What s in federal health reform for small businesses?

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1 Community Chamber Development Corporation The CCDC is an affiliate of the Chautauqua County Chamber of Commerce 512 Falconer Street, Jamestown NY ~ Bennett Road, Dunkirk NY ~ What s in federal health reform for small businesses? Gregory A. Krauza Director of Member Development [email protected] 1

2 Presentation Outline 1. The Need for Health Reform 2. The Affordable Care Act: Ensuring health coverage for all. 3. The New York SHOP Exchange: Makes it easier for small employers to offer coverage 4. NY State Department of Finance Insurance Premium Rate Review 2

3 The coverage crisis 2.8 million (15%) New Yorkers lack health insurance (50 million in US). 50% of uninsured adults in NY work full-time jobs. 800,000 employees of small businesses lost coverage in the past decade. Employers are cutting back health benefits, or cutting them altogether. 3

4 The coverage crisis (cont.) Between 2000 and 2009, health insurance premiums in NY grew by 92%, while median earnings only rose by 14%. The average annual cost of insurance in the individual market in NY is over $12,000 for an individual, more than $24,000 for a family. 4

5 Rising Costs Premium growth outpaces inflation and wages 5

6 The ACA: How does it work? It s like a 3-legged stool: 1. Employer and individual mandate 2. Access to tax credits 3. The Health Exchanges SHOP Individual 6

7 Employer Coverage Requirement Fewer than 50 employees: Not required to offer coverage 50+ employees: Will be penalized or ($2000 per employee after the first 30) if they don t offer coverage, of if the coverage offered isn t affordable to their workers and the employees end up getting subsidized coverage on the individual Exchange employees: Must automatically enroll employees in health plans (employees can opt out). 7

8 Tax Credits (Available NOW!) What firms are eligible? Fewer than 25 full-time employees Two half-time employees count like one full-time employee Average annual wages < $50,000 Not counting wages of the owner or her family Employer pays at least 50% of premium cost Non-profits eligible too 8

9 Tax Credits How much is the credit worth? Level of credit depends on number of employees and their average wages. Highest credit is 35% of firm s health insurance costs For firms with <10 employees with average wages <$25,000 Example: Tina s Bagels has 7 employees with average wages of $24,000. She made $100,000 in profit, and without the credit her federal income tax would be $30,000. She spent $40,000 on health insurance for her employees. The tax credit would save Tina $14,000 (35% of $40k) And a credit subtracts dollarfor-dollar from her final tax. That s better than a deduction that only reduces taxable income. With the credit, Tina would owe $16,000 in taxes. 9

10 Tax Credits How to claim the credit Claim credit using IRS Form 8941 available at Credit can be reflected in determining estimated tax advances Credit applies towards income tax, not employment taxes Credit can be carried forward and backward Talk to your accountant! 10

11 Health Insurance Exchange How it will affect the insurance market Insurance works best when healthy people buy it too. Then insurance spreads the risk among the insured population. Us, all in one boat. The Exchanges, the mandate, and tax credits work together to encourage healthy people to buy coverage, improving the risk pool, driving down prices. NY s Exchange is expected to reduce premiums by 66% in individual market and 22% in small group market. 11

12 The New York SHOP Exchange: (Small Business Health Insurance Options ) Makes it Easier for Small Employers to Offer Coverage 12

13 Health Insurance Exchange Basics One-stop web portal Picture kayak.com, but for health insurance Lower costs (22% lower in small group market) Tool to compare plans and calculate costs Streamlined billing Firms can still choose to bypass the Exchange. Small Business Exchange INSURANCE PLANS EXCHANGE Choice Comparison Billing Tax Credits SMALL BUSINESSES 13

14 A one-stop SHOP Employer Registers with the SHOP Selects plans Sets premium contribution Manages account Employee Eligibility request Employee receives invitation Registers Select plan & coverage Enrolled SHOP Exchange Eligibility verification Display eligible plans & rates Enrollment completed

15 Simplifies access and choices for employers Easy account setup Compare: Premiums Benefits Networks Select employee plan options Set level of premium contribution Make a single monthly payment 15

16 Eases the process for employees Easy account setup Compare: Premiums Benefits Networks 16

17 Rate Review How it works State Dept. of Financial Services now reviews and approves premium increases before they go into effect. Plans must now spend 82 cents out of every premium dollar on enrollees health costs If plan spends less than 82% on medical claims, they must pay refunds. You can file comments on rate increases before they are approved ACA provides funding to New York to run the program. companyprofiles.healthcare.gov 17

18 More Resources NY State Health Benefit Exchange: Health Care For All New York: Community Health Advocates: Hotline: (888) HHS Information: Congressional Budget Office: Kaiser Family Foundation: Community Catalyst: ACA: 18