The open-enrollment period for U.S. taxpayers to secure medical health insurance for 2019 via the Health Insurance Marketplace runs from Nov. 1, 2018, through Dec. 15, 2019. While the new tax law introduced on Jan. 1, 2018, does eliminate the Obamacare individual shared responsibility penalty for individuals who go without insurance in 2019, there are other reasons taxpayers should consider enrolling in a marketplace plan for 2019.
Some states, such as the District of Columbia, Massachusetts and New Jersey, have implemented their own individual mandates that will assess penalties on residents who do not have minimum essential health care coverage in 2019 and who do not qualify for an exemption.
In addition, by enrolling in a marketplace health care plan, you will continue to receive many of the benefits and incentives that the Affordable Care Act (ACA) introduced, such as guaranteed coverage for pre-existing conditions and free annual physical exams and preventive care immunizations, screenings and counseling. Without a marketplace plan, you may be denied coverage from a private insurer, or you may be unable to afford care and treatment for an unexpected illness or injury to you or your family members.
Due in part to the elimination of the individual mandate, most families should expect to pay higher premiums for plans in 2019 than they did in prior years. However, the premium tax credit has also increased for 2019, helping qualifying taxpayers to subsidize their costs for coverage. High-income families that do not qualify for the premium subsidy may want to consider setting aside pre-tax dollars into health savings accounts (HSAs) to help them pay healthcare costs, including marketplace plan premiums.
About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via e-mail at info@bpbcpa.com.
Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.
Beginning on October 1, 2016, more than half of the United States’ acute-care hospitals that are paid through the Inpatient Prospective Payment System (IPPS) will receive less money from Medicare due to a history of higher-than-expected patient readmissions within 30 days of discharge. The penalties, which can equal as much as a 3 percent reduction in a hospital’s Medicare rate, are a part of the Hospital Readmissions Reduction Program (HRRP), which was created under the Affordable Care Act (ACA), to pay hospitals for the value of care provided to Medicare beneficiaries, rather than volume of care. Under the ACA, certain hospitals are excluded from the penalties, including those serving veterans, children and psychiatric patients.
The Medicare payment adjustments are measured by a ratio based on the “appropriate” number of patient readmissions, as determined by Medicare and the number of actual readmissions that occurred between July 1, 2012, and June 30, 2015, for patients whose original care focused on certain conditions, such as heart attack, heart failure, coronary artery bypass graft surgery, pneumonia, chronic obstructive pulmonary disease (COPD) and elective total knee or total hip replacements. The reimbursement reductions are then applied prospectively to all of a hospital’s Medicare patient billing, regardless of the reason for patient admission, for fiscal year 2017, which begins in October 2016. The Centers for Medicare and Medicaid Services (CMS) annually provides hospitals with a 30-day window to review and correct confidential reports detailing the excess readmission calculations via its QualityNet portal. For the 2017 fiscal year, this period occurred in June 2016.
Since the HRRP program began in 2012, the rate of unplanned hospital readmissions have declined while CMS has increased the number of medical conditions the program measures. As a result, the number of hospitals being penalized in FY 2017 will not differ significantly from the prior year, but the penalties are expected to rise to $528 million, which is approximately $108 million more than last year.
Hospitals that are a part of the Inpatient Prospective Payment System (IPPS), must prepare for lower Medicare reimbursements while also aiming to reduce patient readmissions through quality control measures. Failure to do so will not only result in reimbursement cuts, it will also put hospitals’ reputations at risk when CMS posts readmission data on the publically accessible Hospital Compare website.
The advisors and accountants with Berkowitz Pollack Brant have extensive experience providing tax, audit, litigation support and consulting services to hospitals, physician practices, HMOs and third-party administrators.
About the Author: Whitney K. Schiffer, CPA, is a director with the Audit and Attest Services practice of Berkowitz Pollack Brant, where she works with hospitals, health care providers, HMOs and third-party administrators. She can be reached in the firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.
Physicians operating in a highly scrutinized and demanding regulatory environment with lower reimbursements are continuing to sell their practices to hospital networks at a rapid rate. In most instances, this consolidation results in a win-win for all parties. Physicians gain steady salaries while losing the administrative headaches of managing a private practice; hospitals receive the benefit of new revenue streams and referrals from their newly-employed on-staff physicians. However, these arrangement are not without risks. Both independent practices and the healthcare facilities seeking to purchase them should engage in an exhaustive process of preparation and due diligence to improve the likelihood that the merger will yield the positive benefits that all parties hope to receive.
Considerations for Physicians
Compliance with patient privacy laws and the Affordable Care Act, and requirements for electronic health records and the transition to ICD-10 are just some of the burdens of managing a private practice. They take time away from delivering patient care and drain resources that together may spur a decision to sell a practice. Before pursuing a sale, physicians should consider their own goals and needs and weigh them against the financial, legal and emotional ramifications of their actions, including how a sale might affect their time, independence, compensation, tax liabilities, net earnings and ownership of assets; or how will it impact existing staff and patients. When a decision to sell is made, physicians must begin the arduous and time-intensive process of preparing their practices to fetch the best possible sale price.
Prepare the Practice for Sale
Preparation is key to consummating a sale in which physicians can receive top-dollar for their practices. By demonstrating a trend of sound financial performance, physicians can often command a higher sales price. If profits are trailing, physicians should take the time to make improvements or enhance operations before putting the practice up for sale.
Engage professional counsel. The earlier a physician consults with legal, tax and financial counsel, the better the chances he or she will be prepared to commence the sale process. Lawyers and accountants understand the physician’s practice and have the experience required to maximize a practice’s purchase price and secure the best terms to meet the physician’s needs and desires.
Clean Up Financial Records. Physicians should gather at least three years of tax returns and clean financial records to substantiate claims of positive practice performance. Look at physician compensation and personal expenses paid by the practice, CPT codes and relative value units (RVUs), insurance reimbursements and payor mixes, and ensure all the numbers are accurately reported and have underlying source documentation which can be provided during the due diligence process. The accrual method of accounting should be employed to demonstrate a more accurate picture of the practice’s operating activity and practice profitability.
Don’t Overlook the Practice’s Non-Tangible Assets. In addition to hard assets, such as furniture and equipment, the value of a medical practice is influenced by the skills and reputation of its physicians and staff as well as the relationships these individuals have developed with patients and insurers. Prepare information to support claims of active patients and favorable reimbursement agreements with insurers.
Benchmark Practice Metrics against Similar Practices. A medical practice that can demonstrate it performs better than similar practices in the same market may be able to command a higher sales price. By compiling data that compares the number of patient visits the practice sees in a year, RVUs, cash collections and insurer reimbursements with similar practices, the practice may be able to earn a higher appraisal. If the numbers are not impressive, the physicians should consider holding off on a sale until they can turn things around for the better.
Keep Cash Flow in Reserves. Should a medical practice succeed in attracting a buyer and securing a positive valuation, the managing physicians should ensure they maintain ample cash flow in reserves to cover a potential slowdown in reimbursements before the transaction is consummated.
Considerations for Hospitals
Engage Professional Counsel. Just as physicians want the best terms for the sale of their practices, hospitals and health care facilities want real value for their investment in a private practice. Proper due diligence with the assistance of experienced lawyers and accountants will help the hospital make an informed decision and avoid potentially expensive missteps.
Carefully Analyze Financial Records. Arriving at a fair valuation for a medical practice requires hospitals to examine the underlying financial aspects of the practice’s operations, which are not always easily apparent. What is the quality of the practice’s billing and collection efforts? Are receivables in line with reimbursements and expenses or are they inflated? Are the reimbursement agreements favorable? What tangible assets does the practice own and what assets will the hospital need to maintain? What expenses can be carved out of the valuation (i.e. physicians’ personal, discretionary expenses) to identify the practice’s true earnings?
Consider the Non-Financial Aspects of the Practice’s Operations. Because medical practices and hospitals operate in a highly litigious and regulated environment, it behooves hospitals to assess a practice’s internal controls, compliance history and legal judgements before pursuing a practice purchase. Similarly, hospitals must consider their own legal responsibilities when structuring purchase agreements to avoid potential violations of tax laws, anti-kickback statutes and the Stark Law, which prohibits medical providers from making referrals to others with whom the provider has an existing financial relationship.
Prepare for Negotiations. The best way to ensure a smooth buy-sell transaction is for all parties to engage in open dialogue, build consensus and leave nothing to misinterpretation. Specificity and attention to detail can go a long way to ensure a win-win for all. Be clear on the terms of the sale, employment agreements and compensation for physicians and support staff; how the transaction will be structured; how the hospital will roll the practice into its existing operations; and the responsibilities of all parties prior to and during the closing and through the transition.
The accountants and advisors with Berkowitz Pollack Brant’s Audit and Attest Services practice have a long history of working with hospitals, health care facilities and medical professionals to audit financial statements, assess internal controls and implement processes and procedures to ensure regulatory compliance and improve profitability and tax-efficiency.
About the Author: Whitney K. Schiffer, CPA, is a director with the Audit and Attest Services practice of Berkowitz Pollack Brant, where she works with hospitals, health care providers, HMOs and third-party administrators. She can be reached in the firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.
The Office of the Inspector General for the Department of Health and Human Services (HHS) is warning physicians to take a closer look at their compensation agreements to ensure compliance with anti-kickback statutes. More specifically, HHS is on the lookout for physicians who enter into compensation arrangements, such as medical directorships with hospitals or other organizations, which reflect the potential for past or future patient referrals rather than the fair-market value of the services the physicians provide.
The alert comes on the heels of HHS’s settlement with a dozen individual physicians whose “questionable” compensation took into consideration the “volume and value of [the physicians’] referrals” and included payment from related entities to the physicians’ office staff. While HHS concedes that the organizations making the payments are liable for their actions, the deferral agency is putting the onus on physicians to ensure the terms and conditions of their medical directorships are structured and monitored appropriately to comply with anti-kickback laws. Failure to do so may result in personal liability, including risk of criminal, civil and administrative sanctions.
The advisors with Berkowitz Pollack Brant’s Audit practice work closely with doctors, physician groups, hospitals and other providers to ensure compliance with healthcare laws through proper managements of internal controls and reviews, compilations and audits of financial statements.
About the Author: Whitney K. Schiffer, CPA, is a director with the Audit and Attest Services practice of Berkowitz Pollack Brant, where she works with hospitals, health care providers, HMOs and third-party administrators. She can be reached in the firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.
The Patient Protection and Affordable Care Act (PPACA), also referred to as the Affordable Care Act (ACA), Healthcare Reform and Obamacare, represents one of the most extensive changes to the nation’s healthcare system. In its most basic terms, the law aims to rein in healthcare costs and expand individual access to affordable health care coverage. Despite this simplistic definition, the details contained in the law can be quite confusing, especially for the nation’s employers who face some of the law’s most complex compliance challenges.
With compliance comes considerable financial and operational implications for businesses large and small that must now share in the responsibility of providing employees with varying degrees of healthcare benefits. As a result, reform will ultimately force employers to make significant changes to the ways in which they conduct their businesses. They will need to gain a thorough understanding of their new responsibilities under the law and take the necessary steps to carefully plan and implement mandated strategies.
Moreover, they will need to educate employees about new benefit options and coordinate all activities with various internal business functions, as well as governmental organizations such as the Internal Revenue Service and business partners that include insurance brokers and tax and accounting professionals.
Understanding the Basics
Since the PPACA was signed into law in 2010, it has already provided millions of Americans with healthcare benefits that were not previously available to them. These include the expansion of coverage to dependent children, the elimination of cost-sharing requirements for preventative-care services and the exclusion of lifetime limits on the amount insurers will pay for an individual’s medical care. To continue realizing these and other intended benefits of reform, the PPACA will impose on insurers, healthcare providers, businesses and consumers a series of regulations that will be introduced in stages over the next few years.
At its core, healthcare reform requires all U.S. citizens and legal residents to buy and maintain health insurance. At a minimum, this must include essential coverage for ambulatory and emergency services; hospitalization; chronic disease and preventive and wellness care; maternity and newborn care; mental health, substance abuse and rehabilitation treatment; and prescription drug, vision and dental care.
Failure to secure appropriate and essential healthcare insurance by January 1, 2015, can result in financial penalties. This deadline was pushed back in mid-2013 from its original start date of 2014 to give companies more time to research their options and comply with the new rule. However, most aspects of the Affordable Care Act are still in place with their original deadlines.
Later in 2013, a variety of healthcare options will be introduced to meet the needs of various consumers, whether they are unemployed, self-employed or working for other businesses. For example, new federal- and state-run competitive healthcare marketplaces, also referred to as Health Insurance Exchanges (HIEs), will provide individuals with an online resource where they may review a range of plans and purchase one that meets their specific healthcare needs and financial situation. Similarly, beginning in 2014, small businesses with 50 or fewer employees will have access to Small Business Health Option Programs (SHOP) through which employers may offer their employees approved health plans with a range of benefit levels and cost-sharing arrangements.
However, to achieve the ultimate goal of affordable and attainable healthcare for all, large businesses will need to take on a significant portion of the financial and administrative burdens associated with paying for PPACA implementation. For example, beginning in 2015, large businesses, defined as those with 50 or more full-time equivalent (FTE) workers, must choose between offering health insurance to their employees or paying a financial penalty. Conversely, businesses with more than 200 FTE employees will not have the option to pay a penalty; they will have no other choice but to enroll all of their workers in company-sponsored medical plans.
Regardless of the size of a businesses or whether or not it selects to offer employee health coverage, all U.S.-based employers will need to establish systems and processes for tracking employees’ hours, maintaining detailed records, meeting stringent IRS reporting requirements and leading the charge to educate the workforce about their rights and responsibilities under healthcare reform.
Deciding to Play or Pay
Large businesses with 50 or more employees must take the time now to assess their options and decide whether they will “play” by the rules of the PPACA and offer health insurance to their full-time employees (including dependents under the age of 26), or decline to provide company-sponsored coverage and instead “pay” an assessment of $2,000 per full-time worker per year.
Playing by the rules of reform further requires employer-sponsored plans be “affordable” and cover at least 60% of employees’ annual healthcare costs while ensuring employee costs for premiums do not exceed 9.5% of their pre-tax household income. This affordability requirement does not extend to coverage offered to an employee’s dependents, who, as a result, may face additional expenses should an employer choose to pass along a portion of increased premium costs to them.
Employers opting to pay the Employer Shared Responsibility assessment may do so if at least one of their FTE employees qualifies for a tax credit from the government to purchase individual coverage through a public exchange.
When deliberating whether they will play or pay, employers should review a range of cost calculations and considerations to determine the pros and cons of providing their workers with medical care coverage. For example, businesses may deduct on their corporate returns the costs they spend to provide employee health benefits. Conversely, employers that opt to pay the shared responsibility assessment may not deduct that payment from their corporate taxes.
Getting Started
In order to properly prepare for and implement strategies to comply with the provisions of healthcare reform, businesses should first become familiar with the law’s related deadlines. They must set aside the time to fully understand and prepare for the consequences that compliance may have on the financial and administrative aspects of their organizations. To do so, they may require the assistance of outside professionals, such as insurance brokers, lawyers and accountants, who not only understand all of the complexities associated with compliance but can also provide guidance that is tailored to meet a business’s specific needs and desires.
Healthcare reform is a reality. No longer can employers sit back and take a wait-and-see position. Astute business executives have already started the planning process, weighed the various options available to them and decided how best to proceed. While the true costs and challenges of reform may not be known for some time, the one certainty is that both employers and employees alike will need to take appropriate actions to adapt to the changes that lie ahead.
About the Authors
Whitney Schiffer is an associate audit director and leader of the Healthcare Services Practice and Adam Cohen is an associate tax director with Berkowitz Pollack Brant. For more information, call (305) 379-7000 or e-mail wschiffer@bpbcpa.com or acohen@bpbcpa.com.
About Berkowitz Pollack Brant Advisors and Accountants
For nearly 30 years, the professionals of Berkowitz Pollack Brant have solved problems, provided knowledge and helped clients build their companies. The firm and its affiliates Provenance Wealth Advisors and BayBridge Real Estate Group have offices in Miami, Ft. Lauderdale and Boca Raton, Florida.
Berkowitz Pollack Brant has been named one of the top 100 firms in the U.S. by both Accounting Today and INSIDE Public Accounting. One of the largest firms in South Florida, it is comprised of talented and resourceful professionals who provide consulting services with an entrepreneurial focus. Specialty areas include tax planning and compliance, corporate and commercial audits, forensics and litigation, business valuation, and wealth management and preservation.
For more information about the firm or its affiliates Provenance Wealth Advisors and BayBridge Real Estate Group, visit www.bpbcpa.com
Patient Protection and Affordable Care Act
Timeline of Provisions
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2013
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Distribute Summary of Benefits and Coverage (SBC) to Employees
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Employers must provide employees with printed or electronic documentation describing the health-plan benefits they offer, including cost-sharing responsibilities of employers and employees, or risk a penalty of $100 to $1,000 per employee. SBCs must be issued:
- when employees apply for coverage,
- every year when coverage is renewed,
- within seven days of an employee’s request for it, and
- at least 60 days before significant changes in coverage take effect.
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Notify Employees about Competitive Health Care Marketplaces / Health Insurance Exchanges (HIEs)
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By October 1, 2013, employers must provide employees with written notification detailing:
- the availability and services of insurance exchanges beginning on January 1, 2014, and
- the qualifications required for employees to receive premium assistance tax credits or cost-sharing reductions.
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Report the Value of Group Health Benefits on Employees’ W-2s
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Employers who issue 250 or more W-2s must report the total cost of group health benefits they provide to employees, including total premiums paid by employer and employee, in Box 12, code DD, of each employee’s W-2.
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Apply New Medicare Tax Rates to High-Income Earners
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Employers must deduct an additional 0.9 percent Medicare surtax from the paychecks of high-income taxpayers, including individuals with earnings of more than $200,000 or married couples filing jointly with earnings exceeding $250,000.
In addition, high-income taxpayers will be assessed a new 3.8% Medicare contribution tax on the amount by which modified AGI exceeds $200,000 for individuals or $250,000 for married filing jointly, whichever is less.
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Limit Employees’ Contributions to Flexible Spending Accounts
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Employees may not exceed a $2,500 pre-tax annual contribution to Flexible Spending Accounts (FSAs) under employers’ cafeteria plans. |
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Issue Medical Loss Ratio (MLR) Rebates to Employers
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Employers are entitled to receive a rebate from insurance companies that do not spend between 80 and 85 percent of their premium on clinical services and activities intended to improve healthcare quality.
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2014
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Decide to Play or Pay
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Employers must decide whether they will provide employees with “affordable” health insurance or pay a $2,000 shared responsibility assessment per year for each full-time worker that opts out of employer-sponsored plans and qualifies for a federal tax credit to purchase health insurance through a competitive healthcare marketplace option. This mandate will commence on January 1, 2015, and employer-shared responsibility penalties will not apply until 2015.
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File Information Reports with the IRS
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Employers must begin filing with the IRS reports describing the types of health coverage they will provide to employees beginning after December 31, 2014. Reported information will include whether the employer offered its full-time employees and their dependents coverage; whether the plan includes essential coverage; the plan’s waiting period, monthly premium and employees’ share of total allowable cost of benefits; number of full-time employees; and each employee’s name, address and Social Security Number or tax ID number.
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Alert Employees of Coverage Options
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Employers must supply their employees with written descriptions of the coverage they will provide to employees and employees’ dependents, and direct employees to competitive healthcare marketplaces, which are scheduled to go live on January 1, 2014.
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Abide by Plan Exclusion Limitations
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Employer-provided health plans may not refuse coverage to adults with pre-existing conditions, nor impose waiting periods of more than 90 days, nor may deductibles for small business exceed $2,000 for individuals and $4,000 for families. Limits on out-of-pocket expenses for high-deductible health plans will remain in effect at $6,250 for individuals and $12,500 for families.
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Abide by Dependent Coverage Guidelines
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Employers must extend healthcare coverage to employees’ dependent children under the age of 26. The guidance does not include an employee’s spouse in its definition of dependents and therefore excludes spouses from coverage requirements.
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Apply Applicable Tax Credits
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Small businesses with fewer than 25 employees may qualify for a tax credit of up to 50% of their contributions to employees’ health insurance. |
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Contribute to Transitional Reinsurance Program
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Sponsors of self-insured group health plans must begin making contributions of $5.25 per covered individual per month to the Transitional Reinsurance Program, which will be used to pay premiums for high-risk individuals in the competitive healthcare marketplaces. |
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Expect an Increase in Health Plan Costs
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Health insurers are almost certain to pass onto their customers the costs they incur from a new tax intended to help pay for reform. |
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