Small Group (Under 50 Employees) Resource Guide Changes and Considerations This presentation contains audio. Please make sure your speakers are on. An independent licensee of the Blue Cross and Blue Shield Association. U7430b, 2/11 Health Care Reform and Employers + Many major provisions take effect in 2014: ▪ Individual mandate ▪ Exchanges ▪ Subsidies + Employers will have many new considerations: ▪ ▪ ▪ ▪ Employer mandate: large employers may pay penalties Calculations for determining full-time equivalent employees Some tax credits may be available New reporting requirements 2 Calculating FTEs to Determine Employer Size Number of Full-Time* Employees Total Part-time** Hours / 120 Total Full-Time Equivalent Employees (FTEs) * Full-time employees are defined as those who work at least 30 hours per week ** Part-time exempts seasonal employees (employed fewer than 120 days) Example Meets Requirements of a Small Employer A firm has: • 25 full-time employees that work 30+ hours • 10 part-time employees who all work 24 hours per week (96 hours per month, per employee) These part-time employees’ hours would be treated as equivalent to 8 full-time employees: 10 employees x 96 hours/120 = 1,920/120 = 8 FTEs 25 Full-time + 8 Full-time equivalents = 33 FTEs Small Group Exemption + Small businesses with fewer than 50 full-time employees (or equivalent full and part-time employees) are EXEMPT from: ▪ Penalties related to the employer mandate provision of the Affordable Care Act (ACA) ▪ ACA requirement to offer affordable coverage Small Business Tax Credits – 25 or Fewer FTEs ≤ 10 Full-Time Employees ≤ 25 Full-Time Employees Maximum Average Annual Wages Up to $25,000 Up to $50,000 Percentage of Premium Paid by Employer At least 50% At least 50% Maximum Potential Credit 2010-2013 Up to 35% of employer premium payment (25% for tax exempt firms) Scaled, dependent on average wages & FTEs Maximum Potential Credit 2014 – on Up to 50% of employer premium payment (35% for tax exempt firms) up to 2 years Scaled, dependent on average wages & FTEs Calculating Employees and Average Wages for the Small Business Tax Credit Total Number of Hours Paid in Given Year Total Wages Paid in Given Year 2080 FTEs FTEs Average Annual Wages BCBSNC Tax Credit Calculator http://www.bcbsnc.com/content/campaigns/taxsavings/index.htm Reporting Requirements Source: Ernst & Young LLP 2012 Employer requirement to inform employees of coverage options Reporting of enrollment in health insurance coverage Employers subject to Fair Labor Standards Act Self-insured employers, insurers Distributed to Employees IRS TBD – Delayed until future guidance issued Effective 1/31/2015 Fees & Assessments + Health Insurer Tax Fee ▪ ▪ ▪ ▪ New sales tax on health insurers 2014 tax amount = $8 billion 2018 tax amount increases to $14.3 billion Tax increased based on premium trend thereafter + Reinsurance Fee ▪ Applies to all issuers and self-insured group health plans ▪ Fees will fund reinsurance program 2014 – 2016 to stabilize premiums in individual insurance market ▪ Proposed annual fee is $63 per enrollee in plan Fees & Assessments, continued + Comparative Effectiveness Research Fee (PCORI) ▪ Applies to insurers and self-insured for policies or plan years ending after 9/30/12 thru 10/1/19 ▪ Funds research on effectiveness of medical treatments and prescription drugs – FY2013 $1 per covered life – FY2014 $2 per covered life – FY2015 on – indexed + Tax on “High Value Plans” (“Cadillac” Plans) ▪ Beginning in 2018 ▪ 40% excise tax imposed on insurer & self-insured on total annual value of employer-sponsored coverage that exceeds $10,200/single, $27,500/family (value includes employer/employee contributions) Employer Considerations Coverage Options ACA Compliant Plan Defined Contribution Plan Employer continues offering coverage that is compliant with ACA Employer provides funding that employee uses to purchase their choice of health insurance Exchange Employer uses Exchange to provide health insurance coverage • Small Employers 2014-2016 (50 and below) • Small Employer 2016 (100 and below) • Large Employers in 2017 (State option) Source: Deloitte Consulting LLP: HR Executive Series 7/11/12 Existing Provisions (Already in Effect) Individual Market Small Group Market Large Group Market SelfInsured Children’s Preexisting Conditions (2010) Yes Yes Yes Yes Rescissions (2010) Yes Yes Yes Yes Yes Lifetime Limits (2010) Yes Yes Yes Yes Yes Annual Limits Restrictions (2010) Yes Yes Yes Yes Preventive Care (2010) Yes Yes Yes Yes No Age 26 Adult Children (2010) Yes Yes Yes Yes Yes Medical Loss Ratio (2011) Yes Yes Yes No Yes Unreasonable Rate Review (2011) Yes Yes Yes No No Provision Grandfathered Does not apply to individual coverage, but applies to all other grandfathered coverage Does not apply to individual coverage, but applies to all other grandfathered coverage Future Provisions Individual Market Small Group Market Large Group Market SelfInsured Grandfathered Modified Community Rating (2014) Yes Yes No No No Essential Health Benefits (2014) Yes Yes No No No Actuarial Value (2014) Yes Yes Same as Essential Health Benefits No No Out of Pocket Maximum (2014) Yes Yes Yes Yes No Annual Limits – eliminated (2014) Yes Yes Yes Yes Does not apply to individual coverage, but applies to all other grandfathered coverage Clinical Trials Coverage (2014) Yes Yes Yes Yes No Employer Mandate (Pay or Play) (2014) No No Yes Yes, if applicable large employer Yes Provision Future Provisions Provision Individual Market Small Group Market Large Group Market Self-Insured Grandfathered High-cost Plan Excise Tax (Cadillac Tax) (2018) No Yes, remitted by issuer Yes, remitted by issuer Yes, remitted by plan administrator Yes Nondiscrimination rules for insured plans (TBD) No Yes Yes Similar prior requirement No, though selfinsured plans must observe prior requirement regardless of grandfather status Essential Health Benefits + ONLY non-grandfathered small group and individual plans must cover + 10 categories 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness and chronic disease management; and Pediatric services, including oral and vision care Other Considerations + Exchanges and premium tax credits may make individual coverage more affordable for a firm’s employees + Recruitment and retention may be more difficult if employers don’t offer coverage + ACA includes several provisions to help employers establish or continue wellness programs: ▪ In 2014, employers are allowed to apply up to a 30 percent premium contribution differential (HHS may raise this to 50%). ▪ In 2014, $200 million over a 5 year period will be available for wellness grants for employers with fewer than 100 employees that work 25 hours or more per week. Key Considerations & Next Steps for Employers + Assess impact of health care reform provisions on workforce ▪ Do your employees value your company differently, if it doesn’t provide health insurance as a benefit? + Determine applicability of employer penalties ▪ Small Employer Groups (fewer than 50 full time employees) are EXEMPT + Consider other financial and tax implications + Assess your current benefit designs + Prepare for complying with tax and other reporting requirements Thank You! This document is for educational and discussion purposes only and is NOT intended to provide legal advice. This document reflects information gathered to date. Please note that due to the changing nature of health care reform, BCBSNC recommends continued monitoring of legislation and regulations related to the topics contained herein. An independent licensee of the Blue Cross and Blue Shield Association. ®, SM Marks of the Blue Cross and Blue Shield Association. 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