Welcome to the

CFA Webinar Series:

How the Healthcare Law Affects

the Franchise Community

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www.thecfainc.com

Misty Chally

Executive Director, CFA

VP, Legislative Affairs, NFA

Christy Williams

Executive Director, BWNFA

Chief Operating Officer, NAMG

The Patient Protection and

Affordable Care Act

Signed into law (P.L. 111-148) on Mar. 22, 2010

Extends health insurance coverage to about 32 million

currently uninsured.

Individual Mandate – Starting 2014, with penalty of

$695 ind./$2,915 family

Employer Mandate – (Free rider) Penalty for lack of

“affordable” coverage if 50 or more employees

Creates State Insurance Exchanges – Available in

2014, state marketplace for insurance

Small Employer Credits – Up to 50% of employer’s

contributions (up to 5 yrs.)

According to the Congressional Budget Office (CBO)…

Cost = $938 billion/10 years

$569 billion in new taxes and tax increases

$528 billion total cuts to Medicare

Creates up to 16,500 new jobs for the IRS

Billions more in spending authorized, but not appropriated.

Cost $$$

Insurance Reforms – 6 months after enactment Prohibits lifetime limits and rescissions

(waivers) Dependents covered until 26th birthday No preexisting conditions for under 19 yrs.

old First dollar coverage for preventative care

W2 Reporting – Employers must list the value of their health plan on employees’ W-2’s.

Starting 2013 - must list value of 2012 plans

Immediate Changes

Individual mandate

Health insurance exchanges open to individuals and small businesses

Expansion to Medicaid, Subsidies, Exchanges

Free-Rider employer mandate

Guaranteed issue; no pre-existing conditions

Premium credits: individuals purchasing from exchanges up to 400% of the federal poverty line

Significant Changes in 2014

Supreme Court Decision

Decision

5-4 decision

• Majority: Roberts, Kagan, Sotomayor, Breyer, Ginsburg

• Minority: Scalia, Kennedy, Thomas, Alito

Holding:

Individual mandate is constitutional; penalty is a tax

Medicaid expansion is not constitutional -coercive to states and transforms the program

If a portion of the law is unconstitutional it can be severable from the rest of the law

Health Care: Regulations

“We have to pass the bill, to find out what’s in it.”

2,700 page law

Thousands of pages of regulation to date

Still waiting for regulations, written by Agencies’ officials, to define broad statutory provisions

Essential Health Benefits

Exchanges

Employer Mandate

8/31: Treasury released guidance on 90-day waiting period & definition of full-time

THE EMPLOYER MANDATE

Exempt: Employers with less than 50 full-

time equivalent employees (FTE’s)

Employers must provide “minimum essential

coverage” to full-time employees

Covers “essential health benefits”:

• Affordable: Limits cost-sharing

(>9.5% of income)

• Adequate: Has an actuarial value of

at least 60%

Employer Mandate

1) Determine if you have 50 or more FTE’s

2) Add part-time and full-time

a. Full-time: based on average 30 hrs/wk over a

month

b. Ex. – 2 part-time employees working 15 hours

each = 1 full time employee

# of Full-Time (FT) Employees

+ # of Hours/week Worked by PT Employee in a month

120

= Total Full Time Equivalent Employees

What Are FTE’s?

Once 50 FTE threshold is met,

employers must only provide

COVERAGE for their ACTUAL full-

time employees

Salaried employees

Employees working more than

30 hours per week

What Are FTE’s

Does not offer coverage AND at least one F/T employee

using the tax credit for exchange

$2,000 per full-time employee per year

Offers “inadequate” or “unaffordable” coverage AND has at

least one F/T employee using the tax credit for exchange

“Inadequate” = doesn’t meet 60% actuarial value

“Unaffordable” = >9.5% of employee’s income

Penalty: $3,000 per each employee receiving tax credit

Not to exceed $2,000 x FTE’s (above)

Penalties

PENALTIES ON THE FIRST 30 FULL-TIME

EMPLOYEES ARE WAIVED

No Penalties on first 30 Full-Timers

Options?

• Less than 30 full-time employees

• Move full-time to part-time (<30 hours per

week)

• Still considered a “large” employer but

Possibly addressed in regulations

Key Provision

PHASE 1 (2010-2013):

Qualifications

(1)less than 25 full-time employees AND

(2)Average wages of $50,000 or less AND

(3)Company pays min. of 50% of premiums are eligible for tax credit up to 35% of premiums.

(a)Maximum credit if you have 10 or less full-time employees w/ avg. wage of $25,000.

Other: Small Business Tax Credit

PHASE 2 (2014-2015):

Same criteria; but only for employers buying insurance through the exchange.

Credit increases up to 50% of premiums; but only good for 2 years

Other: Small Business Tax Credit

Other: Employee Enrollment

Large Firm Automatic Enrollment Program

More than 200 full-time employees

90 Day Waiting Period

For employers with <200 employees

One Year Look Back Period

To determine full-time status

Other: Employee

Notification Requirement

Beginning March 1, 2013, employers

must provide employees written

notification explaining exchanges and

subsidies

Christy Williams

Chief Operating Officer

National Association Management Group

Recent IRS Guidance on Full-

Time and Waiting Periods

Current/Ongoing Hourly Employees:

Employer may establish a “Standard Measurement Period” of

between 3 and 12 months

• (May be referred to as “Look back” period)

If deemed full time, the employee must be granted a “Stability”

period in which employee is considered full time REGARDLESS

of the number of hours he/she actually works

• Stability period must be at least 6 consecutive months and no

shorter than the measurement period.

• EX: 12 month Measurement Period = 12 month Stability

Period

• Employer may establish an “Administrative Period” up to 90

days between initial measurement period and Stability Period

Calculating Full Time Hourly

Employees

New hires (if not reasonably expected to be regularly working 30 or

more hours)

Employer may establish an “Initial Measurement Period” of

between 3 and 12 months

If deemed full time, the employee must be granted a “Stability”

period in which they will be considered full time REGARDLESS

of the number of hours they actual work

• Stability period must be at least 6 consecutive months and no

shorter than the measurement period.

• Stability period for new hires must be the same as

Current/Ongoing employees

Additional guidance available regarding subsequent measurement

periods, overlapping measurement periods, etc. for new employees

Full Time Employees ~ New Hires

If an employee that is a new hire is

“reasonably expected” to work 30 hours or

more per week, they must be offered coverage

after a 90 day waiting period

For employers with 200 or more Full time

employees, you must provide automatic

enrollment

NAMG Program Structure

Alternative Options

Self funded plan flexibility

Self funded plans are exempt from some provisions, although the

law is not clear on them and not all regulations have been

released.

Fully insured plans will be limited to deductibles of $2,000 per

individual, $4,000 per family in 2014

• At least one analyst questions whether this will only apply to small

employers (less than 100 employees)

• Not known whether Self funded plans are not subject to this restriction

• Possibility that self-funded plans not required to provide essential

benefits?

•Summary of Benefit Coverage (SBC)For enrollments beginning September 23, 1012

EX: Health+ enrollment 5.1; must distribute 60 days prior to effective date

Must distribute to ALL ELIGIBLE employees

Must be no more than 4 pages and 12 pt font

•Starting in 2013, employers must provide the value of

employees health insurance plan on employees W-2

(2012 premiums)Companies with fewer than 250 W-2s exempt (not 250

employees)

•Provide written notice to all employees by March 1,

2013 explaining insurance exchanges and subsidies

More Info on 2013

Requirements

How We Plan to Help

•NAMG is utilizing many national and industry

specific resources to monitor PPACA and

regulations as they are released (NRA, US

Chamber, SIIA, SHRM)

•While we support repeal of the law, we are

monitoring the law and regulations to keep

members informed and to ensure our current plan

is in compliance.

EMPLOYER PENALTIES

AND STATE EXCHANGES

• Employer Penalties

• If your Group sponsored plan meets all requirements and

employees STILL go to the exchange, you do not pay

penalty on them.

• It is the responsibility of the employee to pursue the

appropriate government process when they choose

to purchase a policy through the exchange.

• NAMG has significant concerns regarding the

employer penalties, likely future increases after 2014

and the amount of latitude you give the government

for your overall business operations should you

choose to pay the employer penalties vs offer a

qualifying group program.

EMPLOYER PENALTIES

AND STATE EXCHANGES

• State Exchanges

• Proposed legislation to mandate employers

with 50 or fewer employees to purchase their

group policies from the State Exchange

• Ex: District of Columbia…..

• Others expected to follow

• If your State does not have an approved

exchange set up the employees will have

access to a national health exchange.

State Exchanges

Rates based solely on age, no medical underwriting

Compression of rates expected

“Minimum Essential Benefits” possibly issued at each

state level?

2014 and Beyond…

No retro terms allowed on employees and

dependents

2014

Excise tax on “Cadillac” Plans

Estimated that 30% of all current plans would be

considered a “Cadillac” Plan in 2018

• Individual premium: $10,200; Family: $27,500

What Next?

Evaluate your operations (Starting now for 2013

changes!)

Possibly reduce hours worked by part time

employees

Wait for additional regulations to be released….

VOTE!!!!!!!!!

THINK THROUGH YOUR DECISIONS!

Is “Paying the Penalty” really the best option for your

business?

Evaluate the behavior of your employees and the

Individual Mandate

The Requirement to Buy Coverage Under the Affordable Care Act

Beginning in 2014

Start here.

Do any of the following apply?

· You are part of a religion opposed to

acceptance of benefits from a health

insurance policy.

· You are an undocumented immigrant.

· You are incarcerated.

· You are a member of an Indian tribe.

· Your family income is below the threshold

requiring you to file a tax return ($9,350 for

an individual, $18,700 for a family in 2010).

· You have to pay more than 8% of your

income for health insurance, after taking into

account any employer contributions or tax

credits.

Yes

There is no

penalty for being

without health

insurance.

No

Were you insured for the whole year

through a combination of any of the

following sources?

· Medicare.

· Medicaid or the Children’s Health Insurance

Program (CHIP).

· TRICARE (for service members, retirees, and

their families).

· The veteran’s health program.

· A plan offered by an employer.

· Insurance bought on your own that is at

least at the Bronze level.

· A grandfathered health plan in existence

before the health reform law was enacted.

Yes

The requirement to

have health

insurance is satisfied

and no penalty is

assessed.

No

There is a

penalty for being

without health

insurance.

2014

Penalty is $95 per adult

and $47.50 per child (up

to $285 for a family) or

1.0% of family income,

whichever is greater.

2015

Penalty is $325 per adult

and $162.50 per child (up

to $975 for a family) or

2.0% of family income,

whichever is greater.

2016 and Beyond

Penalty is $695 per adult

and $347.50 per child (up

to $2,085 for a family) or

2.5% of family income,

whichever is greater.

The penalty is pro-rated by the number of months without coverage, though there is no penalty

for a single gap in coverage of less than 3 months in a year. The penalty cannot be greater than

the national average premium for Bronze level coverage in an Exchange. After 2016,

penalty amounts are increased annually by the cost of living.

Pay VS Play

EX: Employer with 100 actual full time

employees

Pay the Penalty: 100-30 waivers = 70

• $2,000 X 70 = $140,000

PENALTY IS NOT TAX DEDUCTIBLE

Pay VS Play

EX: Employer with 100 actual full time

employees

“Play” and offer group coverage:• 100 full time employees; assume 50% of employees join your plan

• Average salary is $10 per hour and employees work 40 hours per week.

• $20,800 annual salary; 9.5% is $1,976

• Kaiser estimates an individual policy on the exchange will cost $4,500 -

$5,000.

• Assume policy is $4,500

• $4,500 - $1,976 = $2,524 is employer’s maximum tax deductible

contribution:

• 50 employees x $2,524 = $126,200 premium (TAX DEDUCTIBLE)

NOW ~ How many of your employees will actually spend

$1,976 of their annual salary or pay the first year $95 tax?

Issues & Questions

Can employers “reverse” discriminate and base

contribution on 9.5% of employees income, so

contribution varies based on salary

Would negatively affect higher compensated employees

Discrepancy between Individual Mandate on 8% cap on

individuals vs 9.5% on employers

No clear answer on age requirement (what if you have

17 Y/O working 30 or more hours per week)?

Penalties (taxes) for dependents under age 18 is ½ of penalty

for those over age 18.

Franchisee-Focused

Questions

Issues & Questions

Question: Can each of my restaurants be

considered separately so that I can

maintain <50 employees?

IRS Code §414: Common Control Test

Common Control Test: “if two or more

restaurants have the same five or fewer

owners, collectively owning at least 80% of

the shares or interest, those restaurants

shall be considered a single employer.”

Issues & Questions

Question: Can I get a waiver like

McDonalds did?

Waiver was only for “mini-med” plans

No waiver from 2014 employer

mandate

Temporary waiver for LIMITS on

limited benefit (mini-med) plans for 1

year for P/T, temporary workers

Still must comply in 2014

Issues & Questions

Question: How much will this cost me?

Unknown yet – regulations coming soon

Law: “minimum essential coverage” with at least 60% actuarial rate (covers 60% of costs)

Question: Can I purchase insurance through the exchange?

2014 & 2015: States can decide if employers w/less than 50 or 100 employees can purchase

2016: Employers with <100 employees must be able to purchase

Issues & Questions

Question: Can my current plan be

“grandfathered”?

Not likely

Must have existed as of 3/23/10

Is the penalty on employers deductible for

income tax purposes?

No

Issues & Questions

What if an employee has insurance through a

parent or spouse?

If the employer doesn’t offer coverage AND

another employee uses a credit to go to the

exchange, the employee would be counted

($2,000) towards the penalty regardless of

whether he/she has coverage

Same standard applies if the employer

provides coverage that is either unaffordable

or doesn’t meet minimum standards

QUESTIONS?

Thank you to sponsor Velocity Signs!

Misty Chally

mistyc@thecfainc.com

(202)416-0270