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ACA, SHOP, and Small Business Tax Credits

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ACA, SHOP, and Small Business Tax Credits

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ACA, SHOP, and Small Business Tax Credits

  1. 1. The Affordable Care Act Information on SHOP, and The Individual Marketplace Presentation By:
  2. 2. What is the ACA? • The Affordable Care Act (ACA) was enacted in March 2010. – Biggest overhaul of the United States’ health care system since Medicare and Medicaid in 1965 – Requires most individuals to obtain health care coverage – Requires insurance companies and employers to provide consumer protections related to health coverage, like covering pre-existing conditions and not charging more for coverage based on gender – Employers of size groups now must offer coverage as well
  3. 3. What Are The Major Changes? • Across-the-board changes to health insurance include: – – – – – – – – – Eliminating annual and lifetime limits on essential health benefits Prohibiting insurance companies from canceling coverage Elimination of Pre-Existing Condition Limitation Providing free preventive care Requiring insurance companies to spend no more than 20 percent of premiums on administrative, overhead and marketing costs and requiring companies that exceed that number to issue refunds to their customers Waiting periods can no longer exceed 90 days Most costs now accumulate towards out-of-pocket maximums including copays (limits on deductibles and oop’s) The individual mandate Creation of Exchanges for both Individual Marketplace and SHOP for small employers
  4. 4. Health Benefits Exchange Public health insurance exchange required by ACA Primarily online marketplace for purchasing health insurance (Qualified Health Plans) Run by state or federal government with consumer assistance from other entities For individuals and small employers (generally up to 50 employees)
  5. 5. Who Is Eligible For The Exchange? Individuals • Citizen or legal resident • Not incarcerated • Reside in state covered by Exchange Small Employers (SHOP Exchanges) • Qualify as a small employer based on size • Offer QHP coverage to at least all FT employees • Use SHOP in primary office location or employee’s primary worksite location Most individuals can shop for Exchange coverage (even if eligible for employer coverage)
  6. 6. Individual Exchange Subsidy Provide assistance to low-income individuals: • 100%-400% of federal poverty level ($11,490-$45,960 individual or $23,550-$94,200 for family of four) • Not eligible for government programs that provide coverage To help pay premiums or reduce cost-sharing Not available to individuals who are: • Eligible for affordable, minimum-value employer coverage or • Enrolled in an employer plan • Making less then $11,490 (Medicaid Eligible)
  7. 7. Shop Exchange • Small Business Health Option Program (SHOP) – Exchange for small employers 2014-15 • States can limit size to up to 50 employees 2016 • States must increase size to up to 100 employees 2017 • States can let any size employer participate Employers with over 50 FT employees not required to offer health insurance until 2016
  8. 8. How To Count Full Time Employees? • Full Time = 30 hours/week or 130 hours/month • Part Time Counts in proportion to hours worked, so two employees working 15 hours/week would count as 1 FT employee • Counts are used to determine large employer vs small and tax credit eligibility but you do not have to offer insurance to the part-time employees • Seasonal workers have their own sets of rules (employers will need to use 6 month at minimum look back) • Other calculation is total hours of service for all employees (no more then 2,080 for any 1 employee) divided by 2,080 = total employees
  9. 9. Employer Responsibility Small Employers (fewer than 50 FT/FTE employees) Large Employers (50+ FT/FTE employees) • No requirement to offer coverage • Can get tax credits for providing coverage • Must offer coverage to FT employees and dependents to avoid penalties • Coverage must be affordable and provide minimum value • Penalties delayed until 2015 Employer penalties triggered if any full-time employee receives subsidized coverage in an Exchange
  10. 10. Large Employer Plan Responsibility Is affordable • Employee’s contribution for self-only coverage does not exceed 9.5% of income • Safe harbors for what income and premium amount to use Provides minimum value • Plan covers at least 60% of costs on average • MV calculator or design-based checklists
  11. 11. Small Employer Requirements For Tax Credit • Fewer the 25 FT Equivalent Employees – Owners/partners, seasonal workers less then 120 days in calendar year can be excluded – Hours include PTO • Average gross wages for employees needs to be less then $50,000 per FTE • Have to offer qualified plan through the SHOP which covers all essential health benefits • Employer must pay for at least 50% of the employee only premium of the health insurance
  12. 12. Tax Credit Opportunity • Credit is on a sliding scale based on wages and number of employees • Maximum amount is 50% of your employer contribution For Example: If you have 9 employees and your employer contribution of the total premium is $50,000 annually, you may be eligible to get $25,000 back. The smaller the business the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.
  13. 13. How To Apply 1. Talk with a licensed agent or broker about your company to determine your options and eligibility 2. Purchase a qualified health plan from the SHOP through a broker or agent 3. Fill out the SHOP Application 4. File Form 8941. http://www.irs.gov/uac/SmallBusiness-Health-Care-Tax-Credit-for-SmallEmployers
  14. 14. Contact Information and Questions? Eric Stern 312-768-0634 (phone) estern@sterninsgroup.com

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