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NJ CUPA ‐ HR ‐‐ The Affordable Care Act & Its Implication for Employers April 4, 2014

The Affordable Care Act & Its Implication for Employers About NJBIA… • Represents 21,000 companies of all sizes and types, which employ over 1 million workers in the State. • Advocate for business representing their interests in both legislative and regulatory arenas in order to make this state a great place to do business. • NJBIA provides a wide range of benefits and services to members, including: insurance programs, committees and seminars.

The Affordable Care Act & Its Implication for Employers Additional member resources from NJBIA:  Healthcare Issues Network : Electronic updates about developments that affect the cost and availability of health insurance.  Health Affairs Committee : Meetings that bring a wide range of healthcare stakeholders together to hear from lawmakers & policy leaders.  NJBIA Fast Facts : Fact sheets to help businesses comply with laws & regulations affecting business.  Seminars : An annual series to assist businesses of all sizes make health insurance purchasing decisions.

The Affordable Care Act & Its Implication for Employers Employer Coalition for Technical Education • Businesses can allow vocational ‐ technical students to come in and experience firsthand what goes on in a business through internships and demonstrations. • Business operators themselves can go into the classroom and provide students with instruction from the unique perspective of an employer. • And businesses can contribute by helping vocational technical schools develop a curriculum that teaches the skills that are needed in the working world.

The Affordable Care Act & Its Implication for Employers Employer Coalition for Technical Education • NJBIA formed a partnership with the NJ Council of County Vocational Schools to help get businesses directly involved in education. • The goal is to align our education a policy with workforce needs to create a pipeline of qualified students that have the workplace readiness skills that employers need.

The Affordable Care Act & Its Implication for Employers Minimum Wage, etc. • Minimum wage will be increased under new federal contracts to $10.10 an hour, from $7.25 (federal). • Regulatory changes to the Fair Labor Standards Act are also expected to be proposed in the near future to narrow the “white ‐ collar” exemption. • New Jersey’s state minimum wage rose to $8.25 on January 1, 2014 (with annual inflation adjustments each September).

Average Annual Health Insurance Premiums and Worker Contributions for Family Coverage, 2003 ‐ 2013 $16,351 80% Total Premium Increase $11,786 $9,068 89% Worker $6,657 Contribution Increase $4,565 $2,412 2003 2013 Worker Contribution Employer Contribution SOURCE: Kaiser/HRET Survey of Employer ‐ Sponsored Health Benefits, 2003 ‐ 2013.

The Affordable Care Act & Its Implication for Employers • However, Garden State residents’ self ‐ reported awareness of the reforms doesn’t necessarily correlate with their knowledge of specific aspects of the law. – Just 1 ‐ in ‐ 3 New Jerseyans have heard a lot (11%) or some (23%) regarding the new health care exchanges, or marketplaces, which open on October 1st. – Another 31% have heard only a little and 33% have heard nothing at all.

The Affordable Care Act & Its Implication for Employers • 90% of the respondents to the Midwest Business Group on Health survey reported that employees wondered how the Affordable Care Act would affect their benefits. Other survey highlights: – About 90% of self ‐ funded employers say they will not steer their covered lives into either public or private exchanges in the near future – instead, choosing to study the HIX model further before making any moves. Source: Midwest Business Group on Health (MBGH) survey conducted in June and July, released in September 2013. 40 respondents.

The Affordable Care Act & Its Implication for Employers – More high deductible health plans and fewer managed care plan options, including point ‐ of ‐ service plans, are expected among MBGH members during the next four years, though there’s uncertainty about the number of employers planning to offer only HDHPs. – Nearly 70% of respondents are developing their own ACA messaging on open ‐ enrollment options, as well as an overview of health care reform and its impact on benefit programs. Few of them indicated that they are relying solely on their health plan for employee communications in this area.

The Affordable Care Act & Its Implication for Employers • Key areas of focus for ACA compliance include educating employees about the law (71%), benefit designs that will reduce exposure to excise taxes (59%) and wellness plan incentives (49%). • More than 70% of respondents say they will not increase salaries for employees who obtain insurance coverage from public exchanges. • Employees of MBGH members are most concerned about the impact of the ACA on their benefits (64%) and higher out ‐ of ‐ pocket costs (63%), but they also are eager for information about the exchanges (53%).

What Should Employers Know?

The Affordable Care Act & Its Implication for Employers The individual mandate • Requires most US citizens and legal residents to purchase health coverage or incur a tax penalty of $95 (or 1% of adjusted gross income), whichever is greater for 2014. • Individuals under 18 pay one ‐ half. • Exemption: There are some, including for certain religious backgrounds and the so ‐ called “hardship exemption” if the cost of the annual premiums exceed 8% of household income.

The Affordable Care Act & Its Implication for Employers • Penalty calculation: Generally, the penalty is based on a percentage of the taxpayer’s household income, and is imposed on a monthly basis. – The flat dollar amount is phased in over three years ($95 for 2014; $325 for 2015; and $695 for 2016 and then indexed for inflation). – The applicable percentage is 1% for 2014; 2% for 2015; and 2.5% for 2016 but cannot exceed the annual premium for the “bronze” level plan offered thru the exchange.

The Affordable Care Act & Its Implication for Employers  Effects of the individual mandate:  Gives all taxpayers, including employees, an incentive to obtain coverage  Increases the likelihood of 1. Employees seeking a premium tax credit and 2. Triggering IRS assessments against employers  What is a premium tax credit ? A refundable (advanceable) federal tax credit available to certain low ‐ income individuals who were not offered affordable, minimum value plans to subsidize exchange obtained coverage.

The Affordable Care Act & Its Implication for Employers Small Employer Tax Credit – Beginning in 2014, the credit refunds 50% of health insurance expenses for eligible employers purchasing thru exchange and is available for any two consecutive years. (Credit was 35% for 2010 – 2013) – The credit is fully available to companies with 10 or fewer full ‐ time employees and average wages below $25,000. The credit phases out as the number of employees increases to 25 and wages grow to $50,000. Tax ‐ exempt organization of maximum credit of 35%.

The Affordable Care Act & Its Implication for Employers Exchange Enrollment • Enrollment in the individual exchange began October 1 and ran thru March 31, 2014 for individuals. • For 2014, open enrollment will be delayed until Nov. 15 ending Feb. 15, 2016 • SHOP enrollment for employers will be on ‐ going, however there was an annual open enrollment period from October 15 – November 15. Coverage began Jan. 1, 2014. • To find out more, visit Healthcare.gov and find information links. Alternatively, call 1 ‐ 800 ‐ 318 ‐ 2596.

The Affordable Care Act & Its Implication for Employers Marketplace: The Basics • NJ has a federal Individual and SHOP Marketplaces • Each plan’s actuarial value (AV) must fall within the metallic tier (Bronze – 60%, Silver ‐ 70%, Gold – 80% and Platinum – 90%). AV=% of total average costs for covered benefits that a plan will cover • Rating is now to the member level so a rate is paid for each individual and each member of their family • e.g. At Widget LLC Adam pays $300/m, Betsy pays $225/m and Chris pays$350/m.

The Affordable Care Act & Its Implication for Employers Marketplace: The Basics • Other rating changes: • No gender rating • Tobacco use is not a permitted rating factor in NJ, but is permitted in other states by as much as 1.5x • Plans available “on the exchange” are also available “off the exchange” • What happened in 2014? • Widespread disruption. New rating, taxes and benefit changes contributed to higher premiums while metallic tiers, MOOP and networks lead to new plans for many.

The Affordable Care Act & Its Implication for Employers Q. Can I buy in the SHOP if I’m self ‐ employed or own a small business? A. If you’re self ‐ employed with no employees, you can shop for coverage on the exchange. If you have fewer than 50 employees, you can get coverage for yourself and your workers through the Small Business Health Options program, known as the SHOP Marketplace.

The Affordable Care Act & Its Implication for Employers Employers with 1 ‐ 49 employees: • Considered a “small employer” • No mandate that small employers provide coverage • This is a “new” definition. New Jersey formerly defined small employer as having 2 ‐ 49 employees