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How Healthcare Reform Will Impact Your Small Business SCORE LA

How Healthcare Reform Will Impact Your Small Business SCORE LA. Natalie Orta, U.S. Small Business Administration July 10, 2013. Topics for Discussion Today. Tax credits Grandfather provisions Employer Responsibilities Individual Responsibility Requirement (Self-Employed)

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How Healthcare Reform Will Impact Your Small Business SCORE LA

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  1. How Healthcare Reform Will Impact Your Small BusinessSCORE LA Natalie Orta, U.S. Small Business Administration July 10, 2013

  2. Topics for Discussion Today Tax credits Grandfather provisions Employer Responsibilities IndividualResponsibility Requirement (Self-Employed) Cost Containment Provisions Marketplace / Exchange Covered California Your questions and comments

  3. Small business tax credits • In effect now (as of tax year 2010) • $40 billion in credits by 2019 • Which businesses are eligible? • Fewer than 25 full-time employees • Average annual wages <$50,000 • Employer pays at least 50% of the premium cost

  4. Small business tax credits • Tax credits on a sliding scale: • Up to 35% of premium expenses for 2010–13 • Up to 50% of premium expenses for any two years beginning 2014 • Tax credits do not cover premium expenses of owners or their families • Tax credits can not be claimed by the self-employed

  5. Grandfathering: “If you like what you have, you can keep it” • A grandfatheredplan is a health plan in which a small business was enrolled on March 23, 2010 • Grandfathered plans do not need to comply with several insurance reforms, but do need to comply with some provisions • Regulations allow for making several changes (adding employees, changing carriers) without jeopardizing grandfather status • Significantchanges (dropping specific benefits, radically increasing premiums, etc.) may be cause for losing grandfather status

  6. Shared responsibility • No business mandated to offer coverage • large firms may pay fee for not offering – Starting 2015 • Businesses with fewer than 50 FTEs exempt • 96% of all businesses exempt from any fees

  7. For larger employers (≥50 FTEs) Beginning January 1, 2015 • Fail to offer coverage-$2,000 per year for each full-time employee (≥30 hours) Excluding the first 30 full-time employees • Firms only pay fee if at least one worker qualifies for federal financial assistance in Exchange. • Failing to offer “affordable” coverage- $3,000 per year for each full-time employee receiving federal financial assistance in exchange • What is “Affordable”? • Employee’s required contribution must not exceed 9.5% of income • Plan covers at least 60% of healthcare expenses (on average)

  8. Additional responsibilities • W2 reporting – informational only • Allows workers to see how much employer is spending on health benefits • Firms with fewer than 200 workers exempt until further notice Summary of health plan – Insurers provide employers a summary of benefits; employers must share info with workers (Sept. 2012)

  9. Employee Notification www.dol.gov/ebsa/healthreform • Many employers are required by the Fair Labor Standards Act (FLSA) to notify employees of coverage options available through the Insurance Marketplace. • Notifications to existing employees must be out by Oct 1, 2013 and all new employees beginning Oct 1 should receive this notice. Two notices available: one for employers who do offer coverage, one for employers who do not. (<$500,000)

  10. Individual Responsibility Requirement (incl. Self-Employed) Beginning in 2014, most individuals required to obtain insurance or pay penalty May qualify for premium assistance based on income for 100% - 400% of fed poverty level (family of 4 = $23,000 to $92,000) Not eligible for premium assistance in Exchange if employer offers affordable insurance Acceptable coverage: Employer, individual, Medicare, Medi-Cal, Covered CA, etc.

  11. Individual Responsibility Requirement (incl. Self-Employed) Exemptions for certain religions and very low-income individuals (≤ $9,500 per yr) Penalty: $95 or 1% (2014); $325 or 1.5% (2015); $695 or 2.5% (2016) About 1-2% of population expected to pay fee

  12. Cost Containment – Cutting costs saves small businesses money • Exchanges leverage pooled purchasing power to lower premiums • Ensure that more $$ go to medical care • 80/20 Rule- Requires insurers spend at least 80% of small business premiums on medical claims. Limits administrative costs to 20% • Must issue rebates by August 1 every year. • Estimated $1.1B issued in 2012 nationally; 28% small business plans

  13. Cost Containment – Cutting costs saves small businesses money Premium increases are now reviewed by state Other incentives for administrative efficiency and modernization (e.g. pay for performance) Aims to reduce “hidden tax” of $1,000 per year

  14. ACA Benefits No pre-existing conditions – Guaranteed Issue Dependents can stay on parents plan till age 26 No gender based premiums No lifetime caps All plans include 10 Essential Health Benefits

  15. 10 Essential Health Benefits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment www.sba.gov

  16. 10 Essential Health Benefits - continued 6. Prescription drugs 7. Rehabilitative and habilitative services and devices 8. Laboratory services 9. Preventive and wellness services and chronic disease management, and 10. Pediatric services, including oral and vision care www.sba.gov

  17. Small Businesses struggle with costs • Small Business Majority 2008 study: Small business health costs would more than double by 2018 without any reforms. 5X rate of inflation – $2.4 trillion ($243 billion in CA) • Small firms pay 18% more than large businesses • 29.5% self-employed: uninsured (CA: 826,000) • 25% of small employers: uninsured (CA: 175,000) • Their opinion survey: 86% of CA small businesses don’t offer because of cost; but would if affordable. 70% of those who do offer say they are struggling to do so www.sba.gov

  18. Size of American businesses Small Business Majority and Kaiser Permanente poll: After learning about features in the marketplace, percentage of California small business owners who said they’d be likely to offer insurance jumped from 32% offering to 42% • Kaiser Family Foundation: • 4.8M businesses with fewer than 50 employees (35.7%) offer health insurance • 1.7M businesses with 50 or more employees (95.7%) offer health insurance. www.sba.gov

  19. What is a Health Benefit Exchange? • Large marketplace to buy commercial insurance • Compare plans for information about price, quality and service • Plans organizedbylevel: bronze, silver, gold, platinum • Calculator to compare costs across plan options • Streamlined billing process Small Business Exchange INSURANCE PLANS EXCHANGEChoiceComparisonBillingTax Credits SMALL BUSINESSES One-stop shop web portal www.sba.gov

  20. What is a Health Benefit Exchange? • Two Exchanges: individuals; small businesses (2-50) • Opening on January 1, 2014 (pre-enroll begins Oct. 1) • Voluntary • Members of Congress and staff required to use Exchange • Exchanges designed by states -- or by federal gov’t if a state so chooses • State-based exchanges mean increased flexibility and more input from smallbusinesses and other stakeholders • Not a new concept - Business groups, non-profits and state gov’ts already run similar programs in CA, CT, MA, NY, UT www.sba.gov

  21. California Health Benefit Exchange Our Exchange: “Covered California” • First in the nation. Enacted in 2010 – Bipartisan effort • Governed by independent public board • Holding dozens of public board meetings • Executive Director is a former business leader; hiring more staff now • Received federal $$ for planning; Exchange self-funding by 2015; no state dollars spent • Stakeholder advisory panels providing input from small business owners and business organizations www.sba.gov

  22. California’s Key Decisions • Active Purchaser: Exchange will negotiate with insurers • Standard products will provide Apples-to-apples comparison • Employee Choice: Employer selects “tier” of coverage; worker selects insurer; employer receives one bill • Brokers can sell Covered CA products; will be paid market commission rates by Covered CA. • HR Services: COBRA administration, HSAs, wellness plans, etc. • Public-private partnership: Administrative management of small business Exchange to be done by private-sector vendor www.sba.gov

  23. Take a look… www.sba.gov

  24. HealthCoverageGuide.org • Objective, straightforward resource to help Small Businesses navigate the new healthcare system both in and out of the SHOP marketplace • Step by step guide if employers decide to offer coverage, alternative healthcare options if you don’t • Tools like the Small Business Tax Credit calculator and an action plan checklist www.sba.gov

  25. More information www.sba.gov • SBA.gov • Starting Point: www.healthcare.gov • CA Healthcare Coverage Guide: HealthCoverageGuide.org • Covered California: CoveredCA.com • Health Law Guide for Business: HealthLawGuideForBusiness.org • Hot Line: 24 hours a day – (800) 318-2596 • SmallBusinessMajority.org • Information Summary & FAQ • Tax Credit Calculator

  26. Contact Us Los Angeles District Office Natalie Orta 330 N. Brand Blvd., Suite 1200 Glendale, CA 91203 Telephone: 818-552-3291 Email: natalie.orta@sba.gov www.sba.gov

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