Employers and the Affordable Care ActCheryl Fish-Parcham, Families USA
OutlineSmall business
◦Tax credits for some◦End to price discrimination◦SHOP exchange◦When employees might use
individual exchangeLarge business
◦Employer responsibility
Small business tax creditsBusinesses may be eligible if they:Have fewer than 25 full-time equivalent
employees;Pay average wages of less than
$50,000/yearPay at least 50% of premium costs for
single coverage, and either the same % or same $ amount for family coverage.
Buy coverage from a state-licensed insurer
What types of insurance count?Comprehensive and/or limited
benefits:◦E.g., dental, vision, long term care
count if the employer pays 50% of each.
NOT contributions to a health saving account, HRA, or flexible spending account – employer must pay to an insurer
What if the employer owes no taxes?A for-profit employer can carry
over the credit to another year.A tax-exempt employer can get a
“refundable” credit up to the amount the employer withholds for income and Medicare taxes.
What is the amount of the credit?2010-2013:
◦It is highest for businesses with less than 10 workers, and average wages less than $25,000
◦Maximum is 35% of premiums paid for a for-profit business, 25% for a tax-exempt business (but sequestration will hit tax-exempt businesses in 2013)
◦Use a small business tax credit calculator for more information
Some calculatorsSmall business majority:
http://www.smallbusinessmajority.org/tax-credit-calculator/
House – round numbers, uses average wages: http://housedocs.house.gov/energycommerce/smallbusiness/smallbusiness.html
Regence/H&R Block http://www.regence.com/transparency/tax-credit-calculator/index.jsp
How does the credit change in 2014?Maximum credit increases to
50% for a for-profit business, 35% for a tax-exempt business
Firms can claim for any two years beginning in 2014. (They can also claim credits for 2010-2013, which brings the total to six years.)
Resources IRS information:
http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers◦ Includes video, fact sheet, tax forms and
instructions, questions and answers, etc.
HHS: http://www.healthcare.gov/marketplace/small-businesses/ Fact sheet about other small business provisions and links
Small business majority: http://www.smallbusinessmajority.org/policy/healthcare-policy-aca.php
Other ways small business benefits from ACASome small businesses got premium
rebates; the insurance department reviews premium increases;
In 2014, businesses won’t be charged more based on the health or sex of their workers
Small employers (fewer than 50 FTEs) don’t have employer responsibility requirements
Employees can count on more comprehensive coverage
New Marketplaces (exchanges) in 2014SHOP exchange – comparison
shop, allow employees to make different plan choices
If small employers are unable to offer coverage, their workers can go to the new marketplace for individuals (exchange) and may qualify for premium credits.
Do Large Employers Have to Provide Coverage?
No.However, applicable large employers who
don’t provide appropriate coverage to employees may be subject to an “Employer Shared Responsibility” payment if at least one of those employees gets a plan with premium tax credits on the Exchange.
What is a large employer?A large employer:
◦Has at least 50 Full Time Equivalents◦Could be a for-profit, non-profit, or
government entity◦If there were more than 50 FTEs for
only 120 days or less in the year, and the excess workers were seasonal, it isn’t a large employer
What workers must be covered to avoid penalties?Full time workers (not full time equivalents)Full time is 30 hours/week or 130
hours/monthThe following proposed rules could change:
◦No penalty if employer covers all but 5 or 5% of workers.
◦Employers can use a “lookback period” of 3-12 months to determine if variable hour employees work 30 hrs/week; if so, they must be treated as full time for a period that is at least as long and at least 6 months
◦Vacation, holiday, sick hours,etc count as work
Two types of penalties1. Doesn’t provide coverage and at least one worker gets premium credits on the exchange
◦Penalty: $2000 times (# of full time workers – 30)
2. Provides coverage, but it is not affordable or not of minimum value
◦Penalty: $3000 for each worker who gets premium credits, up to a maximum
What does the employer have to offer to avoid penalty #2? Affordable: single plan costs the worker
no more than 9.5 % of wages ◦Proposed: Must also offer worker family
coverage for his/her dependent children. Rules don’t limit the cost of family coverage.
Minimum Value: pays at least 60% of the total cost of covered benefits, for typical population◦Example: Plan has a $3000 deductible, 20%
coinsurance, and $5,950 out of pocket maximum
Will employers cut hours to avoid penaties?Mostly, it won’t make business
sense – takes more trained workers, shorter shifts not profitable;
But restaurants and retail are more vulnerable
Public pressure may help
From “Burgers, Fries and Lies”“… here’s a guy selling something that is a leading contributor to the major health breakdowns in America, a product that may ultimately hasten an early death. He won’t offer insurance to the poorly paid workers who make said time bombs.”- Timothy Egan, writing about Five Guys in the New York Times Opinion Pages, March 21, 2013
Some employers have changed their minds about cutting hoursPublic outcries help!
◦Darden, Papa John’s, Denny’s
Important pointsMost large employers offer coverage
(94-99%)Most say they will continue to do soOffering coverage is the right thing
to do: it helps employees be healthy and productive, and keeps businesses competitive
Not covering workers shifts costs to the government, families, and other businesses