Healthcare Update

1. Presented by: Karen R. Harned, Esq. National Federation of Independent Business March 25, 2014 Healthcare Update

2. NFIB—Who We Represent

5. Small Business& Health Insurance

6. Most Important Small Bus. Problem by Year: (Rank Out of 75 Possible Problems) Source: NFIB Research Foundation, Problems and Priorities

7. Percent Percent Small Businesses Offering Health Insurance by Firm Size and Year: 2000 - 2013 Source: Kaiser Family Foundation.

8. Millions Employees 18 – 64 With Selected Sources of Health Insurance by Employer Type: 2012 Source: EBRI estimates from CPS

9. Health Insurance Premiums:Over Time and for Small Business in 2013

10. Average Small Group Premiums By State (IRS Data)

11. 79 percent of small business owners purchase their employer sponsored health insurance through an agent or broker Small Business & Health Insurance

12. Small Business Under the “Affordable” Care Act

13. Source: NFIB Research Foundation Longitudinal Survey 2013 NFIB.com/ACAgraph

14. “Aggregation rules” may impact as many as 150,000 small businesses • Employees requested small employers to begin offering employee health insurance in 4 percent of non-offering firms in the last 12 months Small BusinessHealth Care Survey Results

15. 84% of small business owners have health insurance; 15% don’t • 35% -- business’ plan • 30% -- individual plan • 19% -- spouses’ plan Small BusinessHealth Care Survey Results

16. 1-2% fewer small businesses offered insurance in 2013 as compared to 2012 • Statistic conceals larger firm by firm churn • 9% offering in 2012 dropped coverage • 5% not offering added coverage Small BusinessHealth Care Survey Results

17. Small employers often pay the entire health insurance premium for their employees • 40% for individual coverage • 27% for family coverage • 21% for plus-one coverage The more employers pay (on a percentage basis), the more likely employees are to participate Small BusinessHealth Care Survey Results

18. 13% plan to cut the hours of part-time employees in 2014. However, no more than half of these planned cuts are associated with the Affordable Care Act. Small BusinessHealth Care Survey Results

19. Small Businesses are very uncertain about how ACA will impact their business • This is the first report in a planned series of three annual reports based on a longitudinal survey of more than 921 small employers Small BusinessHealth Care Survey Results

20. Group Health Insurance Under the ACA

21. Visible to Small Business Owner • The 50 Full-Time Employee Count • What is an Employee? – The Hours Count • What is an Employer? – Aggregation Rules • The Temporary Tax Credit – Much Ado About Little • Loss of Existing Policies • Added Paperwork • Not Visible to Small Business Owner • Full Range of Offering Arrangements • Operation of SHOP Exchanges (with Exceptions) • Back-End (e.g., Change and Reduction in Networks) Complexities

22. Most, but not all, in the fully-insured market will face substantial increases, particularly in 2014 • Community Rating • Minimum Benefit Package • HIT Tax • Supply and Demand Issues • Medical Inflation (Technology, Etc.) • Forced to Change Plans to Obtain a “Qualified Plan” • Unknown Number ACA Cost Drivers for Small Firms

23. Purchase -- Old-Fashioned Way • Purchase -- New-Fangled Way (SHOP Exchanges) • Self-Insure • Move to a Defined-Contribution* Type Plan • Eliminate (Have No) Coverage *taxable income Small Business Owner Options

24. Small Group (<50 Employees) Purchasing Mart • Transparency • More Competition • Theory, State-Based; Practice, Feds Run 36 • Promised Operation by 2015; Delayed One Year • SHOPs Must Offer “Qualified Plans” • State SHOP Choices • Employer-Sponsored Plans (like now) • Employer Chooses Plan Level; Employee Chooses Plan Within the Level • Employer Contributes Flat Amount; Employee Chooses Plan • Groups Up to 100 Employees Melded into SHOP by 2016 SHOP Exchange Purchases

25. Benefits – (Can Be) Much Cheaper • Not Subject to ACA Minimum Benefits, Comm. Rating, or HIT • Not for Everyone • Small Groups Difficult to Individually Underwrite • Poor Cash Flow • Unhealthy, Older Employee Population • Low Risk Tolerance • Status • About 4-6 Percent of Small Employers Now Self-Insure • Increased Interest; 4 Percent “Highly Likely” to Switch; 7 Percent “Somewhat Likely” • Fear – Too Many Good Risks Will Self-Insure • Reinsurance Attachment Points – Feds vs. States Self-Insurance

26. Relevant Influences • Continuing Unsustainable Prices Increases • Limits on Deductibles • Competition for Employees • Individual Mandate; Individual Exchange; and Roll- Out of HealthCare.gov • Escape a Time-Consuming HR Function • Currently Infrequent; About 14 Percent • Most Likely to Occur in Low-Paying Firms • Reasons – 1. Individual Subsidies, 2. Tax Exclusion *taxable income Defined-Contributions*:The Logical Way Out

27. Incentives for a Defined-Contribution*: Three Hypothetical Examples *taxable income

28. Downsizing SHOP Options to One Plan • Postponement of Employer Mandate • Weakening of Individual Mandate • Elimination of Penalties for Failure • to Notify • Postponement of SHOP • Tax Credit Only for Those Who Use SHOP – Revisited • Request for Comments on Attachment • Points for Reinsurance Recent Major Reversals and Pivots

29. House continues to vote on piecemeal repeal or relief efforts - March votes included a delay of the individual mandate and changing the definition of full-time employee (for the employer mandate) from 30 hours per week to 40 hours per week • Senate - Harry Reid says he will allow votes on Democratic ideas. • Administration continues to delay, provide "transition relief," and extend extensions on requirements Possible Policy Changes

30. Repeal the Affordable Care Act • Eliminate Health Insurance Tax • Eliminate Employer Mandate • Change 30 hour work week to traditional 40 hour work week Small Business Policy Objectives

31. How Can You Help Small Businesses Struggling to comply with the ACA?

32. NFIB Healthcare Reform Resource Center - http://www.nfib.com/business-resources/healthcare Questions?

33. Karen Harned • Executive Director, Small Business Legal Center • National Federation of Independent Business (NFIB) • Karen.harned@nfib.org • (202) 314-2061 Speaker Contact