“Size Matters”
How different size employer groups might adjust
under the Affordable Care Act (ACA)
10/15/13
Agenda
• FTE (Full Time Equivalent)
• Individual coverage
• What is a large group?
• Who says?
• “Pay or Play” - 50+ FTEs
• Size Matters – group size influences: Sizes 1-100, 2-50, 2-25, 2-9
• Self-funding
www.TheBrokerageInc.com
233 W Main St, Lewisville, TX 75057
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Reality Check!
• Nearly two-thirds of U.S. households earn less than 400% of the
federal poverty level, the cutoff point for the subsidies
• 49% of the people polled think the ACA has been repealed!
• Announced at June 2013 NAHU Convention in Atlanta
But first…
• 1% of the people battling multiple chronic conditions account for 21%
of the $1.3T total health care expenses, at an average of $88,000 per
person
• 5% accounted for 50% of the total
• The bottom 50% = 2.8% of the total
• Narrow Networks
• ACOs
Enrollment issues
• CMS Enterprise Portal
• Health Insurance Marketplace Certification
• Setting up a user account at www.HealthCare.gov
• Getting set up with the carriers
• Cigna – Halt! Don’t enroll anyone yet…
• Subsidized apps not working for brokers…paper apps?
Medicaid Expansion, Medicare Reductions
• Medicare reimbursement levels will go down between 1-3% for
hospital readmissions within 30 days
• Medicaid reimbursement is going to Medicare reimbursement levels
starting 1-1-14
• “The Arkansas Approach”
Arkansas is taking their Federal funds to expand Medicaid and enrolling this
population into ACA compliant health insurance plans
(Note – Texas State Rep John Zerwas, a Houston area doctor, has proposed a
similar approach called “Texas Solution”, but it did not move in the last session.)
Some of the ACA Delays
• “Pay or Play” moves to 2015
• Employer penalties delayed to 2015
• Reporting will not be mandatory until 2015
• Information reporting by employers & health insurers regarding employer-sponsored
coverage relative to the individual mandate
• SHOP – Small Business Health Options Program
• Was to be a multiple carrier choice
• Now one carrier choice per employer in 2014
• In Texas, you get BCBSTX or BCBSTX as your option
• Self-reporting to the IRS about status of your QHP in 2014
• IRS may still audit
• You must still prove you had coverage
People need to know is still in place
• On January 1, 2014, every American is required by law to own a QHP
with the EHBs or they will be penalized.
• If they cannot afford it, they will be subsidized.
• Subsidies are based on the 70% Actuarial Value Plan
• a.k.a. – The Silver Plan
• CSR – Cost Sharing Reduction applies at <250% FPL
• Must own a 70% AV plan to qualify for CSR
Newly proposed legislation to track
• H.R. 2667 - “Authority for Mandate Delay Act", would create a law
that would require the Obama administration to postpone
implementation of ACA employer coverage mandate
• Introduced by Rep. Tim Griffin, R-Ark.
• H.R. 2575 - Would raise the definition of FTE in the law to be changed
to those working an average of 40 hours per week
• Introduced by Rep. Todd Young, R-Ind.
What is a FTE = Full Time Equivalent?
• Can we all just quit counting and worrying about FTEs for a year?
• The generally accepted HR meaning for the "E" in FTE is "equivalent“
• FTE is often used to indicate a direct, as opposed to contract, fulltime employee
• Example:
• Jane is a regular employee, an FTE, W2 wage earner
• Ralph works only under contract (1099)
• The term WYE (Work Year Equivalent) is often used instead of FTE
when describing the contractor work
FTE
• U.S. federal government, FTE is defined by the GAO as:
• “# of total hours worked divided by the maximum # of compensable hours in a
full-time schedule as defined by law”
• For example:
• The normal schedule for a quarter is defined as 411.25 hours
• 35 hours per week (52 weeks per year - 5 weeks regulatory vacation) divided by 4
• Someone working 100 hours during that quarter represents
• 100/411.25 = 0.24 FTE
• 2 employees working in total 400 hours during that same quarterly period represent 0.97 FTE
So what constitutes an individual?
• Could be several unique situations to consider:
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Sole proprietor
A dependent child or spouse
Court ordered child(ren) health insurance
An employee that is not offered an affordable QHP
How about a “retiree” not yet age 65?
What about the individual coverage?
• Individual mandate
• Presumably, the IRS will monitor compliance with the individual mandate
through self-certification on each individual’s tax return in 2014.
• Health insurance exchanges
• Pending further notice, open enrollment began on 10-01-13, for all statebased, partnership and federally facilitated marketplaces.
What is a “Large Group”
Depends on who you ask…
• Aetna – 2-10 is small group, 101-3,000 is “mid-market” and 3,000 or
more is “”public and labor”
• BCBSTX – 2-100 is small group, with 2-50 being regulated and 51-100
being non-regulated. 101-2000 is mid-market. 2000+ is Nat’l Accts
• CIGNA – 51 +
• Humana - ?
• UHC – 2-100 is small group, 101+ is large group
50+ life groups
• Will be subject to “pay or play” in 2015, not 2014
• W-2 reporting requirements
• Still apply for employers that issue more than 250 W-2s.
• Reporting by: (a) employers & (b) health insurers
• Regarding
• (a) employer-sponsored coverage relative to the individual mandate
• (b) pay-or-play reporting
• will not be mandatory until 2015.
“Pay or Play” delayed until 2015
• The individual mandate to have coverage in 2014 or pay a tax penalty
is still in place
• Individual exchanges are live and “operational” as of 10-1-13
• "Pay or Play“ probably won't go away
• Now that the administration has postponed the implementation, they have
12 more months to strengthen their resolve, plug all the loopholes and
prepare for more stringent enforcement in 2015.
SHOP – Small Business Health Options Program
• Intended to offer multiple carriers to one employer group
• Example:
• Employee 1 chooses an Aetna plan
• Employee 2 chooses a Cigna plan
• Employee 3 chooses a UNC plan
• The choice part of SHOP has been delayed until 2015
• Example:
• Employees 1, 2 and 3 all have a BCBSTX plan
1-100 life groups
• The ACA defines a small group as 1-100
• Is 1 life a group?
• But in Texas, we are still 2-50
• SB 1332 preserved the 2-50 size definition of FTEs
• Maintains compliance with the ACA
• Expires in 2016?
2-50 life groups
• Texas HB 2055 & Texas HB 369
• For 2-50 size employers in Texas, nothing has changed
• Texas SB 1332
• Businesses with fewer than 50 FTE employees will still have access to
the SHOP Exchanges
• Small Business Health Options Program
• Approximately 55% of 2-50 size groups in Texas do not offer health
insurance today
2-25 life groups
• Health Insurance Tax Credits (HITCs) apply
• 1-9 lives = 50% in 2014
• 10+lives = shrinking tax credit
• HITCs present a great opportunity to work with local CPAs to help
their clients qualify
• How do you know if an employer group qualifies?
• www.taxpayeradvocate.irs.gov
www.taxpayeradvocate.irs.gov
The Small Business Health Care Tax Credit
Enter info on the employer
Enter info about the group health plan
Results
To claim the credit – IRS Form 8941
2-9 life groups
• Your traditional “Ma and Pa” market
• Your bread and butter
• You are their HR department
• How do we maximize this demographic?
• BCBSTX has 36,000 groups between 2-50 lives
• Average case size is 9 lives
Typical 2-25 size group
• 1976 started group with one employee
• Grew and grew
• Now has 18 FTEs
• The two owners (“Ma and Pa”) are now ages 65 and 72
• Max rated due to pre-ex
• How much does it help to have 65+ year olds on the plan?
• Recommend the owners take Medicare?
• Will they qualify for HITCs?
Self-funded plans
• New health insurance premium tax does not apply to self funded
plans
• immediate 3% savings over fully insured plans
• Employers have more say in the design of their health plan to fit to fit
their specific group health insurance needs
• Improves cash flow
• Eliminates carrier profits and risk charges
Self funded plans
• ERISA preemption of state action
• ACA does not subject self insured plans to state jurisdiction,
eliminating many state mandates in the process
• Specific stop loss
• Separate deductible for any individual
• Aggregate stop loss
• Protects against an excessive amount of claims expenditures for the entire
plan
Comparison of fully insured vs. self funded
• Company A
• Fully insured, $1,500,000 total premium
• $1,000,000 in claims = $500,000 profit for carrier
• Company B
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Self insured
Worst case scenario is $1,650,000 exposure
Pays $240,000 in projected costs (stop loss coverage)
Reserves $1,360,000 in potential claims
If claims are at $1,000,000, Company B keeps the $360,000 remaining in
reserve
• Saves $260,000
Wrap up
• 6,200,000 uninsured Texans
• 2,200,000 at <138 FPL or lower – not your customers
• 4,000,000 left to decide: do I or don’t I enroll?
• 1,000,000 probably will
• About 13,000 true health agents in Texas to write 1,000,000 or 77
uninsured people per agent
• What if only 3,000 actually wrote those 1M?
Questions & comments
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No “Certificate of Completion” will be distributed.