AFFORDABLE CARE ACT ( ACA ) EMPLOYEE COMMUNICATION PART I OVERVIEW OF HEALTHCARE REFORM

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1 AFFORDABLE CARE ACT ( ACA ) EMPLOYEE COMMUNICATION PART I OVERVIEW OF HEALTHCARE REFORM Most employees are familiar with the terms healthcare reform, the Affordable Care Act ( ACA ) or Obamacare. The media is full of news shows, articles, advertisements and commentary regarding the pros and cons of healthcare reform. Sifting through the maze of information and misinformation is challenging for employers and employees. The purpose of this ACA Employee Communication is to help you understand your alternatives as an employee of ELS Language Centers ( ELS ). As a starting point, it is important to understand the purpose of healthcare reform. The goal in enacting healthcare legislation was to extend health coverage to uninsured individuals. The belief is that if uninsured individuals receive healthcare coverage, the overall cost of healthcare may be reduced for everyone. ELS believes in the objective to extend health coverage to all individuals and ELS has always provided a high level of healthcare to its employees, in addition to promoting good health through the implementation of various wellness programs. 1. What does Healthcare Reform mean to you, as an employee of ELS? Healthcare reform is complicated. However, it should have little impact on you, as an employee of ELS and your family. Healthcare reform requires employers to offer affordable health coverage to all full-time employees working 30 or more hours per week. ELS already provide health coverage to all employees working more than 20 per week. Under the law, affordable healthcare coverage cannot cost you more than 9.5% of your Modified Adjusted Gross Income for single employee health coverage in Thus, if family income is $80,000, no more than $7,600 ($80,000 x 9.5%) may be charged for single health plan coverage. ELS has traditionally charged employees only a portion of the cost of healthcare coverage. In 2013 your cost of coverage is approximately 16% to 22% of the healthcare coverage you elected. These percentages are based upon the cost of the coverage you elect, and not family income. For example, if family coverage costs $15,000 per year, you only pay approximately $3,000 ($15,000 x 20%) and ELS will pay the balance of $12,000 toward your health coverage. 1

2 It is anticipated that all full-time employees of ELS will be offered health coverage that is more generous than required by law, and will cost less than 9.5% of family income for single coverage. Thus, health coverage will be offered to employees of ELS and will be affordable. In addition, healthcare reform requires an employer to pay at least 60% for the cost of health plan coverage. This is called the minimum value requirement. Given the fact that ELS pays approximately 78% to 84% of the cost of all health plans offered to employees, the ELS s will clearly satisfy the ACA requirements to offer affordable health coverage that provides in excess of the minimum level of benefits. 2. What choices do I have? You continue to be eligible to enroll in the s made available by ELS to employees. As an alternative, depending upon your family income, you may give consideration to health coverage under what are referred to as Exchanges or the Marketplace ( Exchange/Marketplace ) health plans. However, it is important to realize that if you are offered affordable healthcare coverage, you will not be eligible for any tax credits or subsidies if you elect and receive health coverage through an Exchange/Marketplace. Therefore, for most employees, it will be more beneficial to accept coverage from ELS, rather than to seek coverage under an Exchange/Marketplace health plan. Only in unusual circumstances could the tax credits available under an Exchange/Marketplace be beneficial. But, once again, remember that if you are offered affordable health coverage, you will generally not be eligible for a tax credit under an Exchange/Marketplace health plan. PART II FREQUENTLY ASKED QUESTIONS ( FAQs ) 1. When does healthcare reform become effective? Portions of healthcare reform became effective as of January 1, For example, you already received substantial information regarding the ability to enroll adult children up to age 26 in the ELS s. Plans that maintained grandfathered status were not required to cover adult children up to age 26 if they had other coverage available, such as coverage available through an employer. For example, if a 24 year old adult child was working for an employer offering health coverage, a grandfathered plan covering a parent was not required to provide health coverage to such a child. Non-grandfathered plans were required to provide coverage whether or not other health coverage was available. Beginning in 2014 all adult children will be eligible for health coverage up to age 26 regardless of the status of a health plan as grandfathered or not grandfathered. 2. May I stay in the ELS s? Yes. You are eligible to continue health coverage under the ELS s if you work 20 or more hours per week. You may also elect to receive coverage under the health plan of a parent, up to age 26, or a spouse or domestic partner if such coverages are available. You may also elect to receive coverage under an Exchange/Marketplace health plan. However, as noted throughout this Communication, if you are offered 2

3 affordable healthcare coverage from ELS, that satisfies the minimum value requirements, you will not be eligible for a subsidy if you elect to receive coverage under an Exchange/Marketplace health plan. 3. What is an Exchange/Marketplace? An Exchange/Marketplace health plan is essentially a health plan sponsored by a particular state and/or the Federal government that is administered by an independent insurance company or a government agency, depending upon the plan. You may think of an Exchange/Marketplace as a new health plan offered by the states and the Federal government. An Exchange/Marketplace plan will be substantially similar to health plans sponsored by Aetna, United Healthcare, Blue Cross/Blue Shield, and other popular healthcare providers. In fact, in some states, existing insurance carriers may administer or operate the Exchange/Marketplace health plan. 4. Are there different types of Exchange/Marketplace s? Yes. The Exchanges/Marketplace health plans will have different plans categorized as Bronze, Silver, Gold and Platinum. The Bronze Plan will be the lowest level plan that can be maintained under healthcare reform. The Platinum Plan is the best plan that may be obtained if you are willing to pay more for such a health plan. 5. Who will run the Exchanges/Marketplace plans? Each state was eligible to elect to set up its own Exchange/Marketplace health plan, run an Exchange/Marketplace health plan in partnership with the Federal government, or let the Federal government run the Exchange/Marketplace health plan in their states. The current status of Exchanges/Marketplace health plans are as follows: State Exchanges/Marketplace health plans will exist in California, Colorado, Connecticut, District of Columbia, Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington. States that will partner with the Federal government to run Exchanges/Marketplaces include Arkansas, Delaware and Illinois. Iowa, Michigan, New Hampshire and South Dakota are still seeking or may have recently received approval to have a partnership Exchange/Marketplace. The following 22 states will let the Federal government run the Exchanges/Marketplaces for them: Alabama, Alaska, Arizona, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Virginia, Wisconsin and Wyoming. 6. What are the tax credits available if I receive Exchange/Marketplace health coverage? 3

4 Tax credits will vary depending upon your income and the income of your family. Tax credits are measured by your level of income, as compared to the Federal Poverty Level ( FPL ). Single Example. The FPL for a single individual in the 48 contiguous states is $11,490 in The maximum contribution for single health coverage (for someone earning at the FPL) is $1, per year ($11,490 x 9.5%) or $90.96 per month ($1, months). No subsidy is available for a single individual earning over 4 times the FPL, which is $45,960 ($11,490 x 4). For a single employee, earning $35,000, age 30, assuming a health insurance cost of $3,325 for a Silver Exchange/Marketplace health plan, the federal subsidy will be approximately 3.2% of the premium cost or $101, leaving $3,224 to be paid by the employee. The cost of healthcare under the Exchange/Marketplace vs. under the ELS Health Plans for a single employee may be compared as follows: Item Exchange Plan Single Income $35,000 $35,000 Total Cost of the for Single $3,325 $6,290 Coverage ELS Cost N/A $5,158 (82%) Tax Credit $101 (3.2%) N/A Employee Costs for Coverage $3,224 (96.8%) $1,132 (18%) Employee Payment Pre-Tax or After-Taxes After-Taxes Pre-Tax Family Example. The FPL for a family of 4 is $23,550. Thus, an income of $70,650 puts a family of 4 at 3 times the FPL (i.e., $23,550 x 3). If family income is over $94,200, the family income is at 4 times the FPL and no subsidy is available. No subsidies are available at any family size if family income is over 4 times the FPL. For a family of 4 (husband and wife each being age 40), with 2 children, assuming a health insurance cost of $11,547 for a Silver Exchange/Marketplace health plan, the federal subsidy will be approximately 42% of the premium cost or $4,835, leaving $6,712 to be paid by the family. The cost of healthcare under an Exchange/Marketplace health plan vs. under the ELS s may be compared as follows: Item 4 Exchange/ Marketplace Plan Family Income $70,650 $70,650 Total Cost of the for Family $11,547 $15,762 Coverage

5 Item Exchange/ Marketplace Plan ELS Cost N/A $12,273 (78%) Tax Credit $4,835 (42%) N/A Employee Costs for Coverage $6,712 (58%) $3,489 (22%) Employee Payment Pre-Tax or After-Taxes After-Taxes Pre-Tax 7. Why would I go to an Exchange/Marketplace? In most cases, ELS does not anticipate that employees will elect to receive coverage under an Exchange/Marketplace health plan. This belief exists for the following reasons: Employees pay for their portion of the cost of health coverage provided by ELS on a pre-tax basis under the ELS Flexible Benefits Plan, in which ELS participates. Your payments for benefits received through an Exchange/Marketplace health plan will be paid on an after-tax basis. The ELS health coverage is generally offered to all employees working 30 hours a week or more and, in most cases, will be affordable coverage. Thus, most employees of ELS will not be eligible for tax credits under an Exchange/Marketplace. Therefore, the cost of Exchange/Marketplace coverage on an after-tax basis, without any tax credits, will cost substantially more than accepting health coverage from ELS, as illustrated in the above examples. 8. Where may I obtain additional information regarding my options? The Internal Revenue Service ( IRS ), the Department of Labor ( DOL ) and the Department of Health and Human Services ( HHS ) are working as a Tri-Agency Task Force to provide information regarding Exchanges/Marketplace health plans and alternatives. A helpful website is This site provides information regarding the Federal subsidy based upon your family status and income. CONCLUSION If you have any further questions regarding the Affordable Care Act, please visit HealthCare.gov for more information. (C:\Clients\Berlitz\Welfare\ACA-FAQ-ELS) 5