The Affordable Care Act: What's in it for my Nonprofit?

May 13, 2014 The Affordable Care Act: What's in it for my Nonprofit? Mitchell Stein

Part 1

ACA Overview • ACA is the law of the land • Universal access to health coverage – two pronged approach. • Expansions to public programs: now optional • Expansion of private programs: new options for individuals and small businesses • Insurance Reform at the Federal Level • Patients’ Bill of Rights • Holding Insurance Companies Accountable • Workforce Expansion and Quality Improvement Provisions

What’s Happening Now • Parts of the law have been in place for several years but some of the major provisions did not go into effect until this year: • Minimum Credible Coverage Requirement: Mandate for Individuals to Have Health Coverage • Marketplace Coverage and Subsidies • Plan reforms including Essential Health Benefits (both Exchange and non-Exchange plans) • Risk Adjustment Programs • Note that for now, the public prong of the two prong approach will not be implemented here in Maine due to the Governor’s veto of Medicaid (MaineCare) expansion. • Some provisions (employer mandate) have still not taken effect

Plan Reforms The plan reforms that provide new protections are essentially a floor that defines what must be included for a plan to be considered health insurance – these apply to insured plans for individuals and small groups, sold on or off the Marketplace • No cancellations due to illness • No lifetime limits • No pre-existing condition exclusions • No-cost preventive services • Out-of-pocket maximum of $6,350 per individual ($12,700 per family)

Marketplaces (Exchanges) An Exchange is a Marketplace that is an easier way to shop for health insurance (now referred to as the Marketplace): www.healthcare.gov Two Marketplaces: Individual and the Small Business Health Options Program (SHOP) The Marketplace provides a way to compare and review choices in a consumer-friendly “apples to apples” format Coverage began as early as January 1, 2014 The initial individual open-enrollment period has now ended Small Groups are not subject to the annual open-enrollment period Individual enrollment annually or at “qualifying event” Standardized plan levels

SHOP(Small Business Health Options Program) SHOP offers: A choice of qualified health plans from different private health insurers Meaningful comparison between plans Take advantage of enhanced level of Small Business Health Care Tax Credits Who’s eligible Employers with 50 or fewer Full-time Equivalent (FTE) employees Starting in 2016, employers with up to 100 FTEs will be eligible Once an employer enrolls, it can grow and still remain in SHOP

SHOP • Employers are not subject to open-enrollment period, can start plans at any time • Minimum participation requirements are waived annually between 11/15 and 12/15 • Employees are subject to an open enrollment period unless they experience a qualifying event • For 2014 “Direct Enrollment” using broker or insurer • For 2015 (November 2014 availability) • Enroll through broker, insurer or directly on the SHOP • Option to offer employees a choice among qualified health plans across multiple health insurance companies

What Insurers Are Participating? • Maine Community Health Options • This is Maine’s new Insurance COOP (community owned and operated plan) • Received loan from Federal government to facilitate start-up • Will offer products on and off the marketplace • Fully licensed by Maine Bureau of Insurance • Anthem • State’s largest insurer will offer products on and off the marketplace • Multi-state plan • An additional plan will be offered by the Blue Cross/Blue Shield (BC/BS) Association, however it will be virtually identical to the Anthem plan (the BC/BS affiliate in Maine) • Other insurers will offer individual and small group plans off the marketplace • Individual: Harvard Pilgrim , Mega • Small Group: Aetna, United, Harvard Pilgrim • Note Harvard Pilgrim will offer plans on Maine’s Marketplace for the next open-enrollment period.

Play-or-pay 2014: No employer requirements 2015: Employers with 100+ employees must offer to at least 70% of full-time employees 2016: Employers with 50+ employees must offer to at least 95% of full-time employees

Part 2

Employer Specifics • Notice of Marketplace Options (samples available on DoLwebsite: http://www.dol.gov/ebsa/healthreform/) • Summary of Benefits and Coverage (SBC) • For insured plans should be created by insurer and given to the employer to distribute • Applies to all individual and group plans (no exception for grandfathered plans) • COBRA • New model notice now includes notification of marketplace options • For those currently on COBRA, extended marketplace enrollment period through July 1, 2014

Employer SpecificsAdditional Items (cont.) • New hire waiting period cannot exceed 90 days (all plans, grandfathered or not) • W2 disclosure of benefit costs began January 2013 (for 2012 year) • If issued less than 250 W2s in January 2012, exempt in 2013 and 2014 • Note this is NOT taxable income. For informational purposes only similar to the 401k box on current forms

Employer SpecificsAdditional Items (cont.) • Flexible Spending Account (FSA) limit of $2,500 including Health and Dependent Care FSAs. HRA and HSA not impacted by new limit (begins in 2013) but are impacted by new regulations • Medicare Tax Increase for income over $200,000 for individuals and $250,000 for joint filers • Patient Centered Outcomes Research Institute Fee (First annual fee payable by July 2013 ) • First year, $1 per covered life, second year $2 per covered life, thereafter the $2 is indexed for Medical Inflation

Employer SpecificsAdditional Items (cont.) • Simple Cafeteria Plans (2014 plan year) • Congress amended the Internal Revenue Code to allow eligible employers' cafeteria plans to qualify as simple cafeteria plans. Simple cafeteria plans are treated as meeting certain nondiscrimination requirements and benefits for cafeteria plans making the process simpler. • Medical Loss Ratio (MLR) Rebates • Distribution depends on who pays the premium (employer or employee)

Health Insurance Marketplace: Subsidies Who can get an individual subsidy? • If NO access to employer coverage: • Household income between 100 and 400% FPL (under 100% FPL legally present non-citizens) • If YES access to employer coverage: Income between 100 and 400% FPL (under 100% FPL legally present non-citizens) AND • Employer plan coverage less than 60% of average expenses or • Employer plan for employee costs more than 9.5% of income • Sample 2013 FPLs: 100% Single - $11,490, Family of 4 - $23,550 400% Single - $45,960, Family of 4 - $94,200

Source: http://www.cbpp.org/files/premium-credit-webinar.pdf

Other Financial Help Income Level Actuarial Value* increased to… 100-150% FPL 94% 150-200% FPL 87% 200-250% FPL 73% *Actuarial Value is percent of average individual’s medical costs covered by the plan • Cost-sharing subsidies (only if Silver plan purchased): • Out-of-pocket spending limits • For insured plans sold on or off the Exchange, maximum individual out-of-pocket is $6,350 (will adjust each year) • Note OOP Max does not include premium costs and does not apply to out-of-network charges

Affordability Issues: The Family Glitch If an INDIVIDUAL has access to affordable coverage at work (defined as costing less than 9.5% of household income for employee-only coverage), and the FAMILY is offered coverage from the employer (even if there is no employer contribution) then the FAMILY cannot access subsidies in the Marketplace However, if the cost of FAMILY coverage for the spouse and dependents of a covered employee exceeds 8% of the household income, they are exempt from the penalty

Affordability Issues: Employee Coverage Subsidies are not available for employees as long as the employer’s coverage is deemed affordable (less than 9.5% ofhousehold income) and credible (60% actuarial value). Unlike individual coverage in the Marketplace, where subsidies vary be income level, employee premiums do not vary by income.

Employer-sponsored Coverage: Common Issues/Questions (cont.) • Employer Contributions to Individual Coverage • There may be a way for employees to buy coverage outside the Marketplace using a 125 salary reduction agreement. Recent guidance seems to indicate that employers can supplement this to a certain extent under certain circumstances. (See your broker/tax professional for details.) • However, there is no way for the employer to structure the plan so that the employee can use pre-tax contributions (from either the employer or employee) to purchase plans on the Marketplace and be eligible for individual subsidies

To offer or partially offer or not to offer, that is the question Three options: Offer to Employee and Dependents Offer to Employees Only Do Not Offer

To offer or partially offer or not to offer, that is the question Variables to consider • Employer’s cost • The coverage offered is tax deductible to the employer • Potential need to increase salary to compensate for the reduction in total compensation (if eliminating existing coverage) • Employee’s cost • The cost of individual coverage is NOT tax deductible to the employee (as opposed to their contribution to employer coverage which is tax deductible) • Coverage might be more expensive than their employer coverage is now, especially if they are not eligible for subsidies • If an INDIVIDUAL has access to affordable coverage at work (defined as costing less than 9.5% of income for individual coverage), then the FAMILY cannot access subsidies in the Marketplace • What is the competition doing • Impact of decision in attracting and retaining employees

Businesses Specific Resources Government (business focused): http://business.usa.gov/healthcare Department of Labor FAQs: http://www.dol.gov/ebsa/faqs/ IRS: http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions MaineBiz resource site: http://www.mainebiz.biz/article/20130822/NEWS07/130829974/1088

The Affordable Care Act: What's in it for my Nonprofit?