Employers and the Affordable Care Act

1. Employers and the Affordable Care Act Cheryl Fish-Parcham, Families USA

2. Outline • Small business • Tax credits for some • End to price discrimination • SHOP exchange • When employees might use individual exchange • Large business • Employer responsibility

3. Small business tax credits Businesses may be eligible if they: • Have fewer than 25 full-time equivalent employees; • Pay average wages of less than $50,000/year • Pay at least 50% of premium costs for single coverage, and either the same % or same $ amount for family coverage. • Buy coverage from a state-licensed insurer

4. What types of insurance count? • Comprehensive and/or limited benefits: • E.g., dental, vision, long term care count if the employer pays 50% of each. • NOT contributions to a health saving account, HRA, or flexible spending account – employer must pay to an insurer

5. What if the employer owes no taxes? • A for-profit employer can carry over the credit to another year. • A tax-exempt employer can get a “refundable” credit up to the amount the employer withholds for income and Medicare taxes.

6. What is the amount of the credit? • 2010-2013: • It is highest for businesses with less than 10 workers, and average wages less than $25,000 • Maximum is 35% of premiums paid for a for-profit business, 25% for a tax-exempt business (but sequestration will hit tax-exempt businesses in 2013) • Use a small business tax credit calculator for more information

7. Some calculators • Small business majority: http://www.smallbusinessmajority.org/tax-credit-calculator/ • House – round numbers, uses average wages: http://housedocs.house.gov/energycommerce/smallbusiness/smallbusiness.html • Regence/H&R Block http://www.regence.com/transparency/tax-credit-calculator/index.jsp

8. How does the credit change in 2014? • Maximum credit increases to 50% for a for-profit business, 35% for a tax-exempt business • Firms can claim for any two years beginning in 2014. (They can also claim credits for 2010-2013, which brings the total to six years.)

9. Resources • IRS information: http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers • Includes video, fact sheet, tax forms and instructions, questions and answers, etc. • HHS: http://www.healthcare.gov/marketplace/small-businesses/ Fact sheet about other small business provisions and links • Small business majority: http://www.smallbusinessmajority.org/policy/healthcare-policy-aca.php

10. Other ways small business benefits from ACA • Some small businesses got premium rebates; the insurance department reviews premium increases; • In 2014, businesses won’t be charged more based on the health or sex of their workers • Small employers (fewer than 50 FTEs) don’t have employer responsibility requirements • Employees can count on more comprehensive coverage

11. New Marketplaces (exchanges) in 2014 • SHOP exchange – comparison shop, allow employees to make different plan choices • If small employers are unable to offer coverage, their workers can go to the new marketplace for individuals (exchange) and may qualify for premium credits.

12. Do Large Employers Have to Provide Coverage? • No. • However, applicable large employers who don’t provide appropriate coverage to employees may be subject to an “Employer Shared Responsibility” payment if at least one of those employees gets a plan with premium tax credits on the Exchange.

13. What is a large employer? • A large employer: • Has at least 50 Full Time Equivalents • Could be a for-profit, non-profit, or government entity • If there were more than 50 FTEs for only 120 days or less in the year, and the excess workers were seasonal, it isn’t a large employer

14. What workers must be covered to avoid penalties? • Full time workers (not full time equivalents) • Full time is 30 hours/week or 130 hours/month • The following proposed rules could change: • No penalty if employer covers all but 5 or 5% of workers. • Employers can use a “lookback period” of 3-12 months to determine if variable hour employees work 30 hrs/week; if so, they must be treated as full time for a period that is at least as long and at least 6 months • Vacation, holiday, sick hours,etc count as work

15. Two types of penalties 1. Doesn’t provide coverage and at least one worker gets premium credits on the exchange • Penalty: $2000 times (# of full time workers – 30) 2. Provides coverage, but it is not affordable or not of minimum value • Penalty: $3000 for each worker who gets premium credits, up to a maximum

16. What does the employer have to offer to avoid penalty #2? • Affordable: single plan costs the worker no more than 9.5 % of wages • Proposed: Must also offer worker family coverage for his/her dependent children. Rules don’t limit the cost of family coverage. • Minimum Value: pays at least 60% of the total cost of covered benefits, for typical population • Example: Plan has a $3000 deductible, 20% coinsurance, and $5,950 out of pocket maximum

17. Will employers cut hours to avoid penaties? • Mostly, it won’t make business sense – takes more trained workers, shorter shifts not profitable; • But restaurants and retail are more vulnerable • Public pressure may help

18. From “Burgers, Fries and Lies” “… here’s a guy selling something that is a leading contributor to the major health breakdowns in America, a product that may ultimately hasten an early death. He won’t offer insurance to the poorly paid workers who make said time bombs.” - Timothy Egan, writing about Five Guys in the New York Times Opinion Pages, March 21, 2013

20. Some employers have changed their minds about cutting hours • Public outcries help! • Darden, Papa John’s, Denny’s

21. Important points • Most large employers offer coverage (94-99%) • Most say they will continue to do so • Offering coverage is the right thing to do: it helps employees be healthy and productive, and keeps businesses competitive • Not covering workers shifts costs to the government, families, and other businesses