What EVERY Hotel Owner MUST know about the Affordable Care Act (ACA)

1. What EVERY Hotel Owner MUST know about the Affordable Care Act (ACA) Presented by the Asian American Hotel Owners Association (AAHOA)

2. #1 What is the Timeline for the Affordable Care Act? • 2013 information determines “large” employer status for 2014 • January 1st • Employers must report health coverage cost on W-2s for 2012 • October 1st – • Open Enrollment for individuals in “exchanges” • Employers must notify employees of “exchange” coverage options • January 1st • Small Business Access to SHOP Marketplaces • Small Business Health Care Tax Credit available • 90 day maximum wait-period instituted for new employees to begin coverage • Penalties assessed for individuals without health insurance coverage • January 1st • “Large employers” with 50 or more FTEs penalized for failure to offer affordable, minimum coverage • Employers must offer dependent coverage • Employers with 200+ FTE must automatically enroll new employees into offered plans • Large employers have access to “exchanges”

3. #2 Is my Business Required to Participate? • ACA imposes penalties on “large employers” who fail to provide insurance to their employees • The ACA defines this employer mandated coverage as “shared responsibility” • A “large employer” is an employer with 50 or more “Full-Time Equivalent” employees (FTE) • “Small employers” are employers with fewer than 50 FTE and are exempt from penalties in the law

4. Full Time Employees and Equivalents • A full-time employee is an employee who works an average of 30 hours per week or more • Seasonal employees are not counted towards FTE • To determine the total number of FTE, use this formula: ] [ Sum of the hours worked by all part-time employees Number of Full-Time Employees + 120

5. #3 What will the ACA cost me as a hotelier? • Large employers must provide coverage options that are “affordable” and have a “minimum value” • Affordability • An employee’s contribution to the premium cannot exceed 9.5% of household income for the taxable year • Minimum Value • Minimum value must meet specified levels of generosity based on the plan’s actuarial value • An offered plan must pay at least 60% of the covered health benefits Can I keep my current plan? Yes – but offered plans must meet standards for minimum value and affordability

6. #4 What are the Penalties for not Complying with the ACA? • Only large employers are subject to ACA penalties (50 or more FTE) • Penalties • Strong Penalty • Employer failure to offer full-time employees the opportunity to enroll in coverage; AND • At least one full time employee enrolls in an exchange • $2,000 X the total number of FTE (minus 30) • Weak Penalty • Employer offers the opportunity for coverage, but the coverage does not meet the ACA’s standards for affordability or actuarial value; AND • At least one full time employee enrolls in an exchange • $3,000 X (only) the number of employees who enroll in an exchange

7. #5 What is a Healthcare Exchange? • Generally, an “exchange” is an online marketplace for the sale and purchase of health insurance • Individuals may access these marketplaces where insurance companies may choose to sell insurance policies • Coverage offered in exchanges will be comprehensive and meet all applicable specifications prescribed by the ACA • Plans offered through the exchanges will be certified as “qualified health plans” or QHPs

8. Small Business Health Options Program (SHOP) Exchanges • Special exchange designed for small businesses to compare insurance plans for employees • 2014 – SHOP open to employers with 50 or fewer FTE • 2016 – SHOP open to employers with up to 100 FTE • Employers who use SHOP must provide coverage to all full-time employees • Employees may choose to enroll in SHOP plan or opt out and purchase insurance on their own • Some states have requirements for number of employees that must enroll in the SHOP plan

9. #6 What if I own Multiple Businesses? • If an employer has multiple companies, each company may or may not be considered separate employers under the ACA • Determining the total number of full-time employees requires an analysis of the “controlled group” rules established in the Internal Revenue Code (IRC) • If a controlled group exists, then the total number of employees must be added to determine “large employer” status under the ACA Types of Controlled Groups • Brother-Sister • Parent-Subsidiary • Combination

10. Brother-Sister Controlled Groups • A group of two or more businesses in which 5 (or fewer) common owners own a “controlling interest” of the group and have “effective control” of the businesses • “Controlling Interest” – 80% or more of the stock of each corporation (but only if the common owner owns stock in each corporation) • “Effective Control” – More than 50% of the stock of each corporation counting the least of each owners share

11. Brother-Sister Controlled Groups Example Controlling Interest (Step 1): • Is total ownership equal to 80% or greater? Effective Control (Step 2): • Add the smallest interest each individual owns in each overlapping business. If that combined interest is greater than 50%, then a brother-sister controlled group exists

12. Parent-Subsidiary Controlled Group • One business owns a controlling interest (80% or more) in at least one other business • “Chain Businesses” – same concept applies, a parent owns a subsidiary and the subsidiary owns 80% or more of a second subsidiary • Example: • Corporation A owns: • 90% of B Corp. • 85% of C Corp. • 65% of D Corp. • A is a common parent of B and C Corporations and thus its employees will be added together to determine “large employer” status under the ACA

13. Combination Controlled Group • Each business is a member of either a parent-subsidiary or brother-sister group; AND • At least one corporation is the common parent of a parent-subsidiary and is ALSO a member of a brother sister group

14. Combined Controlled Group Example A owns: 80% of Y Partnership and 90% of Z Corp. Y Partnership owns 85% of T Corp. Y Partnership, Z Corp and T Corp are members of the same controlled group under common control because: • all three are members of a parent-subsidiary or a brother sister group; and • Y Partnership is the common parent of T Corp. and a member of the Y Partnership – Z Corp. brother-sister group

15. #7 Do owners and Family Members Count as Employees? • An owner is not counted if he/she is a sole proprietor, a partner in a partnership, a shareholder owning more than 2% of an S corporation or an owner of more than 5% of other businesses • Family members are not counted if they are children or grandchildren; siblings or step-siblings; parents or grandparents; step-parents; nieces or nephews; aunts or uncles; sons- or daughters-in-law; fathers- or mothers-in-law; or brothers- or sisters-in-law • Owners and family member hours and wages do not apply to the FTE calculation

16. #8 What are the Reporting Requirements? • The Department of Treasury expects to publish proposed rules describing the reporting requirements for businesses later this summer • The complexity of the reporting requirements in these sections contributed to the delay of the employer mandate to 2015 • Employers are required to provide employees with a standard “Summary of Benefits and Coverage” form explaining what the employers plan covers and what it costs

17. #9 Is my Business Eligible for Tax Credits? • Businesses may qualify for employer health care tax credits if they have fewer than 25 FTE employees who earn an average of $50,000 a year or less • To qualify for the Small Business Health Care Tax Credit, a business must pay at least 50% of its full-time employees’ premium costs. There is no requirement to offer coverage to part-time employees or to dependents • Starting in 2014, the Small Business Health Care Tax Creditis worth up to 50% of your contribution toward employees’ premium costs • The Small Business Health Care Tax Credit is highest for companies with fewer than 10 employees who earn an average of $25,000 or less. The smaller the business, the larger the credit

18. #10 Are there any Other Changes Expected? • The Treasury Department will issue guidelines for employer reporting during the summer of 2013 • The House and Senate are currently considering legislation that may impact the law – stay tuned • The Obama Administration has stated there will be no additional delays in implementation of the ACA

19. What Resources are Available to Me? • www.aahoa.com • www.healthcare.gov • www.sba.gov/healthcare • www.irs.gov • Be sure to consult legal counsel to review your personal situation before making decisions on healthcare options for your employees