HEALTH CARE REFORM OVERVIEW FOR OUR MEMBERS
INTRODUCTION Health care reform being implemented through the Patient Protection and Affordable Care Act (PPACA) is beginning to take shape. Also known as the Affordable Care Act (ACA), it is landmark federal legislation that newly regulates the entire health care system in this country and which will require members to pay special attention and make some careful decisions. What follows are some of the concerns you’ll need to address before you are able to make the best decisions for
CONCERN #1: Should you continue to provide health care at all? The main concern for members will be deciding whether to continue providing company health care or not. While employer supplied healthcare has always been the norm, removing coverage for all employees might now be a viable option under ACA starting in 2014. This would mean your employees would then be required to purchase coverage individually through the Covered California public exchange (coveredca.com), and for the first time, plans will have to accept everyone, regardless of any prior medical conditions. As individuals, some of your employees might qualify for substantial subsidies, depending on their income levels. While providing no health care at all sounds like a gift from the government, saving you major business expense, we believe there are some issues that might make the “providing no health care” strategy unattractive for most of our members. Here’s why: ▶▶ At this point the public exchange for individuals will have the highest rates for the least rich plans. The Health Insurance Marketplace (healthcare.gov) will make available the exact premium and plan choices in October, 2013. ▶▶ The subsidies offered by the government will only be available for your employees that make under $45,960 per year of individual income and up to $94,200 income for a family of four.
your firm. Most will need to be made the start of next year. (See the companion Health Care Reform Timeline and Compliance documents in this series.) What follows are some of the concerns you’ll need to address before you are able to make the best decisions for your firm. Most will need to be made the start of next year. (See the companion Health Care Reform Timeline and Compliance documents in this series.)
▶▶ Example 2: 40-year old family of 4 with $50,000 annual income—monthly premium $1,028, tax credit $741 = an estimated monthly premium $287. ▶▶ Premiums for those plans will be a taxable purchase to your employees, making them a poor value compared to the non-taxable company coverage they currently enjoy. In other words, employees will be buying coverage on the exchange with after tax dollars instead of pre-tax dollars. (In our single individual in example 1, the $277 net cost of coverage will require approximately $100 to $130 additional monthly earnings to pay the required income taxes to purchase that coverage. Your employees might not appreciate this tax bite. ▶▶ The Covered California enrollment forms we have seen for signing up for health care reform do not look too friendly, but may improve with time. Your employees might not appreciate working with the new state agency. (think DMV) ▶▶ You cannot discriminate. Everyone in your firm has to purchase care on the exchange. You will not be able to provide coverage for yourself inside the company and then send everyone else to the state exchange. Employees can, however, waive coverage with you and go to the exchange if they can obtain a better deal with a subsidy, a likely situation for a low wage employee. ▶▶
▶▶ Example 1: 40-year old individual with $35,000 annual income—monthly premium $318, tax credit $41 = an estimated monthly premium $277.
2013-2014 HEALTH CARE REFORM
CONCERN #2: Will there be minimum compliance requirement? The final and perhaps the most troubling concern for members is affordability for you, the employer. This is a two step challenge. First, you need to ensure that your brokers, carriers, and private exchanges provide you with the best possible rates. Once the rates become available, you will be able to determine your best options. Second, once your decision has been made and your plan offerings have been selected, you will need to decide what your employer contribution level will be. The minimum contribution level is typically 50% of a base plan toward the employees’ premiums and none of the dependents’ premiums. Finding the right balance between your affordability and your employees will continue to be difficult as premiums continue to escalate. For most of you, ACA will be less about new requirements and more about affordability CONCLUSION Our conclusion, so far, is that ACA won’t be too onerous once you get past the first decision of whether or not to continue to provide coverage for your employees. The bigger challenge will be about affordability, which means finding the best possible rates and determining the right employee contribution levels. Seeking the best possible rates and value will continue to be the focus and represents the biggest ACA challenge. In the coming months, look for more information from VMA regarding Health Care Reform. Our future focus will be on specific requirements for Small Group Employers and Small Business Tax Credits. Potential Large Group penalties and requirement information will also be provided along with other information regarding posting and requirements.
2013-2014 HEALTH CARE REFORM
What if I want to “gross up” my employee’s pay to help them purchase on the public exchange?
Because the employee will pay with after tax dollars, additional taxes will be owed. If you were to help that employee purchase that policy on the outside, you would have to “gross up” that person’s salary in order to allow for the extra state and federal taxes. (This might also be your personal situation, as an owner.)
As a small business employer, why should I continue to offer medical coverage to my employees?
Employer-sponsored health insurance is valuable for a number of reasons. People who are insured are protected against uncertain and high medical expenses. An insured person is more likely to receive needed and appropriate health care. Health insurance also improves health outcomes and lowers mortality so employees with health insurance are more likely to be productive workers. Many small businesses know that offering health insurance as an added benefit, makes them a more attractive employer.
Q A T
How do I count my employees for Full-Time Equivalent reporting? A large employer is one with more than 50 full-time equivalent employees during the preceding calendar year.
he simplest method of determining whether an employer is a “large employer,” both full-time and part-time employees are to be included in the calculation. 1. Full-time employees are those working 30 or more hours per week. The number full-time employees excludes those full-time seasonal employees who worked less than 120 days during the year. 2. The hours worked by part-time employees (i.e. those working less than 30 hours per week) are to be included in the calculation of a large employer, on a monthly basis, by taking their total number of monthly hours worked divided by 120. For example: A business has 35 full-time employees (30+ hours). In addition, there are 20 part-time employees who all work 24 hours per week (96 hours per month). These part-time employees’ hours would be treated as equivalent to 16 full-time employees. (20 employees X 96 hours =1920 / 120 = 16)
Tax treatments are more favorable for both employees and employers who include health in their employee benefit programs.
The full-time equivalent number of employees is 35 + 15 = 51.
As a small business owner, what is my penalty if I choose not to offer health insurance? For businesses less than 50 equivalent full-time employees there will not be a penalty.
Can we continue to offer insurance where employees can purchase higher levels of benefits from the base plan having the lowest contributions required?
Yes, as long as the base plan meets the minimum essential coverage. An employee can continue to choose a higher level of benefit and pay a higher contribution toward that plan.
2013-2014 HEALTH CARE REFORM
Define “Minimum Essential Health Coverage” The term essential health benefits is to be further defined by regulation, in order to be compliant a plan must include:
▶▶ Ambulatory patient services ▶▶ Mental Health & Substance Abuse Services ▶▶ Emergency services ▶▶ Rehabilitative & habilitative services & devices ▶▶ Hospitalization ▶▶ Pediatric services, including oral & vision care ▶▶ Prescription drugs ▶▶ Preventive & Wellness services & chronic disease management ▶▶ Laboratory services
As an employer, I currently offer Accident and Disability Income coverage. Is this considered Minimum Essential Coverage? No – the following plans do not qualify as minimum essential coverage:
▶▶ Laboratory services ▶▶ Accident coverage or disability income insurance, or any combination
Can an employee waive an employer insurance plan and not obtain coverage elsewhere?
Most employees will be required to have health insurance or pay a tax penalty which phases in over 3 years and becomes increasingly severe. Individuals without coverage will be required to pay a tax penalty when filing their income taxes at the end of the year. 2014 – the penalty will be 1% of annual income or $95, whichever is greater 2015 – the penalty increases to 2% or $325, whichever is greater 2016 – penalty increases to 2.5% or $695, whichever is greater
Above Q & A indicated “most” employees must have coverage – please explain. Following groups are exempt from the requirement to obtain coverage or pay the penalty:
▶▶ Individuals who would have to pay more than 8% of their income for health insurance ▶▶ Individuals whose incomes are below the threshold required for filing taxes in 2012 ▶▶ People who qualify for religious exemptions
▶▶ Limited scope dental or vision benefits
▶▶ Undocumented immigrants
▶▶ Benefits for long-term care, nursing home care community-based care, or any combination
▶▶ People who are incarcerated
▶▶ On-site medical clinics coverage
▶▶ Members of Native American tribes
▶▶ Coverage only for a specified disease or illness ▶▶ Hospital Indemnity or other fixed indemnity insurance ▶▶ Other similar insurance coverage or any combination of above plans
2013-2014 HEALTH CARE REFORM
Q A Q A
Will COBRA and CAL-COBRA continue to be available? Yes – COBRA and CAL-COBRA will still be available providing the employer continues to offer an employer health plan to its employees.
Will HRA’s be allowed under ACA?
Yes – An HRA (Health Reimbursement Account) is an employer funded plan that may be used to reimburse employees for medical expenses including health insurance deductibles, co-pays, and coinsurance. For employees, HRA reimbursements are not taxable, and fund balances can roll over to subsequent years unless the employer specifies otherwise. An HRA is NOT health insurance. Employees need not have health coverage through the employer in order to participate.
Is PIBT compliant with the PPACA/ACA?
Yes – PIBT (Printing Industries Benefit Trust) will function as a Private Exchange and will continue to offer a full range of health insurance plans, most of which will be compliant. PIBT is working directly with our carriers to ensure that all the plans we will be offering will have as many options as is reasonable for the most competitive rates we can negotiate.
Disclaimer: The information shown above is based on information that has been made available to us and is subject to change. Document is not to be used for any legal purposes.
Will rates increase/decrease with Patient Protection and Affordable Care Act (PPACA)?
Yes—Increase, because in addition to rates calculated on the overall cost of claims and administration of the plan(s) there will be additional mandated fees the carriers will charge back to the groups for Comparative Effectiveness Research, Health Insurance Industry Fee, and Reinsurance Assessment Fee. All of these fees will be built in to the rates and charged as part of the premium.
2013-2014 HEALTH CARE REFORM