The Impact of Health Care Reform on Employers

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

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

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

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

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

“Pay or Play” l House l l l 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 l l 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. 6

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

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

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

Assessing the Impact l AHCA surveyed members l Gathered data for several facilities on the: l l 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. 10

What We Found l Number of employees l Varies (between 23, 393 – 1 full time employee): § § § l Up to 50 employees – 10 companies/facilities; 50 -200 employees – 11 companies/facilities; Over 500 employees – 5 companies/facilities. Coverage offered l All offer some type of health care coverage: l l HSA/HDHP; HMO; and PPO. Many offer a choice. 11

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

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

Example of Assessment Company A l Data l 125 Full Time Employees; l HMO coverage for full time workers (30 hours per week) after 90 days of continual employment; l Employer pays 60% of health care premium. l Impact l HELP Committee – “play” requirement met: l l l Employer pays 60% of premium for all full time workers. Finance Committee – employer offers affordable coverage. House – fails to meet “play” requirement = PAY l l l 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. 14

Example of Assessment Company B l Data l l 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 l HELP Committee – fails to meet “play” = PAY l l l Finance Committee – employer offers coverage l l Employer must pay $750 x 44 FTE = $33, 000, plus $375 x # of part time employees But is not required to offer coverage = small employer (<50 FTE) exemption. House – fails to meet “play” requirement = PAY l l l 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

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

Where We’ll Fall Short l House: Most will “Pay” Only 5 out of 27 Facilities meet the “play” requirements Sticking point: l l Required to pay 72. 5% of premium for individuals; AND 65% of premium for families. 17

Where We May Measure Up l Senate HELP: Most will “Play” 15 out of 26 Facilities meet the “play” requirements Sticking point: l l l 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: l Affordability exception to firewall provision (10% of employee’s MAGI). 18