Healthcare Reform: Q&A for Business Owners (April 2010)


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The passage of President Obama’s Patient Protection and Affordable Care Act (the Act), better known as Healthcare Reform, will have far-reaching implications for individual taxpayers and business alike. Valuable information is being generated and distributed at a breakneck pace by insurance and tax experts, but those materials can be overwhelming for anyone who is not fluent in insurance or tax-speak.
Can my company keep its existing health insurance plan?
As an employer, am I required to provide health coverage for my employees?
When will this new legislation take effect?
As an employer, I find the idea of implementing these changes overwhelming. Where do I start?
My company does not currently provide healthcare for our employees, but in light of this legislation I am considering establishing a plan. Is that the right decision?

We will focus on the elements of the Act that are likely to have the greatest and most immediate impact on small to mid-sized businesses and will take time to answer all your questions.

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Healthcare Reform: Q&A for Business Owners (April 2010)

  1. 1. Healthcare Reform: Q&A For Business Owners Presented by Damon Thompson
  2. 2. Damon Thompson • Graduated from Austin College in 1979. • Immediately began working with business owners for their insurance needs. • Began working with G&A Partners as they began to develop their independent insurance agency with the focus of helping business owners identify and mitigate risks.
  3. 3. 10 Year Financial cost & Individuals with Coverage • In very round numbers – Gross Cost $2,500,000,000,000 (t) – New Revenue $1,500,000,000,000 (t) – Net Cost $1,000,000,000,000 (t) • 95% covered when fully implemented – Population 300,000,000 – Covered 285,000,000 – Non-covered 15,000,000
  4. 4. The 100 year timeline • Pre 1929 – Some in society believe in healthcare should be provided by the Federal Government – Some in society believe in healthcare is not among the powers granted to the Federal Government by States • 1929 – The stock market crash • Post 1929 – The decade long Great Depression • 1933 – President Roosevelt – The passage of the body of law which started Social Security – Just prior to placing the bill up for a vote federally provided healthcare was removed because the cost would have been too great • WWII years – President Roosevelt – Employers ask for and receive the ability pay to pay for health insurance and deduct the cost as an ordinary and necessary business expense • Early 1960s – President Johnson – The Great Society and the beginning of Medicare • 1992 – President Clinton – Healthcare reform does not materialize • 2010 – President Obama – Healthcare reform does materialize • 2010, 2011,2012,2013,2014,2015,2016,2017,2018,2019
  5. 5. Prior to March 23, 2010 • If you currently provide benefits and you like what you have, you can keep it. • Employers are not required to offer benefits.
  6. 6. As of March 23, 2010 • If you currently provide benefits and you like what you have, you can keep it... • until further notice is given. • If you don’t currently provide benefits, you aren’t required to… • until further notice is given. • Ultimately the law requires the individual to secure coverage (except for Congressional Members and their Staff, illegal aliens, certain religious groups)
  7. 7. Changes in 2010
  8. 8. 2010 Timeline • Current benefits are grandfathered however you must keep the same benefits unless part of a collective bargaining contract • If a change is made after 3-23-2010 but before Federally stipulated benefits are outlined we don’t know if grandfathering will apply to those contracts
  9. 9. 2010 Timeline • Reimbursement for early retiree expenses until 2014 if you have retiree age 55-64 • If <25 employees AND <$50K annual payroll AND employer contributes at least 50% of employee premium, THEN employer receives a 35% tax credit for premiums spent • September 2010 – Section 105h compliance for ALL plans – Unlimited annual and lifetime policy limits – Coverage for dependents to age 26 – All emergency paid as in-network – Insurance companies must cover pre-ex <age 19 children • November 2, 2010 Congressional Elections
  10. 10. 2010 Timeline • December 2010 – H.S.A. ineligible distributions taxed at 20% vs. 10% – Preventive care except for grandfathered plans – Free immunizations, screenings from the Federal task force (except for Sept. 2010 mammogram statement) – Credit of 50% of premium if employer contributes 50% of premium, has less than 25 employees and average salary is under $50,000 – $2.3 billion new tax on drug companies retro to 2009 sales. (apportionment) – Insurance companies can cancel policy only for fraud
  11. 11. Changes in 2011
  12. 12. 2011 Timeline • W-2 to include cost of benefits (not H.S.A. contributions) • Minimum Loss rations for <100 ee groups is 80% • Minimum Loss rations for >100 ee groups is 85% • Insurance company refunds premium on profitable accounts • Insurance company eats the losses on non- profitable accounts • This is on an account basis, not the aggregate book of accounts insured by an insurance company • Pretax spending accounts - over the counter medications are no longer eligible
  13. 13. 2011 Timeline • January 2011 – Creation of a safe-harbor cafeteria plan – Creation of CLASS, Government sponsored and employee paid Long Term Care plan with automatic enrollment (must decline if not wanted) • March 2011 – Federal study begins to determine if legislation is encouraging employers to move to self-insured plans – Federal study begins to determine the levels of coverage within self-insured plans – Summary of benefits must be provided at time of application and upon delivery of insurance contract to each employee. Summary must be less than 4 pages and at least in an 8 point font, additionally it must be written in "culturally linguistically appropriate manner"
  14. 14. Changes in 2012
  15. 15. 2012 Timeline • Expanded 1099 reporting, possibly monthly vs. annually • New $2.00 per employee per year tax to fund Outcome Based Research
  16. 16. New Presidential Term Begins (from the 2012 election) Changes in 2013
  17. 17. 2013 Timeline • Flexible Spending Account maximum contribution: $2,500 • 1040 tax medical deduction threshold increases to 10% of AGI from 7.5% • Salary & Deferred compensation caps on insurance executives • New Taxes • New 2.3% tax on medical device manufactures ($2 billion) • 0.9% increase in the Medicare tax for high wage earners • 3.8% tax on unearned income for AGI over $200k single $250 joint. These triggers are not indexed to CPI (or anything else) • Employer must tell employees about the health insurance exchange that begin in 2014
  18. 18. Changes in 2014
  19. 19. 2014 Timeline • No more grandfathering of contracts – Guaranteed issue of insurance contracts with no dollar limits on medical conditions existing prior to the date of application • Premiums become community rated – Geography and family size are no longer allowed as variables – Age & tobacco are only variables – Age - 3:1 ratio, Tobacco - 1.5:1 ratio. • The Essential Plan requirements are established – Each State must create an Exchange to include the government plan. If States do not create an exchange the government will create and run one on their behalf
  20. 20. 2014 Timeline • New tax on private health insurance premiums taxed to the insurance company – 2014: $ 8,000,000,000 – 2015: $11,300,000,000 – 2016: $13,900,000,000 – 2017: $14,300,000,000 – 2018: indexed thereafter
  21. 21. 2014 Timeline Free Ride Penalty (in case an employer opts out) IF employer has 50+ employees (including any seasonal) and at least one employee purchases their insurance on the exchange and the employee qualifies for a federal tax credit to help pay premium THEN an employer tax is triggered in the amount of $2,000 per year for every employee in excess of 30 employees or $3,000 for each employee securing coverage through the exchange. The hours worked by all part-time employees are aggregated into Full Time Equivalents for the purpose of calculating the tax.
  22. 22. 2014 Timeline Waiting period for new employees can not exceed 90 days (1st of the month after 60 days of full time employment will work)
  23. 23. 2014 Timeline Employer reporting and enrollment requirements The months during the year for which coverage is available The length of any waiting period to enter the health care plan The monthly premium for the lowest cost health care option offered The employer’s share of the total cost of benefits provided The option for which the employer pays the largest portion of the cost and the portion of the cost paid by the employer in each of the enrollment categories under that option The number of full-time employees for each month of the calendar year The name, address and tax ID number of each full-time employee and the months each employee was covered under the plan Automatic Enrollment of employees for employers with 200+ full- time employees
  24. 24. New Presidential Term Begins (from the 2016 election) 2017
  25. 25. Changes in 2018
  26. 26. 2018 Timeline • The Infamous Cadillac Tax – Originally scheduled to begin after the 2012 Presidential election – Now scheduled to begin after the 2016 Presidential election – Interesting bit of information (in round numbers) – Stated cost of the Healthcare plan over 10 years – 2.5 trillion dollars of cost – 2.5 trillion dollars of new taxes if all Cadillac plans taxed – 2.0 trillion dollars of new taxes if only union Cadillac plans taxed – 0.5 trillion dollars of new taxes if only non-union Cadillac plans taxed
  27. 27. 2018 Timeline • If the tax is triggered, the tax is 40% of the value of the premiums exceeding the threshold and the tax is paid by the insurance company • Single coverage threshold is $10,200+ • Family coverage threshold is $27,500+ • What premiums are included in the calculation? – actual premiums for medical, dental, vision for integrated plans (if dental and vision is written on a free standing basic premium is excluded) – the value of amounts paid out of F.S.A. and H.S.A. withdrawals to pay for medical procedures • What premiums are not included in the calculation? – premiums for Disability, Long Term Care, accident or specified disease policies
  28. 28. Stay tuned as Congress will be meeting between now and then 2019