Presented by: Jerry Leemkuil
Field Manager Association Risk
Management Services
Federated Insurance
I am going to make it easy on
you. Our Congress developed
a flowchart for us to
understand how the bill will
be written and implemented.
Why provide health insurance?
 Attract & retain the best talent
 You genuinely care about your employees and
their families
 Healthy employees are more productive employees
 You know that the business with the best
employees WINS!
Why else?
 Contributions to the employee’s premiums are
tax deductible
 Employee premiums are not subject to Federal
Income Tax, State Income Tax, Social Security,
Medicare, Unemployment Tax, or Work Comp
Agenda
 What is PPACA (or ACA or “ObamaCare”)
 What is “The Marketplace” or Exchange
 “Affordable” and “Valuable”
 Large Group versus Small Group
 Subsidies Available with ACA
 Will Premiums Rise?
 Taxes associated with PPACA
 Health Insurance Options
 What is Federated doing to Respond?
What is ACA?
What is ACA?
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Individual Mandate - 2014
Dependents until age 26
No annual or lifetime limits on care
No Preexisting Conditions - 2014
Expansion of Medicaid - 2014
Taxes on Health Care Industry - 2014
Health Insurance Exchange - 2014
Subsidies - 2014
New Medical Plans – Bronze, Silver, Gold, and
Platinum - 2014
Individual Requirement
 Have health insurance on January 1, 2014 or
pay a penalty
 Open enrollment period October – December
Penalties
 2014 - $95 per adult and $47.50 per child (up
to $285 for a family) or 1.0% of family
income, whichever is greater
 2015 - $325 per adult and $162.50 per child
(up to $975 for a family) or 2.0% of family
income, whichever is greater
 2016 - $695 per adult and $347.50 per child
(up to $2,085 for a family) or 2.5% of family
income, whichever is greater
No penalty for a single gap in coverage of less than 3 months in a year
How much is the Penalty?
For Being Uninsured…
Income
$25,000
$50,000
$75,000
Status
Single
Fam 4
Single
Fam 4
Single
Fam 4
In 2014
$250
$285
$500
$500
$750
$750
In 2015
$500
$975
$1,000
$1,000
$1,500
$1,500
In 2016
$625
$2,085
$1,250
$2,085
$1,875
$2,085
People of lesser means will receive assistance to pay for insurance
www.healthreform.kff.org
Small vs. Large Employers
 “Affordable” Coverage
 “Valuable” Coverage
 Am I a Large Employer?
“Affordable” and “Valuable”
 “Affordable”
 “Valuable”
 Less than 9.5% of W-2
 Has Essential Health
wages
 EE only-Dependents
income is not part of this
equation
Benefit (EHB)
 Actuarial Value of at
least 60%
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Bronze – 60%
Silver – 70%
Gold – 80%
Platinum – 90%
ACA Impact on Employers
Am I a Large Employer?
For each month in 2013
A.
Count the number of employees who worked 130 or
more hours (these are Full Time EE’s)
B.
Count the hours for employees who worked less
than 130 hours and divide by 120 = equivalent FTE
 Add A and B to determine FTEs for the month
ACA Impact on Employers
Am I a Large Employer?
 For each month in 2013 (continued)
 Add the number of FTEs for each month in 2013 and
divide by 12 = Average FTEs
 If 51 or more – you are a large employer for all of 2014
 What you are in 2014 depends on what you were in 2013
Example
 Acme Oil Company has 29 full-time employees
 70 part-time employees (cashiers at c-stores)
 These 70 employees worked 7,000 hours last
month (7,000 / 120 = 58)
 Acme Oil Company has added 58 FTE’s to their
original 29, totaling 87
 Acme Oil must “play”. They have over 51 full
time equivalents
Penalty* for Not Offering
Insurance
 True FTE x $166.67/mo = $2,000/yr
 No penalty unless one or more employees
obtains coverage through Public Exchange and
receives a subsidy to purchase it.
* Delayed for large employers until 2015
Source: The Pay or Play Mandate for Large Employers, McKenna Long & Aldridge LLP
Employer Mandate
What if Coverage isn’t Good
Enough?
 Coverage offered must be…
 Affordable – cost the employee less than 9.5% of
their income to participate.
 Minimum value – actuarial value of 60% or more.
 Employer must then pay $250/mo = $3,000/yr *for
every “True” FTE that goes to the Exchange and
obtains coverage with a tax credit subsidy.
* Delayed for large employers until 2015
Source: The Pay or Play Mandate for Large Employers, McKenna Long & Aldridge LLP
Contrasting Impact on Large and
Small Employers
Large Employer
Small Employer
Employer Mandate (Play or Pay Penalty)
Yes Delayed
No
Discrimination Testing
Yes Likely Delayed
Yes
Metal Tier Plan
No – Meet MEC
Yes
Compressed Age Rating
No
Yes
Compressed Gender Rating
No
Yes
Eliminate Pre-existing Condition Exclusion
Yes
Yes
Essential Health Benefits
No
Yes
$2,000 Deductible Constraint
No
Yes
$6,350 OOP Max Constraint
Yes
Yes
Underwriting Restriction (CAF)
No
Yes
Waiting Period Limited to 90 Days
Yes
Yes
Ratings for small groups
 Rating bands being compressed from 6:1 to
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3:1
Gender Rating is no longer allowed
No rating for pre-existing conditions
No underwriting – everyone gets base rates
Can rate based on Geography, Age, Family
Size, and Tobacco
Rating for large groups
 Can rate for medical history
 Allowed to underwrite - can pay less or more
than base rates
 Can rate based on Geography, Age, Family
Size, and Tobacco
Premium Tax Credit - Subsidy
 Tax Credits for people who earn up to 4 times
the Federal Poverty Level
 If an employer offers a plan to its employees
that is affordable and valuable, no subsidy
will be provided to the employee
Medicaid & Subsidy Threshold
In 2012 Dollars
$90,000
$92,200
$80,000
$76,360
$70,000
$60,520
$60,000
$50,000
400%
100%
$44,680
$40,000
$30,000
$20,000
$10,000
$19,090
$11,170
$23,050
$15,130
$0
1 Person
2 Person
3 Person
4 Person
Eligibility will be based on household income
Source:hhs.gov
Health Insurance Exchange
 Utah opted to not expand Medicaid
 Utah opted to let the Federal Government
put together its exchange
 Enrollment opens on October 1, 2013
 Website - HealthCare.gov
Will Premiums Increase?
New Taxes and Fees
 Health Insurance Industry Fee (HIT Tax)
 $8 Billion in 2014
 Increases year over year to $14.3 Billion in 2018
 Following 2018 increases by premium growth rate of
industry
 Estimated to be equivalent to 2.5% of premium in 2014
 This “fee” is not tax deductible. Insurers must pay the
“fee” out of After-Tax Income.
 At 35% Corporate Tax Rate “Fee” equates to 3.85% of
premium in 2014
New Taxes and Fees
 Reinsurance Assessment
 Reinsurance to stabilize individual insurance market for
2014-2016
 Paid by all Insurers and Self-Insured plans
 $25 Billion over 3 years
 Must pay $63 per member or $5.25 per member per
month
 Approximately 1.5% of premium in 2014
 This assessment is tax deductible
New Taxes and Fees
 Comparative Effectiveness Research Fee for
Patient Centered Outcome Research Institute
(PCORI)
 Conduct Research to determine which treatments
work best
 $1 per member per year, doubles to $2 in 2015
 Paid by Insurer and also by HRA Plans
 Equates to 0.3% of premium in 2014
New Taxes and Fees Summary
 HIT Tax
2.5% before tax consideration
3.85% after tax consideration
 Reinsurance
1.5% of premium
 PCORI
0.3% of premium
4.3% to 5.65%
Premium rates must rise to fund these new taxes and fees.
New taxes and fees for pharmacology and medical services will also drive up
costs and be passed through in premium.
Options for ACA
 Stay on current rate change date (i.e. October
1, 2013 – October 1, 2014)
 Comply with ACA on January 1, 2013
 Drop Health Insurance and give everyone a
raise
 Change your plan year to December 1, 2013
(Delay for another year)
Pay employees additional wages
 Additional wages paid by employer will reduce the
employee’s tax credit.
 Example – 40 year old, single, $30,000 income + $3,600 in
additional wages.
Age
40
40
Income
$30,000
$33,600
Ins Prem
$4,500
$4,500
Subsidy
$1,991
$1,386
EE Pays
$2,509
$3,114
As a result of receiving $3,600 more in wages, this
employee’s tax credit is reduced by $605.
Pay employees additional wages
Employer must pay wage taxes on new wages given to employee
and additional work comp premiums.
Additional Wages
$3,600
Social Security Tax
6.2%
$223
Medicare Tax
1.45%
$52
Work Comp Premium
3.0%
$108
Additional Employer Cost
$383
Employee will incur additional taxes, as well.
Pay employees additional wages
Employee must pay wage taxes on new wages along with
Federal and State income taxes at marginal tax rates.
Additional Wages
$3,600
Social Security Tax
6.2%
$223
Medicare Tax
1.45%
$52
State Income Tax
5.0%
$180
Federal Income Tax
15.0%
$540
Additional Employee Cost
$995
Pay employees additional wages
Let’s review our example:
New Wages
$3,600
Reduction in Tax Credit
$605
Additional Employer
Taxes/Costs
$383
Additional Employee
Taxes/Costs
$995
Net Purchasing Power of Wages
$1,983
In this example, over half of the increase in
wages given to the employee has been eroded!!
Should I consider delaying
ACA?
 Have less than 50 full time equivalent
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employees
Deductible is currently over $2,000
Healthy group
Young group
You want rates locked (certainty) to see how
2014 plays out
Strategies to Delay ACA
 Change Plan Year to December 1, 2013
 Only for small employers
ACA – Federated’s Response
 Substantial investment into the development
of Federated’s “Private Exchange”
 Local Marketing Representatives equipped
with tools for effective one-on-one
discussions offering solutions for business
owners. Marketing Representatives are
receiving ongoing training from Federated on
the latest developments regarding ACA
One “take-away” for you
today…
 Employee Notices are required to
be provided to all employees by
10/1/2013
Employer Requirements
 3 written notices required:
 Existence of the Marketplace (aka public exchange)
including contact information and a description of
services provided by the Marketplace
 Must inform the employee they may be eligible for a
premium tax credit through the Marketplace
 The notice must tell the employee if they purchase
health insurance through the Marketplace, they may
lose the employer contribution to any health benefits
plan and all or portion of such contribution may be
excludable from income for Federal Income tax
purposes
Jerry Leemkuil
507-456-7710
jjleemkuil@fedins.com