Transcript PPACA:Small Business and Individual Mandates

David Roberts, CFP®
LFACHE®, FHFMA®
What We Provide
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Individual Investment Management
Comprehensive Financial Planning
Fiduciary Consulting for:
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Defined Contribution Plans
Defined Benefit Plans
Foundations and Endowments
Corporate Investment Management
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October, 2013 Exchanges Open
Fundamental Contract Change Between
Employers and Employees
Private Medical Practices may be Subject to
Business Mandates
Need to Understand the Impact on Your
Business
Need to Learn New Rules and Terms of the
Game
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 Present
Business Requirements
 Review Individual Mandates
 Describe Issues, Trends and
Options
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Business and Individual Mandates are Very
Complex!
◦ Providers
◦ Businesses
 Small Business Market
 Large Business Market
◦ Individual Market
◦ Insurers
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Businesses Need to Make Informed Decisions!
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Enacted -March 23, 2010
• 2,800 pages; now 30,000 pages of
regulations and more coming
• 160 million workers receive health
insurance coverage
• Only one-half of small businesses
• Roughly half of the $900 billion of
spending in PPACA is devoted to
subsidies for individuals
• PPACA expands Medicaid
potentially.
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Adjusted Community Rating !
Gender Neutral
Pricing Limited by 3:1, Older vs. Younger
Smoker Adjustment by 1.5
Prohibition of discrimination based on
health status and Pre-existing Conditions
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Make insurance companies more accountable
Lower healthcare costs
Guarantee more choice of providers and
plans
Make health care more available
Expand preventive services
Promote use of health information technology
through electronic medical records
Generally enhance quality, safety, and
coordination of care
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Internal Revenue Code- 47 New Tax
Provisions
Employee Retirement Income Security Act
(ERISA)
Public Health Service Act (PHSA)
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Individuals with a Religious Conscious
Exemption
Incarcerated Persons
Undocumented Aliens
Individuals who cannot afford coverage
(> 8 % of Self-Only Coverage of Household Income)
Individuals with Hardship Situation (Defined
by HHS)
Individuals with income below the tax filing
threshold
Members of Indian Tribes
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Carrots - State Health Exchanges
Sticks- Tax Penalty for individuals and
businesses with 50 or more FTEs who provide
no health insurance benefits or coverage that
does not meet several tests:
◦ Affordability
◦ Minimum Essential Benefits
◦ Minimum Employer Contributions
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Mandates Begin January 1, 2014
Employers with 50 or more full-time
employees can be liable for an "assessable
payment“
Two alternative penalties.
◦ Annual Amounts are $2,000 or $3,000 but the
actual amount is calculated monthly.
◦ Generally, if an employee is offered affordable
minimum essential coverage (MEC) under an
employer-sponsored plan, then the individual is
ineligible for a premium tax credit and cost-sharing
reduction for health insurance purchased on the
state exchange.
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Employers and Individuals includes:
 Government Sponsored Programs
 Eligible Employer-Sponsored Plans
◦ Self-Insured Plans
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Plans offered in the "Individual Market"
Grandfathered Health Plans
Other Coverage the Sec. of HHS w/Sec of the
Treasury recognizes
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(1) No MEC- $2,000 per Full Time Employee Less 30
 Employers with at least 50 Full Time Equivalent
Employees and with at least 30 Full Time Employees
must offer MEC meeting specific requirements. If the
employers offer no health plan, they must pay $2,000
per full-time employee penalty if any of the full-time
employees receive a federal premium subsidy
through the health care exchange.
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The calculation of "large employer"
includes part-time workers. However,
the $2,000 per FT Employees Less 30
penalty is calculated based on full-time
workers. Not all large employers with
full-time employees will pay a penalty.
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Ambulatory Patient Services
Emergency Services
Hospitalization
Maternity and Newborn Services
Mental Health and Substance Abuse disorder
services, including behavior treatment
Prescription Drugs
Rehabilitative and Habilitative services and devices
Laboratory Services
Preventive and Wellness services and chronic
disease management
Pediatric services, including oral and vision care
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Large Employer offers health plan coverage, but
one or more full-time employees receive credits
for the exchange coverage. The number of fulltime employees receiving the credit is used in
the penalty calculation in this case. The penalty
is the lesser of:
1. The number of Full-time Employees
minus 30, multiplied by $2,000 or
2. The number of Full-Time Employees
who receive credits for exchange coverage,
multiplied by $3,000.
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Employer has 100 part-time employees (15
hrs. per week) and 30 Full Time workers.
(30+ per week)= Large employer. 90 FullTime-Equivalents. Even if one or more
workers received a premium credit the
penalty is only assessed against the Full
Time employees.
Penalty=30-30x$2,000=0
Penalty applies to all Full-Time employees
minus 30 times $2,000.
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Inadequate Health Plan- $3,000 per Full-Time
Employee Penalty
If employers with 50 or more FTEs offer MEC does
that meet the federal requirements if:
 At least one Full-Time employee obtains a
premium credit in an exchange plan and the plan
does not provide Minimum Essential Benefit (MEB)
 The employees required contribution for self-only
coverage exceeds 9.5% of the employee's
household income or
 The employer pays for less than 60% of the
benefits -AV
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Example: Employer= 35 full-time
workers who work 30 or more
hours per week. Firm has 20 parttime employees who all work 24
hours per week (96 hours per
month).
20 employees x 96 hrs = 1,920
hours
1,920/120 hrs/mo= 16 Full Time
Equivalents
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Example A: Large Employer does not offer
coverage, but no full-time employees
receive credits for exchange coverage. No
Penalty.
Example B: The large employer does not
offer coverage, and one or more full-time
employees receive credits for exchange
coverage.
◦ 50 Employees - 30=20
◦ 20x $2,000=$40,000
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Qualified Health Plans (QHP)
 Four "Metal Levels"
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Bronze - 60% of Actuarial Value
Silver- 70% of Actuarial Value
Gold- 80% of Actuarial Value
Platinum- 90% of Actuarial Value
Catastrophic- Under 30 Only
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If employers terminate their health plans?
An employer's annual healthcare costs will be
much greater than the penalty. The penalty is
non-deductible and employee healthcare
coverage is deductible.
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(1) Individual Tax Subsidies-The
subsidies are generous.
(2) Individual Health Insurance
Premium Tax Credits
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Illustrations: www.kkf.org
Health Reform Subsidy Calculator
Silver Plan-Case
Family Type
Age
Employer Coverage Available
Cost Factor
Projected Income in 2014
Unsubsidized Health Insurance
Maximum % of income the person/ family has
pay for the premium if eligible for a subsidy
to
Actual person/family required premium payment
Government Tax Credit
Out-of-Pocket Costs
Single
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Single
45
No
No
Medium
Medium
$30,000
$3,391
$75,000
$5,609
8.4
None
$2,509
$882
$3,125
$5,609
$0
$6,250
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Illustrations:www.kkf.org
Silver Plan-Case
Family Type Family of 4
Age
35
Employer Coverage Available
No
Cost Factor
Medium
Projected Income in 2014
Unsubsidized Health Insurance
Max % of income person/ family has to
pay for the premium if eligible for a
subsidy
Actual person/family required premium
payment
Government Tax Credit
Out-of-Pocket Costs
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No
Medium
4
45
No
Medium
$45,000
$75,000
$120,000
9.5
None
None
$3,962
$0
$4,167
$5,609
$0
$6,250
$14,245
$0
$12,500
$3,962
$5,609
$14,245
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% of FPL
Income Level
100-133
133-150
150-200
200-250
250-300
300-400
Premium/ Percent of Income
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3-4
4-6.3
6.3-8.05
8.05-9.5
9.5
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If an individual does not have MEC for the
applicable individual or dependents, a tax
penalty will be imposed. The penalty is the
greater of:
1. The applicable dollar amount for the
individual and all such dependents (up to a
maximum of 3 applicable dollar amounts, or
2. A specified percentage of the applicable
individual's household income.
 The minimum for 2014 is $95 and moves up to
$695 in 2016 (inflation adjusted).
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The applicable percentage increases from 1%
in 2014 to 2.0% in2015 to 2.5% in 2016.
For low-income employees, the minimum
penalty is small in comparison to actuals cost
of coverage
Individuals without MEC will not purchase
health insurance, although the tax credit
subsidies will make the insurance less
expensive.
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 No
Criminal Prosecution
 Civil Penalties (?)
 IRS collection tools limited
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Qualified Health Plans (QHP)
2014- Transitional Period
Less than 50 Employees (State Option-100)
 Required to Offer Only One Plan
Of the Four "Metal Levels“
 2017- SHOP Available to up to 100
employees
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Many Players Offering Private Exchanges
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Business Group Exchanges
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Insurance Sponsored Exchanges
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Other Exchanges: Mercer, Towers &
Watson
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Growing Businesses, 50th employee is a
major decision
Workforce Size Determines whether mandate
applies:
◦ Example: Regional and nation restaurants operating as one
employer vs. franchised operations
◦ For those at or near 50th tend to increase in Part-Time
Employees
◦ Part-time vs. Full-time Employees
◦ Independent Contractors and/or Leased Employees
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Lower Income vs. Higher Income
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Premium and Cost-Sharing Steeply
Progressive
Employers must know family incomes to
make decisions.
◦ Affordability Test Basis- Modified Adjusted
Gross Income for Family & 9.5% Test
◦ Employers not entitled to any taxpayer
information
Employees eligible for Medicaid are treated as
being "eligible for MEC"
◦ not eligible for premium tax credit or cost sharing
reduction.
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Michigan –Low Insurance Competition
How to handle controlled and affiliated
service groups?
How to manage businesses with multiple
state locations?
Who will give impartial advice to
businesses
Private vs State (public) Health
Exchanges
Medicaid- Image Problem
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Inequities Built into Subsidies and
Cost- Sharing
How to Administer? Calculation of
monthly amounts for penalties
Appeals: How may an employer
contest an employee's income taxes?
Deductibles are Growing
Move To Self-funding
Move to Defined Contribution Plans
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Lower Premiums
Older
 Sicker
 Female
Higher Premiums
 Younger
 Well
 Male
 Smoker
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 How
many employees will use
the State Exchange? 7% per
CBO; Other studies 2x’s
 How much will Premiums
Increase?
 Can it meet the time
deadlines?
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One Comparison of Estimate Average Premium
Increase for Individuals: Milliman vs. CBO
Milliman (OH)
CBO
55-85%
10-13%
Increase Due to
Expanded Health
Benefits
20-30%
27-30%
Impact of Changes
in Risk Pool
35-40%
7-10%
Total Increase in
Premiums in
Individual Market
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3-5 Year Implementation
Opportunity to Reach Out
◦ Massive Need to Educate Business and Employees
◦ Employees and Individuals will tend to buy on price
alone
Example: Education on Standardized Benefit
Coverage (SBC)- 8 page document with 15
pages of instructions
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