1 The Impact of Health Care Reform on Employers Nancy E. Taylor Greenberg Traurig

2 The Current Status House: All three health care Committees passed similar bills. Next step - House floor action may happen as early as November. Senate: Both the HELP and Finance Committees have passed legislation. Next step – Senate floor action possible. Considering “dr.” fix on Tuesday. Administration: President Obama is taking ownership of Health Care Reform with a strong political/policy desire to complete action.

3 Individual Obligation Individual must have coverage through: Medicaid Eligibility from those up to 100%, 133%, 150% FPL Exchanges Individual Small Group Employer Sponsored Coverage

4 Coverage Obligation Individual must obtain coverage: Medicaid; Medicare; or Minimum Credible Coverage: 65% Actuarial Value (Senate Finance); 73% (HELP) 70% Actuarial Value (House)

5 The Employer Mandate Two constructs for employer obligation “Pay or Play” Offer & contribute to health care coverage for all full time workers, (“Play”) OR Pay a penalty for every worker (“Pay”). “Free Rider” No obligation to offer coverage, BUT Must pay a fee for any full time employee who receives a government subsidy to purchase coverage.

6 “Pay or Play” House Play: Offer & contribute 72.5% of individual premium and 65% of family premium for full time employees (proportionate % for part time workers); OR Pay: Penalty of 8% of total payroll. Senate HELP Play: Offer & contribute 60% of the individual premium for all workers; OR Pay: Annual per worker fee of $750 for every full time worker and $375 for every part time worker.

7 “Free Rider” Senate Finance For employers not offering coverage: If full time employee gets a tax credit to purchase insurance in exchange, Must pay a fee. Penalty owed is the lesser of: A flat fee equal to the average national tax credit; OR $400 x # of full time employees at the firm.

8 Firewall: Employer Mandate & Tax Credits Senate Finance & Senate HELP proposals: Limit the flow of funds If employer offers coverage, Individuals cannot opt out and obtain a tax credit to purchase coverage through exchange.

9 Firewall Exceptions Affordability and Creditable Coverage Exceptions If employee’s share of the premium is unaffordable (exceeds 10% of income) : the employee may be eligible for tax credit; and employer may have to pay. If employer’s plan does not meet the minimum creditable coverage standard: employee may get tax credit; and Employer may have to pay.

10 Assessing the Impact AHCA surveyed members Gathered data for several facilities on the: Number of employees; Health care coverage offered; and Amount employer contributed toward employee premiums; Assessed how the data compared to the requirements of proposed legislation.

11 What We Found Number of employees Varies (between 23,393 – 1 full time employee):  Up to 50 employees – 10 companies/facilities;  employees – 11 companies/facilities;  Over 500 employees – 5 companies/facilities. Coverage offered All offer some type of health care coverage: HSA/HDHP; HMO; and PPO. Many offer a choice.

12 What We Found Contribution towards employee’s premium All contribute towards premium for individual employee; Varied methodologies:  fixed dollar amounts; and  percentages of premium. Varied Amounts:  Range from 33% - 100%. Eligibility requirements Full time employees – 30 hrs or more; Probation period in some instances.

13 Assessing Data How we fare under the various health reform proposals: Do we meet the employer requirements? If not, what would our penalties be?

14 Example of Assessment - Company A Data 125 Full Time Employees; HMO coverage for full time workers (30 hours per week) after 90 days of continual employment; Employer pays 60% of health care premium. Impact HELP Committee – “play” requirement met: Employer pays 60% of premium for all full time workers. Finance Committee – employer offers affordable coverage. House – fails to meet “play” requirement = PAY Does not pay 72.5% of premium for individual coverage; and Does not pay 60% of premium for family coverage; MUST pay 8% of payroll.

15 Example of Assessment - Company B Data 44 Full Time Employees; PPO coverage for full time workers (24 hours per week) after 90 days of continual employment; Employer pays 50% of health care premium for hourly employees and 100% for salaried employees. Impact HELP Committee – fails to meet “play” = PAY Employer must pay $750 x 44 FTE = $33,000, plus $375 x # of part time employees Finance Committee – employer offers coverage But is not required to offer coverage = small employer (<50 FTE) exemption. House – fails to meet “play” requirement = PAY Does not pay 72.5% of premium for individual coverage; and Does not pay 60% of premium for family coverage. MUST pay 8% of payroll.

16 Bottom Line: Impact as Employers CLOSE… Most offer coverage. Most contribute to premiums. But not a slam dunk… Coverage may not be sufficient. Generally, contributions won’t be enough.

17 Where We’ll Fall Short House: Most will “Pay” Only 5 out of 27 Facilities meet the “play” requirements Sticking point: Required to pay 72.5% of premium for individuals; AND 65% of premium for families.

18 Where We May Measure Up Senate HELP: Most will “Play” 15 out of 26 Facilities meet the “play” requirements Sticking point: Must pay 60% of premium for individual; but Affordability exception to firewall provision (12.5% of employee’s AGI). Senate Finance: Appears all will be exempt from penalty Possible Sticking point: Affordability exception to firewall provision (10% of employee’s MAGI).