1 Health Care Reform The “Affordable Care Act”
House Keeping items….. All phone lines are muted – so please send any 1. questions you may have via the chat session during the webinar. All slides will be made available after the presentation 2. at www.capitalbenefitservices.com or at www.epkbenefits.com please simply visit the Health Care Reform section of either website. Any follow up questions you may have, please feel free to send to: Will Compton at wcompton@epkbenefits.com
Topics Covered: The “Affordable Care Act” How did we get here? • Historical look on health care trends and the environment in which the Affordable Care Act was passed? Where are we going? • Specific pieces of legislation that will effect business owners, families, and individuals. What to expect in the future ? • What are the trends to look for going forward
How did we get here? • Health Insurance is a relatively new idea: Rise of Employer Sponsored Coverage started off slowly shortly after WWII…………..Yet by 2010 – 60% of employers were offering Health Insurance. Over time…… • Almost 50 million Americans did not have health insurance in 2010 ‐ 16.3% of the population. • Yet 21% of GDP is spent on Medicaid, Medicare, and CHIP (Children’s Health Insurance Program) • Recent Gallup in March 2013 polled Small businesses who said that healthcare costs are the No. 1 factor hurting their operating environment, • “54% of small businesses said healthcare costs are hurting the business environment "a lot" —Taxes on small businesses came in just behind, at 53%”
Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 1999 ‐ 2012 200% 180% Health I nsurance Premiums 180% Workers' Contribution to Premiums Workers' Earnings 160% 172% Overall I nflation 140% 113% 120% 109% 100% 80% 60% 47% 38% 29% 40% 38% 38% 11% 20% 24% 8% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Where are we going? • President signed Patient Protection and Affordable Care Act on March 23, 2010. (2,400 pages long) • Makes significant changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms • Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant • For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage
Lets take a step back……. • When national health care policy is debated, we jump right to the issue of who should pay the bills….………Yet we seem to blow right past the logical question of why exactly the bills are so high in the first place? • Health insurance has become a “commodity” purchase where consumers want everything paid for and have arguably lost perspective on what the true costs of health care really are. • The Affordable Care Act arguably does very little to address those concerns. • Thankfully WA State has had a robust and competitive Association Plan Market for over 20 years – Such as the: MBA Health Insurance Program • Over 600,000 people are currently getting their health insurance through an association plan in the state of WA.
8 Washington State Washington has one of the lowest average health insurance rates in the country. in part to the presence of Association Health Plans her in Washington State Medic al Insur anc e Pr emiums by State - Small Gr oup Mar ket Washington Avg. Washington R ate R anking High L ow All small gr oups 1-100 5th lowest $332.00 $565.00 $302.00 25-50 employees $330.00 4th lowest $565.00 $265.00 11-25 employees $327.00 4th lowest $577.00 $295.00 10 or less employees 2nd lowest $341.00 $579.00 $332.00
9 Reform Topics Covered The Affordable Care Act begins with the….. Individual Mandate
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Individual Mandate 11 Beginning in 2014, if you are uninsured, not exempt from the new mandate, and refuse to sign up for health care coverage the health care law sets out a formula to determine your penalty, which will be assessed and collected by the IRS as part of your federal income taxes. The penalty will be the greater of : 1) A flat dollar amount per person. Flat dollar amount for individuals: $95 in 2014; $325 in 2015; and $695 in 2016; increases indexed to inflation after that, subject to a cap. OR 2) A percentage of your taxable income fixed percentage of household income in excess of tax filing threshold equal 1% in 2014; 2% in 2015; 2.5% in 2016. (Percentage of taxable income is capped at 300% of flat dollar amount) For dependents under 18, the penalty is half the individual amount.
12 Individual Mandate Example: • Sue and Bob are married and have two children, ages 7 and 9. They are applicable individuals and they do not have health insurance for the 2014 tax year. Their combined household income is $65,000. • Their penalty under the flat dollar amount would be $285 ($95 for Sue, $95 for Bob, and $47.50 for each child) • Their penalty under the percentage of income method would be $650 ($65,000 X 1%) • Their total penalty would be the greater of the two and therefore $650.
13 Individual Mandate Individual exemptions: Who will be exempt from the mandate? I ndividuals who: Have a religious exemption, 1. Incarcerated individuals. 2. Cannot afford coverage based on formulas contained in the law, or have 3. income below the federal income tax filing threshold, (2010 thresholds for taxpayers under age 65 was $9,350 and couples was $18,700) Are members of Indian tribes, 4. Were uninsured for short coverage gaps of less than three months ; 5. Are residing outside of the United States 6.
14 Reform Topics Covered Employer Mandate “Pay or Play”
15 Employer “Mandate” Who is subject to the employer mandate requirement? An employer who has on average of 50 or more Full ‐ Time Employees on business days in the prior calendar year: O Note that both Full Time and Part Time employees count toward the total O Full Time employee = Average of at least 30 hours per week or 130 hours of service in a calendar month which is equivalent to 30 hours per week. Hours worked by Part Time employees are counted toward the total O An employer must aggregate hours worked by Part Time employees in a month / 120 = number of full time equivalent employees . O These full time equivalent employees are used to calculate if you are over or under 50 O Exception for seasonal employees if: O Workforce exceeds 50 FT employees for 120 days or fewer in a year and employees in excess of 50 employed in that period were seasonal workers.
16 Employer “Mandate” Beginning Jan 1 st 2014 – Employers with 50 or more Full Time Employees will be required to: Provide coverage Provide “minimum value” that is deemed “Affordable Coverage” – defined by no more than 9.5% of employee income.
17 Employer “Mandate” How the Penalties are calculated : If an employer fails to offer coverage: ‐ If an applicable large employer fails to offer all FT employees (and dependents) the opportunity to enroll in “eligible employer sponsored plan” for any month….. ‐ ……and just one FT employee is certified (by the exchange) to employer has having enrolled in subsidized coverage for that month: ‐ Monthly penalty = $2,000 X # of FT employees minus the first 30 / 12 (calculated monthly at $166.67) Note penalties are not tax deductible ‐
18 Employer “Mandate” How the Penalties are calculated : If an employers fails to offer “minimum essential coverage” or coverage that is deemed “unaffordable” ‐ If an applicable large employer fails to offer all full time employees coverage that is both affordable and meet minimum requirements ‐ Monthly penalty = $3,000 X # of FT employees who apply for an receive subsidized coverage through the exchange / 12 (calculated monthly at $250.00) ‐ Note penalties are not tax deductible
19 Employer “Mandate” What is Minimum Value? O Plan’s share of total allowed costs is at least 60%. O This is an actuarial value of the plan’s cost ‐ sharing Note that new annual HRA contributions can count towards determining minimum value. What is Affordability? O Plan is deemed unaffordable if employee cost for self ‐ only coverage for the least expensive plan is greater than 9.5% of household income for tax year. O However note that since employer is unaware of household income in most cases, employee W ‐ 2 earnings can be used instead. O An employer is only obligated to offer the chance for dependents to enroll in coverage, not pay for the dependent coverage.
20 Employer “Mandate” Examples: An employer fails to offer coverage: Example: Company has 100 FT employees and does not offer an eligible employer ‐ sponsored plan: O If one FT employee enrolls in subsidized coverage during the year: Annual penalty = $2,000 X (100 ‐ 30) = $140,000. Example: Company has 20 FT employees and 60 FTE equivalent employees. O Treated as having 50 FT employees and thus subject to the rules O If one FT employee enrolls in subsidized coverage for year: O Annual penalty = $2,000 (20 ‐ 30) = $0 O Note that the FTE (full time equivalent employees do not count towards penalty)
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