Affordable Care Act

1. Affordable Care Act Impact on Individuals, Small Employers and Non-Profits

2. Important Terms • Exchange – an organized marketplace for the purchase of state (or federal) regulated and standardized health care plans. Small business exchange is called “SHOP” • All exchanges must be fully certified and operational by January 1, 2014. • Virginia decided on November 9, 2012 to let the federal government design their exchange. • The Exchange will likely be a collaboration of the HHS, IRS, and Department of Homeland Security.

3. Important Terms, cont. • FPL = Federal Poverty Level • Advanceable premium subsidy available up to 400% FPL ($44,000 individual, $92,200 family) • Must purchase insurance through exchange to receive subsidy.

5. Mary, 23 years old, $30,000 income, very healthy • Stay on parents plan until age 26 • Purchase through employer if offered and receive 50% contribution and pre-tax her premium (with a Section 125). • Purchase through insurance company and pay full price with after-tax dollars

6. Mary, 23 years old, $30,000 income, very healthy • Beginning in 2014 -Purchase through exchange and receive premium subsidy limiting premium to $237.50 monthly (9.5% income) and OOP max reduced to $3,967 because income is within 400% FPL OR • Buy no coverage and pay penalty of $300 (1% 2014), $600 (2% 2015), $750 (2.5% 2016). Can pick up insurance after illness or injury occurs.

7. 34 Year old couple, 2 kids, $50,000 income, husband’s employer pays 50% employee-only • Purchase through husband’s employer and receive 50% contribution for husband’s premium and pre-taxed premiums for family • Purchase through insurance company and pay full premium with after-tax dollars

8. 34 Year old couple, 2 kids, $50,000 income, husband’s employer pays 50% employee-only • Beginning in 2014 -Purchase through exchange and receive subsidy limiting total premium to $262.50 monthly (6.3% income) and OOP max reduced to $5,950 due to income below 400% FPL OR • Buy no coverage and pay penalty of $500 (1% 2014), $1000 (2% 2015), $1250 (2.5% 2016). Can pick up insurance after illness or injury occurs. • Note: Maternity covered if insurance chosen

9. Sue, 63 years old, tobacco use, life threatening condition, $45,000 income, no group plan offered • Purchase through an insurance company outside the exchange • Purchase through an exchange • No medical underwriting, however up to 50% rate up due to tobacco use. • Unlimited lifetime maximum and coverage for clinical trials for life threatening condition

10. Important Terms: • Full Time Employee = 30+ hours per week or salary • FTE = Full Time Equivalent: • How to calculate FTE: 1. Exclude owners, family, and seasonal employees 2. Add number of FT + salary employees 3. Add remaining payroll hours / 2080 hrs per year • The IRS states that the definition of a season employee is one that works 120 days or less.

11. Important Terms • Affordable Coverage - Coverage is “affordable” if: • The employees required premium/contribution for self-only coverage does not exceed 9.5% of the employee’s W-2. • Employers must offer minimum standard coverage of at least 60% of medical expenses.

12. Tax Credits • Small Business Tax Credit – offered to employers with 25 or fewer FTE and $50,000 or lower average annual salary. • 2010-2013 = up to 35% credit (25% non-profit) • 2014-2016 = up to 50% credit (35% non profit) • Phased out between 10 – 25 FTE and $25,000 to $50,000 average annual salary. • You have to shop through the exchange to receive credit in 2014-2016.

13. Downtown Bakery10 FTEs, average salary is $25,000 • Do not offer employee coverage. Will not face penalty but employees will be required to buy individual coverage or face tax penalty. • Offer coverage through a insurance company outside of the exchange, but receive no tax credit in 2014 and beyond. Credit of 35% (25% non-profit) available in 2010-2013.

14. Downtown Bakery10 FTEs, average salary is $25,000 • Offer coverage through exchange and receive 50% tax credit toward employer premiums (35% in 2010-2013). If company is non-profit, credit reduces to 35% (25% in 2010-2013) • Additional detailed monthly and annual reporting required by IRS/HHS. Credit limited to only two years beginning in 2014.

15. CARE Family Practice20 FTEs, average salary of $40,000 • Do not offer coverage to employees. Will not face penalty but employees will be required to buy individual coverage or face tax penalty. • Offer coverage through insurance company outside the exchange and receive no tax credit in 2014 and beyond. Credit of 35% (25% non-profit) available in 2010-2013 is phased out between 15 and 25 FT employees and between $25,000 and $50,000 average annual salaries.

16. CARE Family Practice20 FTEs, average salary of $40,000 • Beginning 2014, offer coverage through exchange and receive 50% tax credit (35% non-profit) toward employer premiums, phased out by same criteria. • Additional detailed monthly and annual reporting required by IRS/HHS. Credit limited to only two years beginning in 2014.

17. Other Items • MLR rebates – who receives refund? • 4 actuarial designs begin 2014 (60/70/80/90) • OOP Max increases to $5,950/$11,900 • Exchange services and consumer interaction yet to be defined • Overall premium rate increases due to legislative mandates yet to be determined

18. Other Items: • Beginning in January 2014 – medical underwriting will be eliminated. Rates will be based on age, tier of coverage, geographic location, and tobacco use. • Employers 50+ FTE must offer coverage to employee and dependents, but not spouses

19. 7 Things You Can Do to Get Ready Now • 1.Learn about different types of health insurance (make sure you have the right balance of costs and coverage) • 2. Make a list of questions before it’s time to choose your health plan (can I stay with my current doctor?) • 3. Make sure you understand how insurance works, including deductibles, co-insurance, and out of pocket maximums. • 4. Start gathering basic information about your household income (you will need your income to determine if you will get a break in costs) • 5. Set your budget • 6. Find out from your employer whether they plan to offer health insurance. • 7. Explore your current options

20. Summary • If you are below 400% FPL, you may be eligible for premium subsidy. • If you are a small employer with 25 or fewer FTE and under $50,000 avg annual salary, you may be eligible for a tax credit. * • If you are a small employer with fewer than 50 FTE or fewer than 30 FT employees – no penalty. • If you have 50 + FTE, you may be subject to penalties.

21. Q & A

22. Thank You