Affordable Care Act Impact on Individuals, Small Employers and Non-Profits

Important Terms Exchange – an organized marketplace for the purchase of state (or federal) regulated and standardized health care plans. Small business exchange is called “SHOP” All exchanges must be fully certified and operational by January 1, Virginia decided on November 9, 2012 to let the federal government design their exchange. The Exchange will likely be a collaboration of the HHS, IRS, and Department of Homeland Security.

Important Terms, cont. FPL = Federal Poverty Level Advanceable premium subsidy available up to 400% FPL ($44,000 individual, $92,200 family) Must purchase insurance through exchange to receive subsidy.

Mary, 23 years old, $30,000 income, very healthy Stay on parents plan until age 26 Purchase through employer if offered and receive 50% contribution and pre-tax her premium (with a Section 125). Purchase through insurance company and pay full price with after-tax dollars

Mary, 23 years old, $30,000 income, very healthy Beginning in Purchase through exchange and receive premium subsidy limiting premium to $ monthly (9.5% income) and OOP max reduced to $3,967 because income is within 400% FPL OR Buy no coverage and pay penalty of $300 (1% 2014), $600 (2% 2015), $750 (2.5% 2016). Can pick up insurance after illness or injury occurs.

34 Year old couple, 2 kids, $50,000 income, husband’s employer pays 50% employee- only Purchase through husband’s employer and receive 50% contribution for husband’s premium and pre-taxed premiums for family Purchase through insurance company and pay full premium with after-tax dollars

34 Year old couple, 2 kids, $50,000 income, husband’s employer pays 50% employee- only Beginning in Purchase through exchange and receive subsidy limiting total premium to $ monthly (6.3% income) and OOP max reduced to $5,950 due to income below 400% FPL OR Buy no coverage and pay penalty of $500 (1% 2014), $1000 (2% 2015), $1250 (2.5% 2016). Can pick up insurance after illness or injury occurs. Note: Maternity covered if insurance chosen

Sue, 63 years old, tobacco use, life threatening condition, $45,000 income, no group plan offered Purchase through an insurance company outside the exchange Purchase through an exchange No medical underwriting, however up to 50% rate up due to tobacco use. Unlimited lifetime maximum and coverage for clinical trials for life threatening condition

Important Terms: Full Time Employee = 30+ hours per week or salary FTE = Full Time Equivalent: How to calculate FTE: 1. Exclude owners, family, and seasonal employees 2. Add number of FT + salary employees 3. Add remaining payroll hours / 2080 hrs per year The IRS states that the definition of a season employee is one that works 120 days or less.

Important Terms Affordable Coverage - Coverage is “affordable” if: -The employees required premium/contribution for self-only coverage does not exceed 9.5% of the employee’s W-2. -Employers must offer minimum standard coverage of at least 60% of medical expenses.

Tax Credits Small Business Tax Credit – offered to employers with 25 or fewer FTE and $50,000 or lower average annual salary = up to 35% credit (25% non-profit) = up to 50% credit (35% non profit) Phased out between 10 – 25 FTE and $25,000 to $50,000 average annual salary. You have to shop through the exchange to receive credit in

Downtown Bakery 10 FTEs, average salary is $25,000 Do not offer employee coverage. Will not face penalty but employees will be required to buy individual coverage or face tax penalty. Offer coverage through a insurance company outside of the exchange, but receive no tax credit in 2014 and beyond. Credit of 35% (25% non- profit) available in

Downtown Bakery 10 FTEs, average salary is $25,000 Offer coverage through exchange and receive 50% tax credit toward employer premiums (35% in ). If company is non-profit, credit reduces to 35% (25% in ) Additional detailed monthly and annual reporting required by IRS/HHS. Credit limited to only two years beginning in 2014.

CARE Family Practice 20 FTEs, average salary of $40,000 Do not offer coverage to employees. Will not face penalty but employees will be required to buy individual coverage or face tax penalty. Offer coverage through insurance company outside the exchange and receive no tax credit in 2014 and beyond. Credit of 35% (25% non-profit) available in is phased out between 15 and 25 FT employees and between $25,000 and $50,000 average annual salaries.

CARE Family Practice 20 FTEs, average salary of $40,000 Beginning 2014, offer coverage through exchange and receive 50% tax credit (35% non-profit) toward employer premiums, phased out by same criteria. Additional detailed monthly and annual reporting required by IRS/HHS. Credit limited to only two years beginning in 2014.

Other Items MLR rebates – who receives refund? 4 actuarial designs begin 2014 (60/70/80/90) OOP Max increases to $5,950/$11,900 Exchange services and consumer interaction yet to be defined Overall premium rate increases due to legislative mandates yet to be determined

Other Items: Beginning in January 2014 – medical underwriting will be eliminated. Rates will be based on age, tier of coverage, geographic location, and tobacco use. Employers 50+ FTE must offer coverage to employee and dependents, but not spouses

7 Things You Can Do to Get Ready Now 1.Learn about different types of health insurance (make sure you have the right balance of costs and coverage) 2. Make a list of questions before it’s time to choose your health plan (can I stay with my current doctor?) 3. Make sure you understand how insurance works, including deductibles, co-insurance, and out of pocket maximums. 4. Start gathering basic information about your household income (you will need your income to determine if you will get a break in costs) 5. Set your budget 6. Find out from your employer whether they plan to offer health insurance. 7. Explore your current options

Summary If you are below 400% FPL, you may be eligible for premium subsidy. If you are a small employer with 25 or fewer FTE and under $50,000 avg annual salary, you may be eligible for a tax credit. * If you are a small employer with fewer than 50 FTE or fewer than 30 FT employees – no penalty. If you have 50 + FTE, you may be subject to penalties.

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