The ACA has been a game changer when it comes to how businesses handle health insurance. So, to address these challenges, our Affordable Care Act consulting group helps companies manage the regulations, make sense of the requirements and maintain compliance. Our professionals are experts when it comes to looking at your business’s responsibilities from a financial perspective to help you avoid some of the common pitfalls. Oftentimes we see companies that, due to continued growth, are just now becoming subjected to ACA requirements. Our team members are experts when it comes to helping you strategize in order to choose the option (not insurance plan) that best suits the company mitigate its overall ACA expenditures. We also can help our clients navigate between the different health insurance options (insurance vs. no insurance, HRA, QSEHRA, etc.) to ensure a good fit for your unique company and circumstances. Additionally, our professionals are able to make connections to introduce companies to insurance providers or third-party administrators. Visit http://www.reacpa.com/northeast-ohio-1095c-services to read about a client who recently incurred more than $50,000 in ACA penalties for 2015 that they did not plan for. Are you in the same situation?

1. SHOP, DROP, ROLL,
SELF INSURE,
PRIVATE EXCHANGE
Joe Popp, JD, LLM

2. Choices for employers
SHOP
Drop
Roll
Self-Insure
Private Exchange
Misc – Zane
2

3. What’s an exchange exactly?
Insurance Marketplaces (exchanges) are new
marketplaces for individuals to buy insurance
coverage
 Apples to Apples comparison shopping
 Really large group purchasing power
Small Business Health Options Program (SHOP) which
is a different exchange for businesses
Private Exchange – a program run by an insurance
company that mimics the insurance marketplace – but
only sells their insurance products

4. What’s an exchange?
A health care exchange is an on-line store or
marketplace where individuals can purchase medical
and other benefits. It can be
 Public (run by government) or private (run by industry)
 Group or individual
 Fully insured or self-insured
 Single or multi-carrier
4

5. What’s an exchange exactly?
Delay in small business exchanges (SHOP) for one
year to 2015
 Delay is to four tiers of plans
 Feds in charge of SHOP in 33 states
 Individual exchanges not impacted
 States could offer full SHOP in 2014 if they wanted to

6. What’s an exchange?
HealthCare.gov
 Individual marketplace
 SHOP – business
Private Exchange
 Bloom
 One Exchange (towers watson)
 Aetna, Cigna
 Mercer Marketplace
6

7. SHOP
Small Business Health Options Program
 Availability
• Federally run exchanges (Ohio) – under 50 FTEs
• State run exchanges – under 100 FTEs
• In a few years, rule in federally run exchange states will expand to
under 100 FTEs
7

8. SHOP
What is it?
 Business portal to the exchange
 Sells exchange insurance – more on this in a few minutes
8

9. SHOP
Advantages
 Employer provided coverage (50-99 may satisfy employer pay or
play)
 Not medically underwritten
 Employer contribution flexibility
 Employer contribution tax status
 Employee tax free payroll deduction
 Greater Employee choice
 Buy direct
 Tax credit for companies with under 25 employees
 Start at any time
9

10. SHOP
Disadvantages
 Employer still providing health care (payments to insurance
company)
 No premium subsidies for employees
 Less involved insurance agents (set pricing)
 Limited availability
 70% participation required if you sign up outside open
enrollment (~November – December)
10

11. SHOP
Best for:
 Companies under 50 FTEs
 Whose employees generally would not be eligible for
premium subsidies (they make too much, they are relatively
young)
 Company that still wants to provide coverage (values or
comp)
 Company that would otherwise drop coverage due to the
employer premium cost
11

12. Exchanges are like Travelocity…
12

13. 13

14. 14

15. 15

16. 16

17. Cost of a flight to Hawaii
Lowest
Cost
$922.89
27.5
Hours
Fastest
Time
$1,318.20
12.5
Hours
Not
Overnight
$1,412.10 15 Hours
Special
Time
Particular
Airline
$1,552.00 16 Hours
Special
Provider
17

18. $5K $2.5K $1K $0Deductible 18

19. 19

20. How Insurance is Priced on Exchanges
Base Price of coverage X
Smoker? 0.99
Age? 1.6
Location? 0.9
Total Price of Coverage 1.4256X
Premium Subsidies? -Y
Final Cost of Premium 1.4256X - Y
20

21. Premium Subsidies
• For taxpayers under 400% of the federal poverty
level, there is a maximum amount an insurance
premium can cost you
• Based on second lowest silver in your area
21

22. 22

23. Cost-Sharing Reductions
Note that if you are 100% - 250% of the FPL, you get
enhanced benefits – cost reductions!
A subsidy not only in premium cost, but also in quality
– your copays and coinsurance are subsidized
23

24. Drop
What is it?
 Dropping employer provided health insurance
 Employees generally go to the exchange for coverage
 Usually combined with some kind of employer offset for
increased employee costs
24

25. Drop
Advantages
 Employees eligible can get premium subsidies (ex electrical
contractor)
 Enables net cost savings to employer/employee group
 Not medically underwritten
 Employer no longer in the “providing insurance game”
 Maximum Employee Choice
 Insurance as Comp values/culture change
 Based on workforce, can be enormous competitive advantage
25

26. HSA
In 2013, the limits for individuals are as follows,
according to the IRS:
 A deductible of $1,250 or more
 Total annual out-of-pocket expenses (other than premiums)
for covered benefits not to exceed $6,250
 Annual contributions not to exceed the lesser of 100% of the
deductible or $3,250
26

27. Drop
Disadvantages
 Large employer pay or play penalty (can still be most efficient
choice)
 Based on workforce, can impair ability to retain and attract
high quality staff
 Difficult (impossible?) to provide tax free cash for medical for
staff
 Limited ability for employees to pay pre-tax (HSA)
27

28. Drop
Best for:
 Companies with lots of workers who would get premium
subsidies
 Lowest cost option for many large employers (although high
cost for the employer/employee group)
28

29. Roll
What is it?
 Continuing to offer employer insurance through a traditional
model with an insurance agent
 The default choice for those still on the fence or waiting to see
what happens
 Modification of current plan to save employer costs
29

30. Roll
Advantages:
 Well understood by employer and employees
 Many employers continue to use this model, not going away
 Minor changes save employers money
 Preserves employer ability to get tax deduction for
contributions, tax free to employees, employees can
contribute pre tax
 May satisfy employer pay or play mandate
30

31. Roll
Disadvantages:
 Loss of opportunity for greater cost savings or efficiencies
with other options
 No federal premium subsidies
 Fewer employee choices
 Recently, substantial year over year increases in costs
31

32. Roll
Best for:
 Companies that are OK with being inefficient for the short
term to see how things evolve in these formative years
 Companies that have good rates and that are not
experiencing large increases
 Companies that would otherwise face BIG pay or play
penalties (e.g. they have a relatively low participation rate)
32

33. Self Insure
What is It?
 The business pays for claims up to a certain amount. Stop-
loss coverage then kicks in to cover the overage
 Typically combined with an outsourced administration function
(the insurance company handles the admin for you)
33

34. Self Insure
Advantages:
 Allows for tremendous savings – if you have a low claim
employee group
 You assume the same kinds of risk as insurance companies –
so long as you can absorb or lessen that risk you come out
ahead
 Can satisfy pay or play mandate
 You can transition to Drop if things don’t work out
34

35. Self Insure
Disadvantages:
 In the years you have losses, they will be big
 Still in the insurance game, one might say you are even
deeper in it now
 Additional reporting requirements and fees, you are taking on
functions of an insurance company
35

36. Self Insure
Best for:
 Companies with relatively small, healthy groups
 Large companies that can effectively mitigate risks
 Traditional insurance is too costly and the pay or play penalty
is too costly
36

37. Private Exchange
What is it?
 An offering by a private company selling a concept similar to
the public exchanges
 Typically include promised cost reductions through group
purchasing, increased carrier competition, network savings,
and reduced administrative burden
37

38. Private Exchange
Four kinds of players:
 Carriers
• Aetna, Anthem, Cigna
 Brokers
• Towers Watson, Mercer
 Technology
• Benefit Focus, bswift
 Alternatives to insurance
• Zane Benefits
38

39. http://www.thepeec.com/
39

40. Additional reading
http://www.thepeec.com
http://www.gobloomhealth.com
http://www.bswift.com
40

41. Private Exchange
Advantages:
 Flexible, greater employee choice
 Employer contribution is tax deduction and tax free to
employee
 Employee can contribute pre-tax
 Can satisfy pay or play mandate
 Very customized solutions vs. one size fits all
41

42. Private Exchange
Disadvantages:
 No federal premium subsidies
 Still selling you a particular product (Honda at a Chevy
dealership)
 The large variety of choices can be overwhelming – this is
supposed to make your life easier right?
 Additional admin burden of explaining new options to
employees
42

43. Private Exchange
Best for:
 Larger companies who want to continue offering insurance,
but who want more flexibility and choice
 Companies that want a cutting edge insurance product
43

44. Anything else out there?
Zane Benefits
 Tax-free way to reimburse employees for health care
 IRS guidance from September 2013 makes this dangerous, if
not outright disallowed
 NY times article from May
Insurance or I’ll give you cash – DOL FAQ
44

45. Take Away
An employer who has not considered all of these
alternatives may be missing out on cost containment or
more benefits for the money
No one advisor – CPA, insurance agent, attorney – has
all the answers.
You could be the only advisor to make your client aware
of other opportunities – no commission for you other
than making yourself their new trusted advisor!
45

46. Get Under 50!
46

47. Getting Under 50 – why?
No large employer reporting
No data collection
No pay or play penalties
SHOP availability
47

48. Getting Under 50 – how?
Designed part time class
Move hours from FT PT
Multiple entities (save for later)
Employee leasing
Go “Protean”
W-2 to 1099, but desk rule
Note cap on growth….
What is competition doing?
48

49. Entity Planning
Employee Leasing Companies
 Amish
Breaking 80% ownership
 Business Purpose…
 Multiple Divisions
 Attribution…
 Straw Mans…
 Tie in with Estate Planning
49

50. Joe Popp, JD, LLM
614-923-6577
Joseph.Popp@ReaCPA.com
Questions?