Health Care Reform IMPACT ON INDIVIDUALS & BUSINESSES How do Most Consumers Feel? What You Will Learn Today: Am I eligible for a premium subsidy? Is my business eligible for a tax credit? Do I have to offer my employees group health insurance? How will the new laws affect my employees without insurance? What are the penalties to individuals and businesses without health insurance? 1
A Timeline of Change: 2010 Health Care Reform bill signed into law March 23, 2010 Elimination of Lifetime Maximums Dependants coverage to age 26 Coverage for children with pre-existing conditions Small Business Tax Credit Temporary coverage for consumers with pre-existing conditions (PCIP - ran out of funding 2013). Right to appeal health plan decisions A Timeline of Change: 2011 & 2012 80/20 Rule Medical Loss Ratio (MLR): rebate offered if your insurance carrier didn t spend 80 cents out of every premium dollar to pay for medical claims and activities that improve the quality of care. Rebate should be distributed proportionately to what the employer/employee pay New preventive services for women Summary of Benefits Coverage (SBC) and Uniform Glossary A Timeline of Change: 2013 Department of Labor letters distributed to employees by October 1 st, 2013 October 1, 2013 Open enrollment in the Federally Facilitated Marketplace ( Exchange ) begins. SHOP delayed until November 1, 2013 What is an Exchange? An organized marketplace for the purchase of state or federally regulated and standardized health care plans. Virginia has a federally funded exchange. 2
A Timeline of Change: 2013 Enrollment ends March 15, 2014 all individuals must enroll in a healthcare plan (on/off) by this date or they will have to wait until the next open enrollment beginning October 15, 2014 (will pay a penalty for months uninsured) Only exception to the rule: qualifying event Death Divorce Birth Loss of coverage What is Coming in 2014? Individual Market Individual Mandate a requirement by law that certain persons purchase health insurance or pay a penalty. 2014 - $95 per person ($285 max for a family) or 1% over household income 2015 - $325 per person or 2% over household income 2016 - $695 per person or 2.5% over household income 3
Individual Mandate Exemptions Religious objection Incarcerated individuals Taxpayers with income under 100 percent of poverty (Medicaid) Those who have a hardship waiver People with no income tax liability Members of Indian tribes Those who were not covered for a period of less than three months during the year in 2014 Those that are not lawfully present in the US Premium Subsides Advanceable premium subsidy available to those that are under 400% of the poverty level. Federal Poverty Level Chart shows the income thresholds based on family size (how many claimed on tax return) 1 person - $45,960 2 person - $62,040 Family of 4 - $94,200 4
Premium Subsidies: Must purchase insurance through the exchange to receive the subsidy If employer provides affordable coverage, consumer is not eligible for subsidy Certified brokers are able to shop on the exchange and calculate subsidies for consumers Applicants need to provide projected 2014 household gross income so brokers can calculate the subsidy How are Rates Determined? Adjusted Community Rating (ACR) Age Tobacco use (up to 50% more) Geographic Location (VA has 12 metropolitan rating areas) Tier of Coverage Rates are no longer based on medical history or claims. Medical underwriting no longer determines rates. How are Rates Determined? Going from 10 age bands to 48 age bands Ratio now is 7:1, going to 3:1 0-20 21-64 64+ 5
10 Essential Health Benefits Outpatient care Emergency Room Inpatient care Maternity / Well baby visits Mental Health and Substance Abuse visits Prescription Drug coverage Physical/Occupational/Speech Therapy Lab Testing Preventive care visits including care to manage chronic disease Pediatric dental and vision How are Benefits Affected? All plans currently in place will no longer be available after December 2013 unless it is a grandfathered plan New Plans Platinum (90%), Gold (80%), Silver (70%), and Bronze (60%) Annual Deductible Limits: Individuals $2,000 and Family $4,000 New OOP Maximum Increases: Individuals $6,350 and Family $12,700 HMO products dominate the market with limited provider networks on and off exchange Coverage for clinical trials Mary, age 23, salary of $30,000 What are her choices? Stay on parents plan until she is age 26 Purchase insurance through her employer and pay a portion of the insurance premium Purchase insurance through a private carrier off the exchange and pay full price Purchase insurance through the FFM (exchange) and receive a premium subsidy limiting her monthly premium to 9.5% of her income ($237.50) Choose to buy no coverage and pay a penalty of $300 in 2014 and will be able to pick up coverage after illness or injury occur, but only during annual open enrollment period. 6
Frances, age 60, salary $46,000, tobacco What are her choices? Purchase insurance off of the exchange through a private carrier and be rated up 50% more because of her tobacco use Choose to purchase no insurance and pay a penalty at the end of 2014 ($460) Frances is above 400% of the poverty level, so she is not eligible to shop on the exchange and receive a subsidy What is Coming in 2014? Group Market ACR substantial increases for small business with young employees and low risk ratings Detailed monthly reporting required by IRS/HHS. 200+ FTE must auto enroll New hire waiting period max 90 days Spouse coverage no longer required of employers Employer Shared Responsibility Provision requires employers with 50+ FTE and 30 or more FT employees to pay a penalty What is Coming in 2014? Group Market Small group in VA 2-49 employees (elimination of medical underwriting and risk rating) Large group in VA 50+ (medical underwriting still exists) Additional Medicare withholding on wages increase by.9% (from 1.45% to 2.35%) for employees with income over $200,000 for single filers and $250,000 for married filing jointly. Employer portion of the tax (1.45%) will remain unchanged. 7
Full Time Employee Full Time Employee = 30+ hours per week or salary FTE = Full Time Equivalent: How to calculate FTE: 1. Exclude owners, family, and seasonal employees 2. Add number of FT + salary employees 3. Add remaining payroll hours / 2080 hrs per year The IRS states that the definition of a season employee is one that works 120 days or less. Employer Shared Responsibility Requires employers of 50+ FTEs AND 30 or more FT employees to pay a penalty. -Employer does not offer coverage and at least one employee receives a subsidy - $2000 per full time employee, excluding the first 30 employees. OR -Employer offers coverage, but it s not affordable and at least one employee receives a subsidy - $3000 penalty for each employee receiving subsidy OR up to a maximum of $2000 for each full time employee (excluding the first 30). Employer Shared Responsibility Payment Delayed until 2015 8
Example 1: Wiget Company has 60 FTE s and 40 of those work 30 or more hours. Business is exempt for the first 30 employees; penalty is imposed for 10 employees. 10 X $2,000 = $20,000 Annual penalty is $20,000 over the course of 12 months Example 2: ABC Company has 50 FTE s and 30 of those employees work 30 + hours a week. No penalty imposed because ABC Company is exempt for first 30 employees. Affordable Coverage Coverage is affordable if: - The employees required premium/contribution for self-only coverage does not exceed 9.5% of the employee s W-2. - Employers must offer minimum standard coverage of at least 60% of medical expenses (Bronze plan). 9
Tax Credits for Small Business Small Business Tax Credit offered to employers with 25 or fewer FTE and $50,000 or lower average annual salary. 2010-2013 = up to 35% credit (25% non-profit) 2014-2016 = up to 50% credit (35% non profit) Phased out between 10 25 FTE and $25,000 to $50,000 average annual salary. Employers must shop through the exchange (SHOP) to receive tax credit Joe s Barber, 10 FTE, average salary $35,000 What are their choices? Do not offer employer group coverage. They will not face a penalty because they are under 50 FTE, however any uninsured employee will face the penalty Purchase insurance outside the exchange through a private carrier and receive no tax credit Purchase insurance through the SHOP and receive a tax credit of up to 50% (35% for nonprofits) towards premiums employer has paid out. Credit is limited to 2 years Wigets R Us, 75 FTE (50 FT) avg salary $70K What are their choices? Choose not to offer coverage and pay the penalty, the lesser of $2,000 x (50-30) or $3,000 if employee goes to exchange and receives a subsidy Offer coverage and pay 50% toward employers premiums, whereas employees are paying 12% of their salary in insurance premiums. Must pay penalty as stated above because coverage is not affordable by definition Offer coverage and pay 80% towards employee premiums, whereas employees are paying 9.4% of their income in premiums. No penalty because coverage is affordable No tax credit available due to average salary and number of employees 10
23 Days into Open Enrollment: Daily system glitches and unsuccessful application submissions Carriers with limited plans don t have approval for all plans in 2014, therefore rates are delayed Higher rates for individuals and groups that don t early renew or that don t qualify for the tax credit Groups experiencing premium increases so high that tax credit does not offset the increase enough Carriers are reporting 40-50% increase for small groups in 2014 What Our Clients Are Seeing: Example 1: Local Non-Profit 5 Employees Currently June 1, 2014 renewal Early Renewal Option - $4,200 June 1 2014 renewal - $7,078 Example 2: Manufacturing facility in Alexandria 23 Employees Currently January 1, 2014 renewal Early Renewal Option - $5,600 January 1, 2014 renewal - $13,600 Our Advice: Take Early Renewal Options to keep current coverage for another year while the systems and actuarial tables level themselves out Let the dust settle on health care reform guidelines, etc Talk to a certified broker to review options for your business and your employees in the open marketplace. 11
Q & A Thank you 12