals court in Washington ruled Tuesday that a key piece of last year’s federal health-care overhaul is constitutional, handing the Obama administration another legal victory ahead of the Supreme Court’s likely consideration of the law.

The U.S. Court of Appeals for the District of Columbia Circuit ruled that Congress, acting under its power to regulate interstate commerce, had the authority to require individuals to carry health insurance or pay a penalty.

“The right to be free from federal regulation is not absolute, and yields to the imperative that Congress be free to forge national solutions to national problems, no matter how local–or seemingly passive–their individual origins,” Judge Laurence Silberman, a Reagan appointee, wrote for the court.

The 2-to-1 ruling marked the second time a Republican appointee has voted to uphold the law.

Judge Harry Edwards, a Carter appointee, joined Silberman’s ruling.

Judge Brett Kavanaugh, an appointee of President George W. Bush, dissented from the court’s decision, but he offered no opinion on the merits of the law. Instead, he said that lawsuits challenging the insurance mandate are premature because the mandate penalties amounted to a type of tax that can be challenged only after it is collected, rather than before.

A U.S. appeals court in Virginia adopted similar reasoning in September when it ruled that such lawsuits can’t proceed until individuals start paying penalties in 2015.

The D.C. Circuit is the third U.S. appeals court to rule for the Obama administration. A fourth, the 11th Circuit Court in Atlanta, ruled the law’s insurance mandate is unconstitutional.

It is a near certainty that the Supreme Court will resolve the matter, and the justices may indicate within days whether they will consider the health-care law during their current term.

The court is scheduled to discuss several challenges to the health-care overhaul during its private conference on Thursday.

If the justices decide during their Thursday meeting to hear one or more health-care cases, they could make the announcement that day or, more likely, disclose the decision in a written list of orders that is scheduled for release on Nov. 14. However, there is no guaranteed date for the court to reveal its plans.

If the court agrees to consider the health-care law, oral arguments will likely be scheduled for the spring of 2012, with a decision expected by the end of June.

Tuesday’s appeals court ruling is notable because the D.C. Circuit’s decisions traditionally get particularly close attention from the Supreme Court, in part because four of the justices–including Chief Justice John Roberts–previously sat in that circuit.

Silberman, the author of Tuesday’s ruling, is a well-respected conservative judge who has served on the court since 1985. Another Republican judicial appointee, Judge Jeffrey Sutton of the Cincinnati-based Sixth Circuit, provided a pivotal vote when that court upheld the health-care law in June.

Sutton wrote a concurring opinion upholding the insurance mandate as a reasonable way for Congress to exercise its authority over the insurance and health-care markets.

no comments >

CMS Cuts Some Slack on HRA Reporting Rules

September 28th, 2011 | No Comments |
Category: CDHC, Compliance and Regulatory, HRA, Health Reimbursement, Uncategorized

The Centers for Medicare and Medicaid Services (CMS) provided badly needed relief to Health Reimbursement Arrangement (HRA) administrators in an Alert that was issued on Thursday.

HRAs have been subject to a quarterly reporting requirement under Medicare Secondary Payer (MSP) rules that have been in effect for years. What this means is that HRA administrators must provide participant data to CMS so it can determine when Medicare is primary or secondary coverage to an employer-provided HRA.

One key exception was for participants with an annual benefit level of less than $1,000. Effective October 3, 2011, the Alert increases that threshold to $5,000. The practical impact will be a significant reduction in the number of participants who must be reported.

Another important change relates to participants who have exhausted their account balances for the year, where the employer has already fully funded the account. These participants should now be reported to CMS as terminated.

For the past two weeks, there were several indicators that CMS might relax this reporting requirement. A September 7, 2011, teleconference indicated to us that CMS might make this change, and we anticipate that other positive changes may be in the works.

Stay tuned.

no comments >

New Regulation Requires Health Plan Option Summary in 2012

September 1st, 2011 | No Comments |
Category: CDHC, Compliance and Regulatory, Health Care Reform, PPACA, Uncategorized
This month, the Departments of Labor and HHS proposed rules for the “uniform summary of coverage” that is required under PPACA. Heath insurers and group health plans (including grandfathered plans) must provide consumers with clear, consistent and comparable information about their health plan benefits and coverage beginning in 2012. Specifically, the proposed regulations provide rules implementing PPACA provisions that would ensure consumers have access to two forms that will help them understand and evaluate their health insurance choices.These forms include:

  • A Summary of Benefits and Coverage
  • A uniform glossary of terms commonly used in health insurance coverage

Summary of Benefits and Coverage

The summary document will include the key features of the plan or coverage such as the covered benefits, cost-sharing provisions, and coverage limitations and exceptions. Consumers will receive the summary when shopping for coverage, enrolling in coverage at each new plan year, and within seven days of requesting a copy from a health insurance issuer or group health plan.

The Summary of Benefits and Coverage will also include a new, standardized health plan comparison tool called “Coverage Examples” that illustrate what proportion of care expenses a health insurance policy or plan would cover under common benefits scenarios. The Center for Consumer Information and Insurance Oversight (CCIIO) will provide standards for plans and issuers to simulate claims processing for each scenario so consumers can see an illustration of the coverage they get for their premium dollars under a plan.

Uniform Glossary of Terms

Under the proposed regulations, insurance terms will be the same across all plans. Insurance companies and group health plans will be required to make available a uniform glossary of terms used in health insurance coverage, for example “deductible” and “co-pay.” This will allow an easier comparison of insurance plans, and the Departments of HHS and Labor will post the glossary on both www.HealthCare.gov and www.dol.gov/ebsa/healthreform/.

Click here to read the proposed regulations.

Click here to read the Model Summary of Coverage.

Click here to read the fact sheet.
no comments >

Survey Says: Some Large Employers Will Consider Dropping Group Health Coverage

August 30th, 2011 | No Comments |
Category: CDHC, Health Care Reform, PPACA

By TOM MURPHY, AP Business Writer

INDIANAPOLIS (AP) — Nearly one of every 10 midsized or big employers expects to stop offering health coverage to workers once federal insurance exchanges start in 2014, according to a new survey from a large benefits consultant.

Towers Watson also found in a survey completed last month that an additional 20 percent of the companies are unsure about what they will do.

Another big benefits consultant, Mercer, found in a June survey of large and smaller employers that 8 percent are either “likely” or “very likely” to end health benefits once the exchanges start.

Employer-sponsored health insurance has long been the backbone of the nation’s health insurance system. But the studies suggest that some employers, especially retailers or those offering low wages, feel they will be better off paying fines and taxes than continuing to provide benefits that eat up a growing portion of their budget every year.

The exchanges, which were devised under the health care overhaul, may offer an alternative for their workers. These exchanges aim to provide a marketplace for people to buy insurance that can be subsidized by the government based on income levels.

A large majority of employers in both studies said they expect to continue offering benefits once the exchanges start. But former insurance executive Bob Laszewski said he was surprised that as many as 8 or 9 percent of companies already expect to drop coverage a couple of years before the exchanges start.

Such a move comes with potential payroll-tax headaches and could subject firms to fines. It also would give their employees a steep compensation cut if companies don’t raise pay in exchange for ending coverage.

“Dropping coverage is going to be very difficult for these (companies) to do,” said Laszewski, a consultant who was not involved with the studies.

Towers Watson’s Randall Abbott said the survey results should be seen as a snapshot of how companies are thinking now. They can’t be viewed as a final decision because there are still many unresolved variables. No one knows what the exchanges will be like or whether consumers will accept them, and companies may change their thinking once they learn more about the overhaul.

The health care overhaul also faces court challenges, and President Obama is up for re-election next year, two more variables that could shape what happens in 2014.

Copyright © 2011 The Associated Press. All rights reserved.

no comments >

Farewell to the ARRA COBRA Subsidy!

August 30th, 2011 | No Comments |
Category: COBRA, Compliance and Regulatory, Uncategorized

 

The federal COBRA subsidy, first available Feb. 17, 2009, covered 65 percent of the cost of COBRA health insurance premiums for up to 15 months. To qualify for the subsidy, recipients must have originally become eligible for COBRA as a result of an involuntary termination of employment occurring between September 2008 and May 2010. The subsidy was originally available to employees laid off from Sept. 1, 2008, to Dec. 31, 2009, but several extensions pushed the end date to May 31, 2010. The subsidy for the recipients who were terminated as late as May 31, 2010, will end on Aug. 31, 2011.

 The DOL has updated its FAQs page with questions related to the sunset of the ARRA COBRA Subsidy:

http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreduction.html

no comments >
< previous page