Scott Lyon, Senior Vice President Small Business Association of Michigan

Transcription

1 Scott Lyon, Senior Vice President Small Business Association of Michigan

2 Patient Protection and Affordable Care Act H.R Health Care & Education Affordability Reconciliation Act H.R ,000 30,000 pages of Regulation

3 Access to Qualified Coverage Guaranteed Issue, Subsidies, Medicaid Expansion Standardize Product Choices Exchange/Marketplace and metal levels Level Playing Field for Insurance Carriers Standard Rating rules, Essential Health Benefits and Risk Sharing Shared Financial Responsibilities Taxes, fees and Out-of-Pocket Maximums Quality and Delivery System Reforms

4 Increasing Cost of Health Care Drives Insurance Premiums Higher Erosion of Employer Sponsored Health Insurance due to cost Increasing Number of Uninsured Rapid Growth in Medicaid Costs and Enrollment Pressure on Budgets

5 2012 $6,515 $15, $5,049 $13,770 Family Premium 2005 $4,024 $10,880 Single Premium 2000 $2,471 $6,438 $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000

6 Private Sector Employers Offering Coverage Total % Under 50 Employees 36.9% Over 50 Employees 98.3% The Kaiser Family Foundation, 2011 State Health Facts

7 55 50 Millions Uninsured US Census Bureau

8 The conversation is same as it has been for 30 years Small businesses need access to affordable health insurance for themselves, their families and their employees The rising cost of health care, and therefore health insurance premiums, continues to be the number one conversation/concern

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10 Tax Credits for Small Businesses (Phase 1) Cover Children to Age 26 No Pre-Ex for Children Restrictions on Recession and out-of-pocket maximums Over the Counter Drug Exclusion Summary of Benefits and Coverage Simple Cafeteria Plan W2 - All employers must include on their employees W2s the aggregate cost of employer sponsored health benefits. Delayed for small business. Required if 250+ W-2s are issued

11 Section 125 Limits: FSA contributions are limited to $2,500/year/participant Tax Change: Threshold for deducting unreimbursed medical expenses from federal taxes increased from 7.5% to 10% Medicare Tax Rate: For individuals who earn $200,000+ (family $250,000+) the Medicare tax rate increases by.9% (1.45% %) for employee share only and 3.8% tax on unearned income Exchange Notification October 1 - employer is required to notify all employees of the Insurance Exchange/Marketplace

12 New Insurance Rules Medicaid Expands Employer Mandate Health Insurance Exchange Individual Mandate

13 Insurance Exchanges/Marketplaces Online marketplace for purchase of insurance (Oct. 2013) Mi Health Marketplace Waiting Period For plan years beginning on or after Jan.1, 2014, a group health plan or health insurance issuer offering group health insurance coverage shall not apply any waiting period that exceeds 90 days. Individual Mandate - Requires all U.S. citizens and legal residents to have qualifying health coverage or face a penalty if they do not. Those under FPL or those that do not file a tax return no penalty Employer Mandate /Free Rider/Shared Responsibility - Employers with more than 50 full-time equivalent employees must offer affordable coverage that meets minimum essential health benefit standards, to 95% of employees, or potentially be subject to a free rider penalty.

14 Individual Mandate - Penalties $95/year or 1% of taxable income 2015 $325/year or 2% of taxable income $695/year or 2.5% of taxable income and increased by COL Individual Coverage Subsidies Coverage must be purchased at the Exchange Family incomes between 133% and 400% of FPL. Under 250% of FPL also receive reduced cost sharing Individuals and their dependents who have been offered employer coverage that meets the minimum value and affordability tests are not eligible for the subsidy The subsidy is a refundable and advanceable tax credit paid directly to the insurer via the Exchange The tax credit is based upon the second lowest cost silver plan in the Exchange

15 50 Employee Calculation 2014 and 2015: 1 50 FTE = Small Group 2016: FTE = Small Group Full-time Employee working 30 hours or more per week in an average month (130 hours in a calendar month - including paid vacation, sick time, etc.). Part-Time Part-time employees count toward the total number of employees on a pro-rated basis. Divide the total hours worked by part-time employees in a month by 120. Seasonal Seasonal employees count unless the group s workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year and those seasonal employees are what put the employer above the threshold (50). Control Group All members of a controlled group count.

16 Don t assume that because your companies have separate employer identification numbers (EIN) that the employees will be counted separately for the determination of the Affordable Care Act, and for that matter COBRA. They most likely will not be. Types of Control Groups: Parent Subsidiary A parent-subsidiary controlled group exists wherever a parent organization owns 80% or more of the equity in a subsidiary organization. (For corporations, the 80% + test is based on attaining that level of voting power or total value based on all classes of stock; for partnerships, the 80% + test is based on attaining that level of profits interest or capital interest; for trusts and estates, actuarial interests are used.) Brother-Sister - common control group exists wherever the same five or fewer persons (counting individuals, estates and trusts as "persons") (i) collectively own 80 percent or more of the equity in two separate trades or businesses, and (ii) taking into account the level of ownership each of those five persons holds in each of the two organizations (using a lowest common denominator approach) collectively own more than 50 percent of the equity in both of the trades or businesses. Affiliated Service Group - exists wherever several organizations regularly collaborate in the services they provide to the public (typically, integrated services), and the several organizations are linked by a material level of cross-ownership. Failure to correctly identify the "employer" can cause you or your customers to not properly understand which ACA rules apply to the company(s).

17 Variable Hour Employees 1. Initial Measurement Period New Employees 2. Standard Measurement Period 3 12 months chosen by employers and can vary by employee class uniform and consistent for all employees in the same category 1. Collective bargaining vs. non-collective bargaining 2. Salaried vs. hourly 3. Employees of different entities 4. Employees in a different state 3. Administrative Period Up to 3 months to determine plan eligibility 4. Stability Period If employee is full-time during the measurement period, coverage is extended during the stability period as long as the employee remains an employee, but hours can decrease. 5. Stability Period (2) Stability period must be at least 6 consecutive calendar months and it must begin after the standard measurement period

18 50+ FTEs Coverage Offered Does ANY Employee receive a premium subsidy? Employer Penalty No Yes $2,000 per full-time employee, excluding the first 30 employees Yes No None Yes Yes Lesser of: $3,000 x number receiving assistance at the Exchange or $2,000 per employee (minus the first 30)

19 Cost of Coverage Thresholds Employee portion of premium vs. W-2 Box 1 Employee Employer Penalty % Is not eligible for Exchange Tax Credits None 9.5% and up May be eligible for Exchange Tax Credits if under 400% FPL Lesser of: $3,000 x number receiving assistance at the Exchange or $2,000 per employee (minus the first 30)

20 Federal Poverty Limit - FPL 2011 FPL Hourly Rate (40 hr week) W2 Wage 100% (Possibly Medicaid Eligible) $10,890 $5.24/hr 9.5% $86/mo 133%(Possibly Medicaid Eligible) $ $6.96/hr 9.5% $114/mo 150% (Minimum Wage) $16,335 $7.85/hr 9.5% $130/mo 200% $21,780 $10.47/hr 9.5% $172/mo 250% $27,225 $13.09/hr 9.5% $216/mo 300% $32,670 $15.71/hr 9.5% $259/mo 350% $38,115 $18.32/hr 9.5% $302/mo 400% $43,560 $20.94/hr 9.5% $345/mo 400% family of 4 $89,400 $20.94/hr 9.5% Employee Share of Single Premiums per 9.5% income Standard $345/mo since employer only has to use the single rate for lowest tier plan to calculate affordability

21 Drop coverage all together $2,000 x (80 30) = $ 100,000 annual, $8,333 monthly Provide coverage at minimum value, but not affordable to some Lesser of: $3,000 x # of employees purchasing coverage on the exchange and qualifying for a subsidy or $2,000 X (see above) Maintain coverage at minimum value, employee contribution does not exceed 9.5% of household income No penalty

22 If an employer drops coverage and sends employees to the exchange, employees do not see the penalty money the employer pays. Many employers think that if they drop coverage and send people to the exchange that their employees will get free or drastically reduced coverage. For many employees, particularly those without dependents, the subsidy may not exist or will be small.

23 IRS reporting will begin in 2015 for health insurance coverage provided on or after January 1, Information to be reported includes: Your company's name and employer identification number A certification as to whether your company offers its full-time employee* (and their dependents) the opportunity to enroll in a health plan that meets the definition of a minimum value plan. If your company certifies that it does offers its employees and dependents the opportunity to enroll, then you must also report: The length of your waiting period* (cannot exceed 90 calendar days) The months during the calendar year for which coverage was available The monthly premium* for the lowest cost option available by category of employee Your (employer's) share of the total allowed cost of benefits provided under the plan The number of full-time equivalent employee (FTE)* for each month during the calendar year The name, address, and tax identification number of each full-time employee* during the year (by month) when the employee (and dependents) were covered under your group health plan Such other information the Secretary may require

24 Small Business Tax Credits treating the symptom 2014 Part II 2 years Tax credit equal to 50% in Part II of the employers health insurance costs, if: 10 or fewer full-time equivalent employees Average annual wages of less that $25,000 (not including owner s or owner s family member wages) Employer pays 50% or more of the premium Must Purchase via Exchange Companies with between 11 and 25 workers and an average wage of less than $50,000 are eligible for partial credits If currently offer Qualify or Not? Or, enough to maintain plan If you do not offer, is the incentive enough to begin?

25 Products & Underwriting Pricing New Products (Metal Levels) Guarantee Issue New Deducible and Out of Pocket Max. Member Level Age Rates Rating Regions Tobacco Surcharge Taxes and Fees Taxes and fees to fund various initiatives and expenses Risk Sharing Stabilizing Risk Pools Across Insurance Carriers

26 Today Individual 10:1 age rating - Group 5:1 age rating Tomorrow Individual and group 3:1 age rating Single, Two-Party and Family rates for group Member level rating each covered individual gets their own rate (children 0-20 one band, age 64+ one band)

27 No Employer Mandate or Penalty New Product Menu New Essential Benefits One Subscriber Groups to Individual Plans Guaranteed Issue No Pre Ex and No Annual or Lifetime limits Eligibility requirements (30/hrs = fulltime) Invoice will look different Contribution Strategy New Deductible cap ($2,000/$4,000) Out of pocket max ($6,350/$12,700) SHOP Exchange Grandfathered plans exempt No longer Single, Two-person or Family rates Rates will be per person based on ages, smoking status and area of enrolling members, with a maximum of 3 oldest children Additional taxes will apply on top of these changes

28 Comparative Effectiveness (PCORI) Federal Tax on Insurance Premiums Reinsurance Fees Phase out in 2017 When How Much Individual and Small Group ASC July 2013 $1 - $2 PMPY Yes Yes No 2014 % of premium Yes Yes (stop loss) Marketplace Fee % of premiums on marketplace Medicare Yes $5.25 PMPM Yes Yes No Small Group only No No Risk Adjustment fee 2014 $.96 PMPY Yes No No High Cost health plan (Cadillac Tax) % excise tax on premiums above limit Yes Yes Yes, if in a Group plan

29 Insurers estimate there will be a 5% - 7% increase in rates due to new PPACA taxes and fees (before trend) New deductible and out of pocket maximums will impact rates Loss of Industry Factor will impact rates Change in age bands will impact rates? Member level rating will impact rates

30 Rating Standards Age, Tobacco, Geography and Family Status Member Level Rating Rating Regions 2014 for Individual Plans 2014 for groups with 1 50 employees 2016 for groups with employees 2017 for groups with 100+ employees Taxes and Fees 2013 for all size groups

31 March 23, 2010 coverage is Grandfathered Allowable changes Addition of New Employees and Family Copayment increase Greater of Total Medical inflation + 15% or $5 Deductible increase Total Medical inflation + 15% Non-allowable changes Company merger cannot be to make grandfather status available to combined workforce. Elimination of all or substantially all benefits to diagnose or treat a particular condition causes a plan or health insurance coverage to cease to be a grandfathered health plan. Any increase in a percentage cost-sharing requirement (such as coinsurance). A greater than a 5% change to the contribution rate No change in insurance companies even for the same plan Does not apply when self-insured employers switch TPAs or union CBAs.

32 Individuals Self- Employed Small Employers (2-50) Health Insurance Exchange Blue Cross Blue Shield of Mi/BCN Priority & Health Plus HAP & United Consumers Mutual New Health Care CO-OP National Plan(s)

33 American Health Benefit Exchanges for Individuals and Small Business Health Options Program (SHOP) where small businesses with up to 100 employees can purchase qualified coverage. (states can limit to 50 employees until 2016). An online marketplace. October 1 - Employer to Employee notice requirement of Exchange - FLSA Section 18B for model notice October 2013 Up and running and accepting applications for coverage period beginning in January 2014 Subsidies If an individual is eligible for a subsidy they must purchase coverage from the Exchange Subsidies are Based on Income From 133% of FPL ($15,282) - 400% of FPL ($45,960 single and $94,200 family). Sliding scale credits.

34 Subsidies are only available on the individual exchange Individual premiums are paid with after tax dollars Group coverage (2-50 only) can be purchased on the SHOP Exchange Some groups may be eligible for a small business tax credit if the group has fewer than 25 full time employees, pays an average wage of less than $50,000/year, and pays at least 50% of employee premiums Employee Choice Employer picks the metal tier and employees have the option to choose the plan they would like based on employer choices

35 Individuals and Groups with 1 50 employees can enroll in October 2013 for coverage in 2014 Groups over 50 employees can enroll in the Marketplace Jan. 1, 2016 Groups over 100 employees can enroll in the Marketplace Jan. 1, 2017 (at option of the State) Open Enrollment - October 1, 2013 March 31, 2014

36 Coverage Options Multiple Insurance Carriers Plans at the: Platinum: 90% actuarial value (+/- 2%) Gold: 80% actuarial value (+/- 2%) Silver: 70% actuarial value (+/- 2%) Bronze: 60% actuarial value (+/- 2%)

37 1. Ambulatory patient services 2. Emergency services 3. Hospitalization 4. Maternity and newborn care 5. Mental health and substance use disorder services including behavioral health treatment 6. Prescription drugs 7. Rehabilitative and habilitative services and devices, 8. Laboratory services 9. Preventive and wellness services and chronic disease management 10. Pediatric services, including oral and vision care Reviewed annually by HHS Plans and Rates embargoed until October by Michigan OFIR

38 All small group plans must adhere to deductible and out-of-pocket limits in 2014 Deductible Range $0.$2,000 individual $4,000 family Out-of-pocket range for all EHBs includes deductible *Out-of Pocket Maximums only apply to Essential Health Benefits $ 6,350 individual* $12,700 family* (tied to HSA limits)

39 PPACA s premium tax credit (subsidies) only are available to qualified individuals purchasing coverage through health insurance exchanges after January 1, 2014 Individuals with family incomes between % of the federal poverty level, who are not covered by an employer sponsored plan that is available and affordable, are eligible for a premium subsidy Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost-sharing Individuals and their dependents who have been offered coverage through an employer that meets an affordability and minimum value test are not eligible to purchase coverage through an exchange and cannot get a subsidy.

40 Considerations for Employers: Exchanges are new and untested Coverage will be available for purchase outside the exchange more options Coverage may be available through a private exchange If the employer drops coverage, then everyone has to go to the exchange to get coverage

41 The premium subsidy will come in the form of a refundable and advanceable tax credit paid directly to the individual s insurer The amount of the refundable premium tax credit received is based on the premium for the second lowest cost Silver Level Plan on the exchange and in the rating area where the individual is eligible to purchase coverage Exchange subsidies do not mean free coverage and they will benefit lower income individuals and families very differently from higher compensated individuals Plan decision makers and their families generally will not qualify for subsidies

42 Individual Family Status Income Percentage of income that may be spent on health insurance Estimated value of the employee s annual tax credit in year old with qualified employer coverage Married, two children $35, % of household income No one in the family qualified to buy coverage in the exchange or get a subsidy 30 year old with no employer coverage Single $35, % of household income $155 (based on Kaiser Family Foundation s projection of a $3440 annual single premium in 2014) Individual s annual premium costs would be $ year old with no employer coverage Married, two children $35, % of household income $8,720 (based on Kaiser Family Foundation s projection of a $10,108 annual family premium in 2014) Family s annual premium costs would be $1, Year old with qualified employer coverage Married, three children $55, % of household income $0 -- No one in the family is qualified to buy coverage in the exchange or get a subsidy 45 year old with no employer coverage Single $55,000 N/A $0 Individual may buy coverage in the exchange but would not qualify for subsidy Individual s annual premium payments would be $5,609 based on Kaiser Family Foundation s projection of 2014 single premium 45 year old with no employer coverage Married, two children $55, % of household income $10, 100 (based on Kaiser Family Foundation s projection of a $14, 250 annual family premium in 2014) Family s annual premium costs would be $4,135

43 2018 Cadillac Tax An excise tax on insurers or employer health insurance plans with aggregate values that exceed $10,200 for an individual and $27,500 for a family takes effect. Tax is indexed to the CPI-U beginning in 2020 Cadillac Tax is 40% of the value above the threshold. Have you done the math? We have

44 2014 Health Benefit Purchase Scenario EMPLOYER Premium Credits & Cost Sharing. Who will be Eligible?

45 Employee Base - Mix of full and part-time employees. What side of 50 is your company on? Coverage Offered If you currently offer health insurance coverage to your employees, why do you do that? Does coverage offered meet the affordability and minimum value tests? Send Employees to the Exchange - If you stop offering employer coverage and send employees to the Exchange, what will the reaction be? Will employees still look to you for answers? Will they buy coverage or take their chances and pay the fine? Exchange Subsidies Subsidies do not mean coverage will be free, lower income families will benefit the most, with middle and upper income people receiving very limited subsidies. Health of Workforce Impact on productivity, absenteeism and employee morale. Tax Issues - Employer premiums are tax-deductible, individual premiums paid to the Exchange are after tax. In you increase the employee salary to make up for lost benefits, employer FICA taxes also increase. Impact on Workers Comp. If employee remain uninsured, will non-workplace injuries that before would have been covered by health insurance suddenly become a work related injury? Competitors Will your best and brightest become your competitors best and brightest?

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