The Health Care Reform Law

1. The Health Care Reform Law BRAD D. STEELE VP of Gov’t Relations & General Counsel National Club Association 1201 15th Street NW, Suite 450 Washington, DC 20005 202.822.9822 steele@nationalclub.org www.nationalclub.org

2. National Club Association • Our Mission: “To defend, protect and advance the interests and well-being of private social and recreational clubs” • NCA makes sure the private club industry’s voice is heard • On Capitol Hill, • In the agencies, • In the statehouses, and • In the courthouses

3. Congressional Action in 2010

4. The Patient Protection and Affordable Care Act • Insurance reforms • Insurers may not have annual limits on benefits (2014) • Insurers may not have lifetime limits or “unreasonable” annual limit on benefits • Insurers must accept everyone regardless of a pre-existing condition (2014) • Insurers must accept children 19 and younger with pre-existing conditions • Insurers must renew coverage on individuals even if they suffer health problems during the year (2014)

5. The Patient Protection and Affordable Care Act • Insurance reforms • Insurers must place a limit on annual out-of-pocket expenses – includes coinsurance costs (2014) • Deductibles for those in the small group market may not be more than $2,000 for individual plan and $4,000 for family plan • Insurers may not look at gender or past claims to determine yearly rates (2014)

6. The Patient Protection and Affordable Care Act • American Health Benefit Exchanges • Each State must have an Exchange that offers “qualified health plans” • An Exchange must: • Certify that offered plans meet gov’t requirements • Provide a comparative analysis of plans • Provide cost information for each plan • Assign a rating to each plan • An Exchange may operate in more than one State

7. The Patient Protection and Affordable Care Act • American Health Benefit Exchanges • Clubs with 100 or less employees may use the Exchange to purchase ins. for their workers • Small Bus. Health Options Program (SHOP Exchange) • States may allow clubs with 100+ into SHOP in 2017 • An employer may select the level of coverage and employees may select any plan within that level • A health ins. provider in small group market must consider all enrollees – those in the Exchange and not – to be members of a single risk pool

8. The Patient Protection and Affordable Care Act • American Health Benefit Exchanges • Clubs must notify employees about Exchange: (2013) • What services it provides, • How to contact it, • That they may be eligible to get a tax credit or subsidy, and • That they may lose the employer’s contribution, but that any payment they make for ins. will be tax exempt • Each State’s Exchange must be up by 2014

9. The Patient Protection and Affordable Care Act • Employer mandates on private clubs • Clubs with 50+ employees must provide breaks for a nursing employee to express milk (2010) • As often as needed and for as long as needed • For 1 yr. after the child’s birth • Must provide a location that is shielded from view and free from intrusion for the breaks • A bathroom/locker room will not suffice • Clubs don’t have to dedicate a specific room, but must designate space to be made available when needed • Clubs with less than 50 are exempt • But must prove “undue hardship” – difficulty and expense

10. The Patient Protection and Affordable Care Act • Employer mandates on private clubs • Clubs must provide these breaks to non-exempt employees (exempt employees not covered) • Not required to pay the employee during these breaks (usually breaks of less than 20 are paid) • This federal law does not trump state laws • If state law requires more or if state laws covers exempt employees, then follow state law • Enforced under the Fair Labor Standards Act • Penalties could include injunction, possible $1,100 fine and attorney’s fees

11. The Patient Protection and Affordable Care Act • Employer mandates on private clubs • Must disclose total health plan cost on employee’s W-2 (delayed to taxable year 2012 - issued 2013) • Must file with the IRS and send to each corp. a 1099 for payment of goods or services totaling $600 or more throughout the year (2012) • No filing needed if payment is to a tax exempt corp. • Rep. Dan Lungren (R-Calif.) and Sen. Mike Johanns (R-Neb.) filed companion bills to repeal the 1099 mandate • Both chambers rejected the measure • Sen. Mary Landrieu (D-La.) said it was a mistake to include this mandate in the health care bill • Pres. Obama may be more agreeable to the repeal

12. The Patient Protection and Affordable Care Act • Employer mandates on private clubs • Clubs with an average of 50 full-time employees during the last year must offer insurance to their full-time employees • “Full-time employee” is one who is employed on average at least 30 hours/week during any month • Part-time employees are to be counted when determining if your club has 50 full-timers • Take the total hours worked by part-timers in a month and divide by 120 then add that number to the number of full-timers to see if you reach 50 • Part-timers are counted but you don’t have to offer ins.

13. The Patient Protection and Affordable Care Act • Employer mandates on private clubs • Clubs that meet the 50 full-time employee threshold and don’t offer insurance will be fined up to $2,000 per full-timer (less the first 30) if • 1 employee enrolls in an Exchange plan and is entitled to receive a tax credit or subsidy • Clubs that meet the threshold and do offer insurance can be fined up to $3,000 for each employee who • Enrolls in an Exchange plan and is entitled to receive a tax credit or subsidy

14. The Patient Protection and Affordable Care Act • Employee eligibility for tax credit or subsidy • For clubs that don’t offer, eligibility is based on: • Whether an employee’s householdincome is no more than 400% of FPL ($88,200 for a family of 4) • For clubs that do offer, eligibility is based on: • Whether an employee’s household income is no more than 400% of FPL ($88,200), and • His premium cost is more than 9.5% of that household income ($8,380) – “unaffordable” or • The offered health plan pays less than 60% of health care costs (not at least a Bronze plan) • Any unused tax credit is refundable

15. The Patient Protection and Affordable Care Act • Free Choice Voucher • Clubs that offer must also provide a “Free Choice Voucher” to certain employees: • Those who have a household income of no more than 400% of FPL ($88,200), and • Whose premium cost is between 8% and 9.8% of that household income ($7,100-$8,600), and • Who have turned down the club’s ins. plan • The club still pays its premium contribution and the employee may keep any excess after paying for ins. from the Exchange • No $3K penalty to the club

16. The Patient Protection and Affordable Care Act • Free Choice Voucher example: • Employees’ ins. contribution is $5K; club’s is $10K • 1 makes $100K, stay-at-home spouse with 2 kids • They make above 400% of FPL and the ins. cost is 5% of household income • 1 makes $40K, spouse makes $20K with 2 kids • They make less than 400% of FPL and the ins. cost is 8.3% of household income • Club must offer “Free Choice Voucher” if the 2nd employee declines ins. • Do you keep this or increase his contribution above 9.8% & pay $3K or drop ins. & pay $2K?

17. The Patient Protection and Affordable Care Act • Seasonal Workers • If a club has 50 full-timers, then its full-time seasonal workers must be offered insurance • If a club has less than 50 full-timers, but seasonal workers push it over the threshold, then • The club will have to offer insurance if it reaches the threshold for more than 120 days • The club will not have to offer insurance if it reaches the threshold for 120 days or less • “Seasonal worker” is one who performs labor or services on a seasonal basis

18. The Patient Protection and Affordable Care Act • Probationary Periods • Clubs with 200 or less employees • May have up to a 90 day probationary period for new full-time employees before offering insurance • Clubs with more than 200 full-time employees • May not have a probationary period and must automatically enroll new full-timers in its insurance plan • All of these employer mandates begin 2014

19. The Patient Protection and Affordable Care Act • Employer mandate example # 1: • A club has 45 FT and 20 PT (working 15 hrs/wk) • 20 x 15hrs/wk = 300hrs/wk; 300hrs/wk x 4 weeks = 1,200hrs/month; 1,200/120 = 10 • So, 20 PT = 10 full-time equivalent (FTE) workers • 10 FTE must be added to the 45 FT = 55 • With 55 FTE, the club must offer ins. to the 45 FT or be fined $2,000/FT • But, first 30 FT are excluded from the fine

20. The Patient Protection and Affordable Care Act • Employer mandate example # 2: • Same club with 45 FT and 20 PT (55 FTE) • The club also employees 25 FT seasonal workers • It does not matter how long the seasonal workers will be at the club • Since the club has more than 50 FTE, those 25 seasonal workers are treated as regular FT • So, 45 FT + 25 FT = 70 FT and the club must offer ins. to those 70 or be fined $2,000/FT • But, the first 30 FT are excluded from the fine

21. The Patient Protection and Affordable Care Act • Employer mandate example # 3: • Club has 45 FT and 25 FT seasonal workers • If the seasonal workers are at the club for more than 120 days, then they are to be included in the FT number • So, 45 FT + 25 FT = 70 FT and club must offer ins. to all 70 FT or be fined $2,000/FT • But the first 30 are excluded from the fine • If they are there for 120 days or less, then they are not added to the 45 FT • Since the club has 45 FT, then no ins. must be offered

22. The Patient Protection and Affordable Care Act • New and increased taxes on club members • A new3.8% tax on interest, investment & dividend income for those making $200K/$250K (2013) • This is on top of capital gains tax and income tax • Medicare payroll tax increased by .9% for those making $200K/$250K (2013) • Clubs need to budget for a potential decrease in revenue • With the payroll tax increase alone, a club with 50 families at $250K could lose over $100,000

23. The Patient Protection and Affordable Care Act • Indirect fees and taxes on private clubs • A fee on drug manufacturers for all items sold (2011) • A 2.9% tax on medical device makers for all products sold (2013) • An insurance comp. fee for all policies sold (2014) • This alone is expected to cause a 3% premium increase • A 40% tax on policies costing more than $10,200 or $27,500 (2018) • All of these new costs will likely be added to insurance policy premiums

24. The Patient Protection and Affordable Care Act • “Grandfathered” health plan regulations • A plan in existence & covering at least 1 employee on 3/23/10 is a grandfathered health plan • As long as it retains its grandfathered status, it is exempt from compliance with the new law • Sec. 105(h) of IRC • To maintain that status, a club must ensure: • The plan stays the same year in and year out; • There is a statement describing it as “grandfathered” in any and all plan materials distributed to employees; and • There are records detailing the terms of the plan to verify, explain or clarify its grandfathered status

25. The Patient Protection and Affordable Care Act • A club will lose its grandfathered status if it: • Eliminates some of a plan’s benefits • Increases the coinsurance percentage • Increases the deductible or out-of-pocket limit by more than is allowed under a gov’t formula • Increases the co-payment by more than is allowed under the gov’t formula • Decreases its premium contribution percentage by more than is allowed under the gov’t formula

26. The Patient Protection and Affordable Care Act • A major factor outside of a club’s control may cause it to lose its grandfathered status • Ins. providers will alter plans to conform with the law so the same plan may not even be available for renewal • Sen. Michael Enzi (R-Wy.) filed a Resolution of Disapproval to remove these regulations • The Senate voted it down • It will be hard to “keep the plan you like” • HHS says 69% of all businesses and 80% of small businesses will likely lose their insurance

27. The Patient Protection and Affordable Care Act • A wild ride in DC • On 12/24/09, the Senate passed it 60-39 • Last Christmas Eve vote – 1895 • Most time on a measure since Declaration of War - WWI • On 3/21/10, the House passed it 219-212 (3/19…) • The President signed it into law 3/23/10 • The slim margins of victory are telling • Even with the Republican wins, no major changes will be made but some small victories now seem possible

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