Affordable Care Act

Impact on Individuals, Small Employers and Non-Profits

Important Terms

• Exchange – an organized marketplace for the purchase of state (or federal) regulated and standardized health care plans. Small business exchange is called “SHOP”

• All exchanges must be fully certified and operational by January 1, 2014.

• Virginia decided on November 9, 2012 to let the federal government design their exchange.

• The Exchange will likely be a collaboration of the HHS, IRS, and Department of Homeland Security.

Important Terms, cont.

• FPL = Federal Poverty Level • Advanceable premium subsidy available up to

400% FPL ($44,000 individual, $92,200 family)• Must purchase insurance through exchange to

receive subsidy.

Mary, 23 years old, $30,000 income, very healthy

• Stay on parents plan until age 26• Purchase through employer if offered and receive

50% contribution and pre-tax her premium (with a Section 125).

• Purchase through insurance company and pay full price with after-tax dollars

Mary, 23 years old, $30,000 income, very healthy

• Beginning in 2014 -Purchase through exchange and receive premium subsidy limiting premium to $237.50 monthly (9.5% income) and OOP max reduced to $3,967 because income is within 400% FPLOR

• Buy no coverage and pay penalty of $300 (1% 2014), $600 (2% 2015), $750 (2.5% 2016). Can pick up insurance after illness or injury occurs.

34 Year old couple, 2 kids, $50,000 income, husband’s employer pays 50% employee-only

• Purchase through husband’s employer and receive 50% contribution for husband’s premium and pre-taxed premiums for family

• Purchase through insurance company and pay full premium with after-tax dollars

34 Year old couple, 2 kids, $50,000 income, husband’s employer pays 50% employee-only

• Beginning in 2014 -Purchase through exchange and receive subsidy limiting total premium to $262.50 monthly (6.3% income) and OOP max reduced to $5,950 due to income below 400% FPLOR

• Buy no coverage and pay penalty of $500 (1% 2014), $1000 (2% 2015), $1250 (2.5% 2016). Can pick up insurance after illness or injury occurs.

• Note: Maternity covered if insurance chosen

Sue, 63 years old, tobacco use, life threatening condition, $45,000 income, no group plan offered

• Purchase through an insurance company outside the exchange

• Purchase through an exchange • No medical underwriting, however up to 50% rate

up due to tobacco use.• Unlimited lifetime maximum and coverage for

clinical trials for life threatening condition

Important Terms:

• 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.

Important Terms

• 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.

Tax Credits

• 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. • You have to shop through the exchange to

receive credit in 2014-2016.

Downtown Bakery10 FTEs, average salary is $25,000

• Do not offer employee coverage. Will not face penalty but employees will be required to buy individual coverage or face tax penalty.

• Offer coverage through a insurance company outside of the exchange, but receive no tax credit in 2014 and beyond. Credit of 35% (25% non-profit) available in 2010-2013.

Downtown Bakery10 FTEs, average salary is $25,000

• Offer coverage through exchange and receive 50% tax credit toward employer premiums (35% in 2010-2013). If company is non-profit, credit reduces to 35% (25% in 2010-2013)

• Additional detailed monthly and annual reporting required by IRS/HHS. Credit limited to only two years beginning in 2014.

CARE Family Practice20 FTEs, average salary of $40,000

• Do not offer coverage to employees. Will not face penalty but employees will be required to buy individual coverage or face tax penalty.

• Offer coverage through insurance company outside the exchange and receive no tax credit in 2014 and beyond. Credit of 35% (25% non-profit) available in 2010-2013 is phased out between 15 and 25 FT employees and between $25,000 and $50,000 average annual salaries.

CARE Family Practice20 FTEs, average salary of $40,000

• Beginning 2014, offer coverage through exchange and receive 50% tax credit (35% non-profit) toward employer premiums, phased out by same criteria.

• Additional detailed monthly and annual reporting required by IRS/HHS. Credit limited to only two years beginning in 2014.

Other Items

• MLR rebates – who receives refund?• 4 actuarial designs begin 2014 (60/70/80/90)• OOP Max increases to $5,950/$11,900• Exchange services and consumer interaction

yet to be defined• Overall premium rate increases due to

legislative mandates yet to be determined

Other Items:

• Beginning in January 2014 – medical underwriting will be eliminated. Rates will be based on age, tier of coverage, geographic location, and tobacco use.

• Employers 50+ FTE must offer coverage to employee and dependents, but not spouses

7 Things You Can Do to Get Ready Now

• 1.Learn about different types of health insurance (make sure you have the right balance of costs and coverage)

• 2. Make a list of questions before it’s time to choose your health plan (can I stay with my current doctor?)

• 3. Make sure you understand how insurance works, including deductibles, co-insurance, and out of pocket maximums.

• 4. Start gathering basic information about your household income (you will need your income to determine if you will get a break in costs)

• 5. Set your budget• 6. Find out from your employer whether they plan to offer health

insurance.• 7. Explore your current options

Summary

• If you are below 400% FPL, you may be eligible for premium subsidy.

• If you are a small employer with 25 or fewer FTE and under $50,000 avg annual salary, you may be eligible for a tax credit. *

• If you are a small employer with fewer than 50 FTE or fewer than 30 FT employees – no penalty.

• If you have 50 + FTE, you may be subject to penalties.

Q & A

Thank You