NFIB's Healthcare Handbook
SPECIAL REPORT: HEALTHCARE - SEPTEMBER/OCTOBER 2013
An employer's guide to the Patient Protection and Affordable Care Act.
What Obamcare Delays Mean for Your Business
Employers Required to Educate Employees on SHOP Exchanges
The Top 3 Cost Drivers of Obamacare
7 Major Obamacare Tax Changes
How Insurance Changes Under Obamacare
Own More Than One Location? You May Have to Provide Health Insurance
How to Navigate SHOP Exchanges
Self-Employed? 4 Ways Obamacare Will Affect You
NFIB Healthcare Resources
SHOP exchanges’ employee choice component and employer mandate pushed back to 2015
Since the Supreme Court upheld the Patient Protection and Affordable Care Act in NFIB vs. Sebelius in 2012, the major hurdles that the Obama administration has faced in implementing the law have underscored its deep flaws.
The shortcomings of the PPACA became even more apparent this spring and summer when the Obama administration delayed two significant portions of the healthcare law until 2015. (The individual mandate, which requires all Americans to buy health insurance or pay a penalty, will still take effect on Jan. 1, 2014.)
Small Business Insurance Exchange Options Delayed
One delay relates to the Small Business Health Options Program exchanges—the online resource hubs that must be set up in all states by Oct. 1 to sell health insurance policies to employers running 50-person or smaller companies.
The SHOP exchanges—either set up by a state or assisted by the federal government—were supposed to include several coverage options for companies to choose from, but the federally facilitated exchanges struggled to establish these options by the Oct. 1 deadline. The arrangements include allowing employers to select one plan, select multiple plans, or select a level of coverage and allow employees to choose a plan from that level.
In March, the U.S. Department of Health and Human Services announced a transition relief plan that would only allow businesses that elect to enroll employees in the federally backed exchanges to offer one insurance plan to employees until 2015. Some state exchanges may still offer additional options.
“SHOP exchanges were originally advertised as a way for small businesses to offer more choices to their employees,” says Kevin Kuhlman, NFIB’s manager of legislative affairs. “With the delay of the employee choice model, employers’ choices are basically the status quo all over again.”
Employer Mandate Postponed
The second delay relates to one of the most onerous portions of the law— the employer mandate, which requires businesses with 50 or more full-time equivalent employees to offer affordable insurance options to their workers or face penalties. The original deadline to comply with the mandate was Jan. 1, 2014, but on July 2, the Obama administration announced that businesses now have until Jan. 1, 2015, to comply with the mandate.
“This is simply the latest evidence that implementation of this law is going to be difficult, if not impossible, and the burden is going to fall on the people who create American jobs,” said Amanda Austin, NFIB’s director of federal public policy. “Temporary relief is small consolation. We need a permanent fix to this provision to provide long-term relief for small employers.”
As the law’s requirements evolve, NFIB is continuing the fight for small business. After the announcement of the employer mandate delay, William Dennis, senior research fellow for NFIB, testified before the House Ways and Means Health Subcommittee on July 9. “Delay of the employer mandate does not erase the inherent problems with the employer mandate,” Dennis said. “It only postpones addressing them.”
Return to NFIB.com to stay up to date with our legislative efforts and the latest news on the healthcare law.
Employers may initially find themselves unfamiliar with the new health insurance market. But it’s up to them to educate their employees on the ins and outs of coverage options—regardless of whether they decide to offer insurance.
All employers—big and small—must provide a written notice to their employees—both full-time and part-time—about the exchanges in their states, and about the fact that they may qualify for a subsidy, by Oct. 1. Employers who offer insurance to their employees can find a model notice here; those who aren’t offering insurance can find a model notice here.
Every exchange is also required to have a website to help with the education process.
Obamacare will boost costs for small businesses because they are subject to certain mandates and taxes that large businesses are not, says Kevin Kuhlman, NFIB’s manager of legislative affairs. Below, we outline three parts of the healthcare law that will be a financial burden on small businesses.
1. Essential Health Benefits
Beginning in 2014, all individual and small business health insurance plans must include a broad list of 10 benefits requirements and service categories known as essential health benefits. “This list is more comprehensive than what nearly all of these policies previously offered,” Kuhlman says. The increased benefit mandates will lead to higher plan costs.
The essential health benefits include:
• Ambulatory patient services
• Emergency services
• Maternity and newborn care
• Mental health and substance use disorder services
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including oral and vision care
The mental health requirement is particularly significant, as it’s the first time in history that employers will be required to provide such coverage as an essential health benefit. In its final rules, the U.S. Department of Health and Human Services allows each state to determine which mental health services must be covered in individual and small group health plans in 2014. For employers, this means coverage costs will vary by state.
2. Health Insurance Tax
The HIT is a tax on fully insured health insurance plans—the policies that many small businesses and the self-employed purchase. This tax will be passed along to small businesses in the form of higher premiums. The Joint Committee on Taxation estimates the HIT will cost small businesses $100 billion in the first 10 years. “It will lead to $350 to $400 in increased premiums annually for a family of four,” Kuhlman says.
3. SHOP Exchange Fees
By 2015, Small Business Health Options Program exchanges must be self-sustaining. Exchanges will require expensive IT and infrastructure maintenance, as well as funding for their websites, call centers and in-person assistance.
In order to fund the exchanges, fees will be passed along to small businesses in the form of higher premiums. According to Kuhlman, the federal government has proposed a 3.5 percent premium fee, and states have proposed similar fees.
“Premium fees to fund the SHOP exchanges threaten to cancel out any administrative savings the SHOP exchanges may enjoy,” Kuhlman says. “The fees and taxes will make health insurance less affordable and less attractive for small businesses.”
Seven new requirements—some of which are hidden—may impact your business in 2014.
The complicated details of the Patient Protection and Affordable Care Act are spelled out in approximately 2,700 pages of legislation. Many of the provisions require employers and employees to pay new and sometimes hidden taxes.
“Many companies are taking a wait-and-see attitude on whether to offer health coverage to employees,” says Robert F. Filotto, CPA, valuation specialist and owner of Filotto Professional Services in Joliet, Ill. He advises owners to be aware of the law’s tax consequences so they can make financially sound choices.
Here’s what you should know.
Medicare Tax on Investment Income
On Jan. 1, 2013, a new 3.8 percent Medicare tax was imposed on the lesser of 1) a taxpayer’s net investment income, or 2) his or her modified adjusted gross income, less the applicable threshold. The tax only applies above the following thresholds: $250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for all other taxpayers.
Taxes on Wages and Income
The Medicare payroll tax increased by 0.9 percent on wages and self-employment income in excess of $200,000 for individuals and $250,000 for married taxpayers filing jointly in 2013. This is in addition to the 1.45 percent payroll tax on wage and salary income, which helps fund the expansion of Obamacare. Another new hook to look out for: The IRS is adding a line on Form 941, where employers can report their withholding liability for this tax on employee wages.
Health Insurance Tax
The HIT is a tax on insurance policies that will be passed on to small businesses in the form of higher premiums. The Joint Committee on Taxation estimates the HIT will cost small businesses more than $100 billion over the first 10 years. NFIB is fighting for repeal of this tax through the Stop the HIT Coalition. Learn more at www.StopTheHit.com.
Prescription Drugs and Medical Devices
Drug companies will pay a new tax on brand-name prescription drugs, and medical device manufacturers will pay a new 2.3 percent tax on their products. These taxes will be passed along to small businesses in the form of higher premiums.
HSA and FSA Changes
Employees with a Health Savings Account or Flexible Spending Account will no longer be able to use pre-tax dollars to buy over-the-counter medications and other healthcare items. Also, there is now a $2,500 contribution limit on paying for high-cost health-related expenses with pre-tax dollars from an FSA.
Reporting Costs in W-2 Forms
Employers who provide health insurance to workers will be required to report the cost of coverage on the W-2 Form, says Amanda Austin, NFIB’s director of federal public policy. “Employers will have to report how much they are paying and how much their employees are paying,” she says. If your business is filing fewer than 250 W-2 Forms, reporting the cost of your coverage is voluntary until the government issues further regulations, says Kevin Kuhlman, manager of legislative affairs at NFIB.
Individuals and businesses subject to the employer mandate might face IRS penalties for failing to purchase or offer affordable insurance.
The application of Obamacare is evolving, so stay abreast of changes by consulting a tax professional or visiting www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions.
Here’s how your insurance policy might change under the new healthcare law.
Although the employer mandate only affects businesses with 50 or more employees, businesses of all sizes will face costly rules and regulations under Obamacare, especially if they offer health insurance. By mandating that all Americans carry health insurance (or pay a penalty tax) and introducing rules that apply exclusively to individuals and small businesses, the insured population will rise, and the insurance products available to serve it will shift.
Here’s a look at some of those changes:
Small businesses are concerned with the cost and complexity of the Patient Protection and Affordable Care Act compliance and should carefully evaluate new policies, says Dave Imbrogno, senior vice president of service and operations at ADP Total Source, which provides human resources solutions to small businesses and advises them on the PPACA’s implications. Because one of the requirements of the healthcare law enforces “essential health benefits”—such as coverage for emergency room treatment and preventive care—the plan designs will likely expand the level of coverage available to small businesses. If you’ve been offering a limited policy in an effort to keep costs low, one that meets these new requirements will cost more—though how much more is hard to quantify before state and federal exchanges launch in October.
Small businesses that offer insurance might be able to keep their existing plans, but they will likely require significant changes. Owners shopping for new plans in 2014 should pay close attention to doctor and hospital networks: They may find that the same brand of carrier may have shifted doctor and hospital networks in a policy designed to comply with Obamacare and to create efficiencies.
Another dynamic that could influence employers’ spend on insurance: Rates under Obamacare are expected to rise for healthy individuals (i.e. young people who in the past were the most likely to forego insurance or only use soon-to-vanish affordable catastrophic products). High rates paid by older Americans or those with chronic health conditions are expected to fall. For that reason, workplace demographics could influence how costly programs and employer contributions to premiums will be.
Owners with multiple businesses may think they’re exempt from providing health insurance because none of their individual locations has 50 employees or more when the employer mandate takes effect in 2015. Not so, say experts.
If a business owner owns multiple businesses, whether they are franchises or a multi-location business, the IRS will aggregate them and consider all of their employees as part of one “controlled group,” says Karen R. McLeese, vice president of employee benefit regulatory affairs for CBIZ Benefits and Insurance Services. So if someone owns four Dunkin’ Donuts shops with 15 full-time and full-time equivalent employees each, that will be counted as a 60-person company.
“It’s a big issue,” says Jeffrey Ingalls, president of The Stratford Financial Group in Wayne, N.J., a full-service insurance brokerage. Franchisees often employ part-timers and don’t typically provide workers with healthcare benefits, he says. Fortunately, there are steps you can take to prepare for the change.
The Small Business Health Options Program exchanges’ employee choice model is delayed until 2015. But employers in states with exchanges that offer multiple coverage options can control costs by setting a strict budget for their plans and letting employees shop among all plans in any price range on the SHOP exchange, says Alan Cohen, chief strategy officer of Liazon, a New York City-based firm that runs the Bright Choices Exchange for more than 2,300 businesses in the U.S. Often, employees will opt for more cost-effective healthcare, such as higher-deductible plans, when they see their options, Cohen says.
Provide or Pay
Because the hourly rates franchisees pay may be moderate, it may be hard to find a plan that the business can afford. Some employers may opt to reduce the number of full-time employees by limiting workers to 29 hours, but Ingalls, who works with franchisees, says “a lot of them have resolved to pay the penalty. They don’t see any way around it.”
Before the Obama administration announced that the employer mandate would be delayed, many multi-location business owners had already taken steps to comply by restructuring their businesses or factoring in the penalties they’d pay for not offering insurance to their employees, says Kevin Kuhlman, NFIB’s manager of legislative affairs.
“The delay won’t provide relief to businesses that have prepared for the law’s impact because they’ve already made adjustments,” he says. “But owners of multiple businesses who weren’t aware that their businesses could be aggregated together now have time to adapt.”
State and federal insurance exchanges will launch in October 2013. Here’s what you need to know about how they work.
All states will have Small Business Health Options Program exchanges established to sell policies to employers running 50-person or smaller companies by Oct. 1, 2013.
These online marketplaces provide a hub for companies to search for, compare and purchase competing insurance plans. While the goal is to make insurance shopping simpler and more transparent, the reality is modest: Although most SHOP exchanges will launch with multiple insurance plans, some states, such as New Hampshire, will launch exchanges with only one plan. The hope is that more insurers will add plans to SHOP exchanges in future years.
Some state-run exchanges such as those in Maryland and California have more than a dozen providers onboard. However, the Department of Health and Human Services decided to delay the SHOP exchanges’ employee choice component, which allows employees to select their own health plans within a “metallic” level. For at least the next year, employers in states with federally run exchanges may only choose one plan for all their employees.
What’s available via exchange can vary between states. States can run their exchanges, partner with the federal government to offer an exchange or defer completely to the federal government for exchange operation. Facing tight deadlines and IT hurdles, 33 states—some of which intended to control their own exchanges—instead enlisted federal help to offer them.
The healthcare law affects businesses of all sizes in different ways. Here, we answer four commonly asked questions about how Obamacare will affect self-employed individuals.
1. I like my current plan. Do I have to give it up?
You’ll be allowed to keep it if it was in effect as of March 23, 2010, according to the National Association of Insurance Commissioners, provided that your insurance company continues to offer it without big changes. Starting with plan years that begin in 2014, the annual deductible for policies that aren’t grandfathered generally can’t be higher than $2,000 for an individual or $4,000 for a family, says Jeff Ingalls, president of The Stratford Financial Group, an insurance brokerage in Wayne, N.J., and author of Healthcare Reform Made Easy. Most small-employer plans aren’t grandfathered, he says.
2. Can I buy insurance through the exchanges?
Yes. If your state doesn’t set one up, you can buy insurance through an exchange the federal government will set up in your state, says Karen Field, a tax principal in audit, tax and advisory firm KPMG’s Washington National Tax office in Washington, D.C. In most cases, you can still go through your usual insurance broker.
3. Is there any way to get a price break?
You may be eligible for federal tax credits to defray the cost of paying premiums if your income is between 100 percent and 400 percent of the poverty level—up to about $92,000 per year for a family of four, depending on where you live.
4. Will my insurance rates go up?
It won’t be clear until insurance companies announce their offerings on your state exchange. UnitedHealth Group Inc. predicts premiums could jump as much as 116 percent.
Insurance companies may charge you more than average based on the state in which you live, your age, number of family members covered and tobacco use.
Because the law limits how much more insurance companies can charge older people than their younger counterparts, older people may see their rates get better, while young people may see an increase, says Alan Cohen, chief strategy officer of Liazon, a New York City firm that runs the Bright Choices Exchange. Starting in January 2015, the law caps maximum out-of-pocket costs at approximately $6,000 for an individual and $12,000 for a family.
NFIB’s Healthcare Resource Center
Visit www.NFIB.com/ResourceCenter to find information about:
• New fees and regulations: NFIB’s Patient Protection and Affordable Care Act Timeline provides details about the changes that have already occurred under the healthcare law and other updates that small businesses can expect through 2018.
• Mandates: Read about minimal essential coverage and the individual mandate, employer mandate penalties, essential health benefits and more.
• Tax information: In addition to information about the Small Business Health Care Tax Credit, here you’ll find details about taxes under the PPACA.
• Compliance: NFIB has details about reporting requirements and other items small businesses must complete in order to comply with the new law.
You can also download NFIB’s Healthcare Playbook, a comprehensive guide to the PPACA, in the Healthcare Resource Center.
NFIB Research Foundation CribSheets
NFIB Research Foundation’s healthcare fact sheets outline the most essential information about the PPACA for small businesses. Download CribSheets about the employer mandate, the individual mandate, the small business health insurance tax and more at www.NFIB.com/CribSheets.
2013 Health Insurance Reform Tax Calculator for Small Business
Use this tool to determine whether your business qualifies for the healthcare law’s new small business tax credit on health insurance.
3 Essential Webinars
Listen to these three webinars about the healthcare law:
1. How Obamacare Impacts the Self-Employed and Small Business
2. Obamacare: What to Expect in 2013 and Preparing for 2014
3. Health Insurance Exchanges and How They Will Affect Your Business
2 Must-Watch Videos
What Is Affordable Health Insurance?
Is Your Small Business Subject to the Obamacare Employer Mandate?
NFIB has compiled other outside resources about the PPACA at www.NFIB.com/Additional_Resources. Here you’ll find:
• Employer mandate and tax provision resources from the IRS
• Information about the state insurance exchanges
• Essential health benefits resources and more
In MyBusiness magazine
To learn about NFIB’s efforts to repeal Obamacare, read “Repeal and Replace.”
Check out MyBusiness’ list of four ways to prepare for Obamacare.