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Understanding PPACA: Key Points & Employer Impact

Learn about the Patient Protection and Affordable Care Act (PPACA) and its implications for employers. Discover why providing health insurance is crucial, penalties for being uninsured, and how the law affects small and large employers. Get insights on affordable coverage, penalties, subsidies, and more.

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Understanding PPACA: Key Points & Employer Impact

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  1. PPACA: What is going on??? Presented by: Jerry Leemkuil Field Manager Association Risk Management Services Federated Insurance

  2. I am going to make it easy on you. Our Congress developed a flowchart for us to understand how the bill will be written and implemented.

  3. Why provide health insurance? • Attract & retain the best talent • You genuinely care about your employees and their families • Healthy employees are more productive employees • You know that the business with the best employees WINS!

  4. Why else? • Contributions to the employee’s premiums are tax deductible • Employee premiums are not subject to Federal Income Tax, State Income Tax, Social Security, Medicare, Unemployment Tax, or Work Comp

  5. Agenda • What is PPACA (or ACA or “ObamaCare”) • What is “The Marketplace” or Exchange • “Affordable” and “Valuable” • Large Group versus Small Group • Subsidies Available with ACA • Will Premiums Rise? • Taxes associated with PPACA • Health Insurance Options • What is Federated doing to Respond?

  6. What is ACA?

  7. What is ACA? • Individual Mandate - 2014 • Dependents until age 26 • No annual or lifetime limits on care • No Preexisting Conditions - 2014 • Expansion of Medicaid - 2014 • Taxes on Health Care Industry - 2014 • Health Insurance Exchange - 2014 • Subsidies - 2014 • New Medical Plans – Bronze, Silver, Gold, and Platinum - 2014

  8. Individual Requirement • Have health insurance on January 1, 2014 or pay a penalty • Open enrollment period October – December

  9. Penalties • 2014 - $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater • 2015 - $325 per adult and $162.50 per child (up to $975 for a family) or 2.0% of family income, whichever is greater • 2016 - $695 per adult and $347.50 per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater No penalty for a single gap in coverage of less than 3 months in a year

  10. How much is the Penalty?For Being Uninsured… People of lesser means will receive assistance to pay for insurance www.healthreform.kff.org

  11. Small vs. Large Employers • “Affordable” Coverage • “Valuable” Coverage • Am I a Large Employer?

  12. “Affordable” and “Valuable” • “Affordable” • Less than 9.5% of W-2 wages • EE only-Dependents income is not part of this equation • “Valuable” • Has Essential Health Benefit (EHB) • Actuarial Value of at least 60% • Bronze – 60% • Silver – 70% • Gold – 80% • Platinum – 90%

  13. ACA Impact on EmployersAm I a Large Employer? For each month in 2013 A. Count the number of employees who worked 130 or more hours (these are Full Time EE’s) B. Count the hours for employees who worked less than 130 hours and divide by 120 = equivalent FTE • Add A and B to determine FTEs for the month

  14. ACA Impact on EmployersAm I a Large Employer? • For each month in 2013 (continued) • Add the number of FTEs for each month in 2013 and divide by 12 = Average FTEs • If 51 or more – you are a large employer for all of 2014 • What you are in 2014 depends on what you were in 2013

  15. Example • Acme Oil Company has 29 full-time employees • 70 part-time employees (cashiers at c-stores) • These 70 employees worked 7,000 hours last month (7,000 / 120 = 58) • Acme Oil Company has added 58 FTE’s to their original 29, totaling 87 • Acme Oil must “play”. They have over 51 full time equivalents

  16. Penalty* for Not Offering Insurance • True FTE x $166.67/mo = $2,000/yr • No penalty unless one or more employees obtains coverage through Public Exchange and receives a subsidy to purchase it. * Delayed for large employers until 2015 Source: The Pay or Play Mandate for Large Employers, McKenna Long & Aldridge LLP

  17. Employer MandateWhat if Coverage isn’t Good Enough? • Coverage offered must be… • Affordable – cost the employee less than 9.5% of their income to participate. • Minimum value – actuarial value of 60% or more. • Employer must then pay $250/mo = $3,000/yr *for every “True” FTE that goes to the Exchange and obtains coverage with a tax credit subsidy. * Delayed for large employers until 2015 Source: The Pay or Play Mandate for Large Employers, McKenna Long & Aldridge LLP

  18. Contrasting Impact on Large and Small Employers Large EmployerSmall EmployerEmployer Mandate (Play or Pay Penalty) Yes Delayed No Discrimination Testing Yes Likely Delayed Yes Metal Tier Plan No – Meet MEC Yes Compressed Age Rating No Yes Compressed Gender Rating No Yes Eliminate Pre-existing Condition Exclusion Yes Yes Essential Health Benefits No Yes $2,000 Deductible Constraint No Yes $6,350 OOP Max Constraint Yes Yes Underwriting Restriction (CAF) No Yes Waiting Period Limited to 90 Days Yes Yes

  19. Ratings for small groups • Rating bands being compressed from 6:1 to 3:1 • Gender Rating is no longer allowed • No rating for pre-existing conditions • No underwriting – everyone gets base rates • Can rate based on Geography, Age, Family Size, and Tobacco

  20. Rating for large groups • Can rate for medical history • Allowed to underwrite - can pay less or more than base rates • Can rate based on Geography, Age, Family Size, and Tobacco

  21. Premium Tax Credit - Subsidy • Tax Credits for people who earn up to 4 times the Federal Poverty Level • If an employer offers a plan to its employees that is affordable and valuable, no subsidy will be provided to the employee

  22. Medicaid & Subsidy ThresholdIn 2012 Dollars $92,200 $76,360 $60,520 $44,680 $23,050 $19,090 $15,130 $11,170 Eligibility will be based on household income Source:hhs.gov

  23. Health Insurance Exchange • Utah opted to not expand Medicaid • Utah opted to let the Federal Government put together its exchange • Enrollment opens on October 1, 2013 • Website - HealthCare.gov

  24. Will Premiums Increase? ??

  25. New Taxes and Fees • Health Insurance Industry Fee (HIT Tax) • $8 Billion in 2014 • Increases year over year to $14.3 Billion in 2018 • Following 2018 increases by premium growth rate of industry • Estimated to be equivalent to 2.5% of premium in 2014 • This “fee” is not tax deductible. Insurers must pay the “fee” out of After-Tax Income. • At 35% Corporate Tax Rate “Fee” equates to 3.85% of premium in 2014

  26. New Taxes and Fees • Reinsurance Assessment • Reinsurance to stabilize individual insurance market for 2014-2016 • Paid by all Insurers and Self-Insured plans • $25 Billion over 3 years • Must pay $63 per member or $5.25 per member per month • Approximately 1.5% of premium in 2014 • This assessment is tax deductible

  27. New Taxes and Fees • Comparative Effectiveness Research Fee for Patient Centered Outcome Research Institute (PCORI) • Conduct Research to determine which treatments work best • $1 per member per year, doubles to $2 in 2015 • Paid by Insurer and also by HRA Plans • Equates to 0.3% of premium in 2014

  28. New Taxes and Fees Summary 2.5% before tax consideration 3.85% after tax consideration 1.5% of premium 0.3% of premium 4.3% to 5.65% • HIT Tax • Reinsurance • PCORI Premium rates must rise to fund these new taxes and fees. New taxes and fees for pharmacology and medical services will also drive up costs and be passed through in premium.

  29. Options for ACA • Stay on current rate change date (i.e. October 1, 2013 – October 1, 2014) • Comply with ACA on January 1, 2013 • Drop Health Insurance and give everyone a raise • Change your plan year to December 1, 2013 (Delay for another year)

  30. Pay employees additional wages • Additional wages paid by employer will reduce the employee’s tax credit. • Example – 40 year old, single, $30,000 income + $3,600 in additional wages. As a result of receiving $3,600 more in wages, this employee’s tax credit is reduced by $605.

  31. Pay employees additional wages Employer must pay wage taxes on new wages given to employee and additional work comp premiums. Employee will incur additional taxes, as well.

  32. Pay employees additional wages Employeemust pay wage taxes on new wages along with Federal and State income taxes at marginal tax rates.

  33. Pay employees additional wages Let’s review our example: In this example, over half of the increase inwages given to the employee has been eroded!!

  34. Should I consider delaying ACA? • Have less than 50 full time equivalent employees • Deductible is currently over $2,000 • Healthy group • Young group • You want rates locked (certainty) to see how 2014 plays out

  35. Strategies to Delay ACA • Change Plan Year to December 1, 2013 • Only for small employers

  36. ACA – Federated’s Response • Substantial investment into the development of Federated’s “Private Exchange” • Local Marketing Representatives equipped with tools for effective one-on-one discussions offering solutions for business owners. Marketing Representatives are receiving ongoing training from Federated on the latest developments regarding ACA

  37. One “take-away” for you today… • Employee Notices are required to be provided to all employees by 10/1/2013

  38. Employer Requirements • 3 written notices required: • Existence of the Marketplace (aka public exchange) including contact information and a description of services provided by the Marketplace • Must inform the employee they may be eligible for a premium tax credit through the Marketplace • The notice must tell the employee if they purchase health insurance through the Marketplace, they may lose the employer contribution to any health benefits plan and all or portion of such contribution may be excludable from income for Federal Income tax purposes

  39. Jerry Leemkuil 507-456-7710 jjleemkuil@fedins.com

  40. Thank you!

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