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Health Care Reform: On the HorizonACA Compliance and Reporting

Editorial Note - APS is devoting a significant amount of our 2013 publications to the topic of Health Care Reform.

Just the Facts on Health Care Reform

With the passing of the Affordable Care Act in 2010, we have already seen a myriad of changes in our healthcare system. The signing of this monumental health care reform legislation required companies to adapt quickly in order to avoid any errors or penalties. Let’s recap what has occurred so far:

  • Small Business Tax Credits - small businesses received a tax credit worth up to 35% of the employer’s contribution to employee’s health insurance and small non-profits received up to a 25% credit.
  • Adult Children - health plans are now required to cover dependents to age 26.
  • Early Retirees - creates temporary reinsurance program for employers providing health insurance coverage to retirees over age 55 who are not eligible for Medicare.
  • Medical Loss Ratio - plan requirements to spend 85% of premium on claims for large plans and 80% for small plans. Available rebates to enrollees if thresholds not satisfied.
  • Flexible Spending Accounts - Over the counter (OTC) products can no longer be reimbursed through health FSAs, HRAs, or HSAs unless prescribed by a physician.
  • HSA Tax Penalty - 20% penalty tax on distributions from HSAs not for qualified medical expenses.
  • Simple Cafeteria Plans - plans available for small businesses with no more than 100 employees.
  • Workplace Wellness Grants - grants available for eligible employers establishing comprehensive workplace wellness programs starting fiscal year 2011.
  • 2011 W-2 Reporting - W-2 forms issued to employees for calendar year 2011 had the option to report the total value of health benefits paid by both the employer and employee.
  • 2012 W-2 Reporting - W-2 forms issued to employees for calendar year 2012 are now mandated to disclose the employer portion of health benefits, resulting in reporting the total health coverage for each employee. This is only required by companies who file more than 250 W-2 forms for calendar year 2012. Additionally, if your company is required to report, you must also include applicable deductions.

Changes This Year

Here are the changes occurring in 2013:

  • Flexible Spending Accounts - $2,500 cap on health FSAs. Notice 2012-40 gives further detail on what cafeteria plans are not subject to this contribution limit and additional information on compliance.
  • Notice of Marketplaces and Subsidies - Effective October 1, 2013 employers are required to provide existing employees with a written notice of Health Insurance Marketplaces and potential subsidies available. New employees must receive the notice within 14 days of their hire date moving forward. The Department of Labor (DOL) has issued model notices with appropriate language.
  • Additional Medicare Tax - tax on individuals earning more than $200,000 and joint filers earning more than $250,000, increase in the Medicare portion of FICA taxes from 1.45% to 2.35% and 3.8% Medicare tax on net investment income.
  • Retiree Prescriptions - companies will have to pay tax on the retiree drug subsidies they receive from the government.

Changes to Come


  • Small Business Tax Credits - tax credits for small business (with no more than 25 employees and no more than $50,000 of average annual wages) to increase. Up to a 50% tax credit when the employer contributes at least 50% of the employee-only premium cost.
  • Benefits Waiting Periods - including grandfathered plans, prohibition of waiting periods in excess of 90 days.
  • Pre-Existing Conditions - including grandfathered plans, prohibition of pre-existing condition exclusions for all plan participants.
  • State Marketplaces - each state may be required to have a Marketplace established for small groups (1-50 or 1-100 employees, depending on state law) and individuals.
  • Wellness Programs - program incentives which may increase to 30%-50% of the cost of coverage for reward-based wellness programs.
  • Annual Limits - new plans and existing group plans will not be able to impose annual dollar limits on the amount of coverage an individual may receive.

Delayed Until 2015

  • Individual Mandate - penalties imposed on individuals without approved health care coverage.
  • Employer Mandate - companies that employ 50 or more full time workers will be required to provide health coverage. For additional information, see Notice 2011-36.

Delayed Until Further Notice


  • Large Employers and Marketplaces - large employers (more than 100 full-time employees) may enter the state Marketplaces, subject to state law.


  • High Cost Health Plans - “Cadillac plan” excise tax imposed on high-cost health plans that exceed $10,200 for individual coverage and $27,500 for family coverage.

How APS Can Help

The Additional Medicare Tax and reporting the employer portion of health benefits information presented in this article are handled by our payroll tax services and built in to APS features.

What Does This Mean for Your Company?

While it’s still up in the air if some of these changes will occur, it’s better to be safe than sorry. Preparing for these changes now will ensure that your company is ahead of the curve in staying compliant.

Visit our Affordable Care Act page for the latest updates on Health Care Reform and the Affordable Care Act.


IRS Affordable Care Act Tax Provisions Health Care Timeline
Society for Human Resource Management Health Care Timeline
Department of Labor Affordable Care Act Information

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