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Federal Health Reform: Impact on Businesses

Federal Health Reform: Impact on Businesses. Kandis Driscoll Christina Vane, MPH Insure the Uninsured Project www.itup.org. Small Business in California Health Coverage Barriers. 78% of small businesses that do not offer coverage would like to do so 80% cite cost as a barrier

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Federal Health Reform: Impact on Businesses

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  1. Federal Health Reform: Impact on Businesses Kandis Driscoll Christina Vane, MPH Insure the Uninsured Project www.itup.org

  2. Small Business in CaliforniaHealth Coverage Barriers 78% of small businesses that do not offer coverage would like to do so • 80% cite cost as a barrier Small business premiums are 10-18% higher than large businesses, on average • Higher administrative cost per employee • High risk profile Source: University of California, Berkeley, Center for Labor Research and Education (2010)

  3. Federal Health ReformLegislation Patient Protection and Affordable Health Care Act (HR 3590) • Signed into law on March 23, 2010 Health Care and Education Reconciliation Act (HR 4872) • Signed into law on March 29, 2010 Source: University of California, Berkeley, Center for Labor Research and Education (2010)

  4. Federal Health ReformOverall Impacts on Small Business The Patient Protection & Affordable Care Act helps small businesses offer affordable health care coverage to employees through: • Tax credits • Insurance regulations • Investments in wellness programs and preventive services • California Health Benefits Exchange Source: University of California, Berkeley, Center for Labor Research and Education (2010)

  5. Immediate Impacts 2010

  6. Immediate Impacts March 23, 2010 • Tax credit of up to 35% of premiums (25% for non-profit) for businesses who offer health insurance with 25 or less full-time employees and average wages of $50,000 or less per year • $4.4B in tax credits over 10 years • Visit (www.irs.gov/sbhtc) to learn more June 22, 2010 • Early Retiree Reinsurance Program for employers that provide benefits to retirees age 55-64 to help offset the costs of expensive health claims July 1, 2010 • Pre-Existing Condition Insurance Plan available for individuals with pre-existing conditions who have been denied or unable to afford coverage (www.pcip.gov) • Internet portal for employers to assess & compare coverage options (www.healthcare.gov)

  7. Immediate Impacts2010 September 23, 2010 • Bans health plans from dropping insurance coverage when an individual gets sick • Regulates rescissions • Requires plans to cover children, regardless of pre-existing conditions • Requires plans to offer coverage for adult children up to age 26 • Young adults (ages 19-29) have the highest uninsured rate of any other age group (30%) • Decrease average premiums per enrollee because younger enrollees will improve average health status in small group market • Increase total plan enrollment and average premium for family coverage (0.7%) Sources: White House, Washington, D.C. (2010), University of California, Berkeley, Center for Labor Research and Education (2010)

  8. Immediate Impacts2010 September 23, 2010 (Continued) • Bans lifetime limits on coverage • 44% of CA small business covered workers had lifetime limits in 2009 • Requires coverage for preventive services with no copayments • 10% of CA small business covered workers were subject to deductibles for preventive services in 2009 Sources: White House, Washington, D.C. (2010), University of California, Berkeley, Center for Labor Research and Education (2010)

  9. Near-Term Impacts 2011

  10. Near-Term ImpactsJanuary 1, 2011 Plans required to meet minimum medical loss ratios (MLRs) of 80% and 85% in the non-group and large group markets • Must provide rebates if MLRs are not met Establishes a 5-year, $200M grant program to small employers who initiate wellness programs • Visit http://www.hhs.gov/grants/for more information Establishes a public long-term care insurance program (CLASS Act) • Financed through voluntary payroll deductions

  11. Federal Reform Implementation 2014

  12. Federal Reform ImplementationJanuary 1, 2014 Individual Mandate • All individuals must purchase basic coverage or pay a fine • Plan must cover at least 60% of expected costs of basic benefits (doctor visits, hospitalizations, prescriptions) • Individuals under 30 and those with financial hardships may purchase catastrophic coverage (primary and emergency care only) • Existing coverage is grandfathered (you like it, you keep it, but it cannot be altered more than 15%) Guaranteed Issue and Renewal • Cannot deny or price coverage based on pre-existing conditions • Premiums may vary based on age, geography, family size, tobacco use

  13. Federal Reform ImplementationJanuary 1, 2014 Individual Penalty • Individuals with incomes below tax filing threshold are exempt • Flat payment rate of $95 in 2014, $325 in 2015 and $695 in 2016 OR • 1% of income in 2014, 2% in 2015 and 2.5% in 2016 and thereafter • Higher of the two

  14. Federal Reform Implementation SB 900 (Alquist & Steinberg) and AB 1602 (Perez) were signed by the governor on September 30, 2010 to create the California Health Benefit Exchange Eligible for Purchase • Individuals (uninsured or with private, individual insurance) • Those with incomes between 133% ($14,000 for an individual) and 400% ($88,000 for a family of four) of the Federal Poverty Level (FPL) qualify for refundable tax credits • Caps premiums on sliding scale between 2% and 9.5% of income • Employers • 50 FTE or less in 2014, 100 FTE or less in 2017

  15. Federal Reform Implementation Provisions • 4 levels of benefits (+ catastrophic plan for young invincibles and financial hardships) • 60%-90% expected medical costs • Bronze, silver, gold, platinum • Rating variation limitations (i.e. age, geography, tobacco use and family size) • Compete on price and quality • States must have exchanges fully operative by January 1, 2014 (SB 900 and AB 1602)

  16. Federal Reform Implementation Small businesses qualify for tax credits if: • They have fewer than 25 FTEs for the tax year • The average annual wages paid are less than $50,000 per FTE • The employer pays at least 50% of the premium cost

  17. Federal Reform Implementation There is a sliding-scale tax credit of up to 35% of the employer-eligible premium expenses for tax years 2010-2013 • Employers with 10 or fewer full-time employees, paying annual average wages of $25,000 or less, qualify for the maximum credit Beginning in tax year 2014, the maximum tax credit increases to 50% of premium expenses and coverage must be purchased from a state health insurance exchange • This tax credit is available for a total of any two years For tax-exempt employers, the same employee and wage requirements apply, but the maximum tax credit is 25% of eligible premium expenses for tax years 2010 - 2013, increasing to 35% in 2014

  18. Federal Reform ImplementationJanuary 1, 2014 “Pay or Play” requirement • Employers with over 50 “full-time equivalent” (FTE) employees must offer coverage or pay fees onlyif one or more of their employees receives tax credits through the Exchange • First 30 employees deducted from calculation (HR 4872) Table: Fee Calculation for Employers with 50+ Employees Adapted from: Benefit logic (2010)

  19. Overall Anticipated Impacts Large decrease in premiums for individuals and employers eligible for tax subsidies Gives small employers more purchasing power Reduced cost and increased competitive pressure may decrease premiums up to 4% for small businesses Slight decrease in large employer premiums due to reduced number of uninsured • 5-6% of California premiums are attributed to cost-sharing for uncompensated care provided to uninsured Reduces job lock • Employees are no longer locked into jobs in order to maintain needed benefits

  20. Sources Benefit Logic, Inc. (July 2010). Health Care Reform: Potential Penalties for Employers Under the “Pay or Play” Rules. Accessed from: http://benefitlogicblog.com/2010/07/16/health-care-reform-potential-penalties-for-employers-under-the-pay-or-play-rules/ California Health Interview Survey. (2007). UCLA Center for Health Policy Research. Accessed from: www.chis.ucla.edu Democratic Policy Committee. (2010). H.R. 4872, The Health Care & Education Affordability Reconciliation Act of 2010, Section-by-Section Analysis. Accessed from: http://dpc.senate.gov/dpcdoc.cfm?doc_name=lb-111-2-42 Dougherty A. Implementation Timeline for Health Reform: 2010-2011. Insure the Uninsured Project. Accessed from: http://www.itup.org/Reports/Health%20Reform/Health_Reform_Timeline_032310.pdf Lucie L, Jacobs K & Graham-Squire D. (March 2010). Federal Health Reform: Impact on California Small Businesses, Their Employees and the Self-Employed. University of California, Berkeley, Center for Labor Research and Education. Accessed from: http://laborcenter.berkeley.edu/healthcare/final_bill_impact_small_business10.pdf&sa=X&ei=4itkTLzIE6WRnAea8r3NAQ&ved=0CBYQzgQoADAA&usg=AFQjCNFpsEQUsSk4YZResc--khHdTEYM-A U.S. House of Representatives. (March 2010). H.R. 3590: Patient Protection and Affordable Care Act. Accessed from: http://www.opencongress.org/bill/111-h3590/text White House. (2010). Young Adults and the Affordable Care Act: Protecting Young Adults and Eliminating Burdens on Families and Businesses. Accessed from: http://www.whitehouse.gov/sites/default/files/rss_viewer/fact_sheet_young_adults_may10.pdf

  21. For resources and additional information we are available at: (310) 828-0338 kandis@itup.org,christina@itup.org http://www.itup.org

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