employers and the affordable care act

Employers and the Affordable Care ActCheryl Fish-Parcham, Families USA

OutlineSmall business

◦Tax credits for some◦End to price discrimination◦SHOP exchange◦When employees might use

individual exchangeLarge business

◦Employer responsibility

Small business tax creditsBusinesses may be eligible if they:Have fewer than 25 full-time equivalent

employees;Pay average wages of less than

$50,000/yearPay at least 50% of premium costs for

single coverage, and either the same % or same $ amount for family coverage.

Buy coverage from a state-licensed insurer

What types of insurance count?Comprehensive and/or limited

benefits:◦E.g., dental, vision, long term care

count if the employer pays 50% of each.

NOT contributions to a health saving account, HRA, or flexible spending account – employer must pay to an insurer

What if the employer owes no taxes?A for-profit employer can carry

over the credit to another year.A tax-exempt employer can get a

“refundable” credit up to the amount the employer withholds for income and Medicare taxes.

What is the amount of the credit?2010-2013:

◦It is highest for businesses with less than 10 workers, and average wages less than $25,000

◦Maximum is 35% of premiums paid for a for-profit business, 25% for a tax-exempt business (but sequestration will hit tax-exempt businesses in 2013)

◦Use a small business tax credit calculator for more information

Some calculatorsSmall business majority:

http://www.smallbusinessmajority.org/tax-credit-calculator/

House – round numbers, uses average wages: http://housedocs.house.gov/energycommerce/smallbusiness/smallbusiness.html

Regence/H&R Block http://www.regence.com/transparency/tax-credit-calculator/index.jsp

How does the credit change in 2014?Maximum credit increases to

50% for a for-profit business, 35% for a tax-exempt business

Firms can claim for any two years beginning in 2014. (They can also claim credits for 2010-2013, which brings the total to six years.)

Resources IRS information:

http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers◦ Includes video, fact sheet, tax forms and

instructions, questions and answers, etc.

HHS: http://www.healthcare.gov/marketplace/small-businesses/ Fact sheet about other small business provisions and links

Small business majority: http://www.smallbusinessmajority.org/policy/healthcare-policy-aca.php

Other ways small business benefits from ACASome small businesses got premium

rebates; the insurance department reviews premium increases;

In 2014, businesses won’t be charged more based on the health or sex of their workers

Small employers (fewer than 50 FTEs) don’t have employer responsibility requirements

Employees can count on more comprehensive coverage

New Marketplaces (exchanges) in 2014SHOP exchange – comparison

shop, allow employees to make different plan choices

If small employers are unable to offer coverage, their workers can go to the new marketplace for individuals (exchange) and may qualify for premium credits.

Do Large Employers Have to Provide Coverage?

No.However, applicable large employers who

don’t provide appropriate coverage to employees may be subject to an “Employer Shared Responsibility” payment if at least one of those employees gets a plan with premium tax credits on the Exchange.

What is a large employer?A large employer:

◦Has at least 50 Full Time Equivalents◦Could be a for-profit, non-profit, or

government entity◦If there were more than 50 FTEs for

only 120 days or less in the year, and the excess workers were seasonal, it isn’t a large employer

What workers must be covered to avoid penalties?Full time workers (not full time equivalents)Full time is 30 hours/week or 130

hours/monthThe following proposed rules could change:

◦No penalty if employer covers all but 5 or 5% of workers.

◦Employers can use a “lookback period” of 3-12 months to determine if variable hour employees work 30 hrs/week; if so, they must be treated as full time for a period that is at least as long and at least 6 months

◦Vacation, holiday, sick hours,etc count as work

Two types of penalties1. Doesn’t provide coverage and at least one worker gets premium credits on the exchange

◦Penalty: $2000 times (# of full time workers – 30)

2. Provides coverage, but it is not affordable or not of minimum value

◦Penalty: $3000 for each worker who gets premium credits, up to a maximum

What does the employer have to offer to avoid penalty #2? Affordable: single plan costs the worker

no more than 9.5 % of wages ◦Proposed: Must also offer worker family

coverage for his/her dependent children. Rules don’t limit the cost of family coverage.

Minimum Value: pays at least 60% of the total cost of covered benefits, for typical population◦Example: Plan has a $3000 deductible, 20%

coinsurance, and $5,950 out of pocket maximum

Will employers cut hours to avoid penaties?Mostly, it won’t make business

sense – takes more trained workers, shorter shifts not profitable;

But restaurants and retail are more vulnerable

Public pressure may help

From “Burgers, Fries and Lies”“… here’s a guy selling something that is a leading contributor to the major health breakdowns in America, a product that may ultimately hasten an early death. He won’t offer insurance to the poorly paid workers who make said time bombs.”- Timothy Egan, writing about Five Guys in the New York Times Opinion Pages, March 21, 2013

Some employers have changed their minds about cutting hoursPublic outcries help!

◦Darden, Papa John’s, Denny’s

Important pointsMost large employers offer coverage

(94-99%)Most say they will continue to do soOffering coverage is the right thing

to do: it helps employees be healthy and productive, and keeps businesses competitive

Not covering workers shifts costs to the government, families, and other businesses