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Slide 1: Navigating Health Care Reform Summit RJF Health Care Reform Resources LinkedIn: http://linkd.in/jffdjF Twitter: #NavHCR Email: HCRAnswers@rjfagencies.com
Slide 2: Integrating Health Care Reform into Your Business Plan Today Bob Radecki RJF Senior Advisor of Regulatory Affairs
Slide 3: Agenda • Impact on employers of 2014 Health Care Reform provisions – – – – Health Insurance Exchanges Individual Mandate Subsidies for low and middle income individuals Employer shared responsibility rules and penalties – Medicaid eligibility expanded • Examples of Health Care Reform’s specific impact on actual employers
Slide 4: Health Insurance Exchanges • Regulatory structure to control how health insurance companies offer plans to individuals and small employers – State based • If state does not implement an exchange, Federal Gov. will operate one in that state – Coverage for individuals and employers up to 50 (100 in some states) – Carriers selling plans through the exchange must offer standardized plan options • Bronze, Silver, Gold, Platinum
Slide 5: Health Insurance Exchanges • Insurance reforms for exchange based plans – Risk pooling • Risk spread across all carriers selling in exchange – – – – No rating allowed based on claims experience No medical underwriting or pre-ex limitations Age rate spread of no more than 3:1 States will also continue to regulate plans offered outside the exchange • Effect of exchange on larger employers – Exchange will administer individual subsidies and regulate penalties for employers
Slide 6: Individual Mandate • Beginning in 2014 individuals must have health insurance or pay an excise tax – Qualified plans: • A health plan offered by an employer • Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE, Veteran’s health plan • Individual health insurance – Individual annual penalty • 2014: $95/adult, $47.50/child (max $285/family) • 2015: $325/adult, $162.50/child (max $975/family) • 2016 on: $695/adult, $347.50/child (max $2,085/family)
Slide 7: Low and Middle Income Subsidies • Premium tax credits & cost sharing reductions for individuals purchasing health insurance through an exchange – Available to individuals with household income up to 400% of Federal Poverty Level (FPL) • Individual = $43,560 • Single parent with one child = $58,840 • Family of 4 = $89,400 – No subsidy to individuals with qualifying “affordable” employer provided coverage • Employee contribution < 9.5% household income
Slide 8: Low and Middle Income Subsidies Uninsured rates vary dramatically by state U.S. Average Texas Mississippi Louisiana Minnesota Connecticut Massachusetts 2009 Uninsured Rate 16.3% 27.8% 24.9% 23.7% 10.5% 9.9% 4.7%
Slide 9: Low and Middle Income Subsidies Uninsured rates vary dramatically by income 2009 Uninsured Rate National Average (adults) Over $90,000 $36,000 ‐ $90,000 Under $36,000 16.3% 4.5% 8.8% 28.6%
Slide 10: Low and Middle Income Subsidies • Cost of individual coverage on an exchange based on a % of household income Federal Poverty Level 133% through 150% 150% through 200% 200% through 250% 250% through 300% 300% through 400% Silver plan cost % of  household income Between 3.00 – 4.00% Between 4.00 – 6.30% Between 6.30 – 8.05% Between 8.05 – 9.50% 9.50%
Slide 11: Low and Middle Income Subsidies • Examples of maximum monthly individual premium on exchange for “silver plan” – Family of 4 at 200% FPL ($44,700) = $234.68/mo – Individual at 300% FPL ($32,670) = $258.64/mo – Mother & child at 150% FPL ($22,065) = $73.55/mo
Slide 12: Employer Shared Responsibility Rules • “Applicable large employer” must offer qualifying coverage to all full-time employees or may pay a penalty – Applicable large employer = 50 or more full time equivalents' (FTEs) • Full-time employees defined as 30 hours/week – Likely with be based on a “qualifying period” • To determine FTEs employer must count part-time employees on a pro-rated basis – Not required to cover part-time employees
Slide 13: Employer Shared Responsibility Rules • 2 different employer penalties – Employer offers coverage to all full-time employees • $3000/yr ($250/month) – Penalty only applies to employees who opt out of employer plan, purchase individual coverage, and receive a tax credit or cost-sharing reduction – Employer does not offer coverage to all full time employees • $2000/yr ($166.67/mo) – Penalty applies to all full-time employees (not counting first 30 employees)
Slide 14: Example 1: Employer Offers Coverage • Employer with 100 employees – Premium: Employee only =$500 • Employee contribution: Employee only = $150 • Employer contribution: Employee only = $350 • Effect of potential employer penalty – 10 employees qualify for subsidy & purchase coverage through an exchange • 6 of these employee currently on plan
Slide 15: Example 1: Employer Offers Coverage Employer Penalty $250 x 10 $2,500 Savings from employees dropping plan Net cost to employer $350 x 6 ($2,100) $400/mo
Slide 16: Example 2: Employer Drops Coverage • Employer with 100 full-time employees – $166.67 x total number of full time employees • Not counting first 30 EEs • If at least 1 employee qualifies for subsidy and purchases coverage through an exchange – Employer penalty • Monthly = 70 x $166.67 = $11,666.90 – Penalty is not tax deductible to employer
Slide 17: Medicaid Expansion • Medicaid Eligibility Expanded – Individuals with household income up to 138% of Federal Poverty Level (FPL) eligible for Medicaid • Household Size 1 = $15,028 • Household Size 4 = $30,843 – Impact on Employer Plan • Expansion of employer plan premium payment program nationwide – States will pay employee portion of available employer sponsored coverage for Medicaid eligible individuals – Could cause currently un-enrolled individuals to join plan
Slide 18: Free Choice Vouchers • Voucher must be provided to eligible employees equal to amount employer contributes to most common plan – Applies to all employers who offer coverage to employees, not just “applicable large employers” – Eligible individuals • Employee contribution to health plan equals 8.0% 9.8% of household income – Individual can use voucher to purchase individual coverage on exchange • If coverage purchased is less than value of voucher, difference is refunded to employer
Slide 19: Health Reform Impact Example #1 • Employees – 172 employees working over 30 hrs/wk – Significant number of low and middle income workers • 110 employees with household incomes < 400% FPL • 7 employees < 138% FPL
Slide 20: Health Reform Impact Example #1 • Plan Design – – – – – – $1000 deductible, $2000 Max – OOP Premium – S = $619, F = $1500 Employer contribution - S = $400, F = $700 Employee contribution – S = $219, F = $800 87% participation Eligibility = 35 hours per week
Slide 21: New Eligible - $21,464 Medicaid - $24,449 Penalty - $22,300
Slide 22: Health Reform Impact Example #1 • Analyze effect of changing employer contribution • Plan • $1000 deductible, $2000 Max – OOP • Premium – S = $619, F = $1500 • Reduce employer contribution - S = from $400 $350, F = $700 • Employee contribution – S = $269, F = $800 • 87% participation • Eligibility = 35 hours per week
Slide 24: Health Reform Impact Example #2 • Employees – 489 employees working over 30 hrs/wk – Fewer low income workers • 214 employees with household incomes < 400% FPL • < 10 employees < 138% FPL
Slide 25: Health Reform Impact Example #2 • Plan Design – – – – – – $2500 deductible with an HSA Premium – S = $477, F = $1169 Employer contribution - S = $412, F = $760 Employee contribution – S = $65, F = $409 84% participation Eligibility = 30 hours per week
Slide 26: Medicaid - $14,064
Slide 27: Dropping Coverage Option • Analyzing the cost of not offering health insurance to full time employees – Penalty = $166.67 per month ($2000 per year) • Do not count first 30 employees • Penalty not tax deductible – Assume employer tax rate of 20% in this example
Slide 28: Dropping Coverage Option • Analyzing the cost of not offering health insurance to full time employees (cont.) – Will employer provide employees with additional income? • Assume some additional income will be expected by employees to make up for loss of benefits • This example assumes additional income equal to 75% of former employer contribution to health plan
Slide 29: Payroll Tax $42,940 Additional Comp $613,482 Employer Tax $56,801 Penalty $284,006
Slide 30: Questions You Need to Ask • How many of your employees may qualify for a subsidy? • What is the cost impact of employees leaving plan and purchasing coverage on exchange? • Is it realistic to drop employer sponsored coverage and let employees purchase individual coverage instead? • What will employees expect from the employer regarding help with coverage decisions?
Slide 31: Navigating Health Care Reform Summit RJF Health Care Reform Resources LinkedIn: http://linkd.in/jffdjF Twitter: #NavHCR Email: HCRAnswers@rjfagencies.com