Health Insurance Exchanges and the Small Group Market

1. Health Insurance Exchanges and the Small Group Market February 21, 2012 Delaware Restaurant Association Education Symposium

2. Employer Eligibility for Exchange • Small Business Health Options Program (SHOP) Exchange will offer health insurance plans to small employers starting in January 2014 • Businesses with fewer than 100 employees are allowed to purchase coverage through the SHOP Exchange in 2014 and 2015 • States can elect to limit to 50 employees • Starting in 2016, the SHOP Exchange must offer coverage to businesses with ≤100 employees • States may choose to expand to larger groups in 2017 and beyond • Total employees for Exchange eligibility = full time workers, part time workers, and seasonal employees • For seasonal, employee count is equal to the proportion of days worked in a year.

3. Tax Credit Eligibility • Employers with < 25 low wage employees may be eligible for tax credits • Low wage = maximum of $50,000 per year • Tax credit may equal up to 50% of employer share of premium

4. Employer Mandate • ACA requires large employers to provide minimum coverage to all full time employees • Minimum Coverage = 60% actuarial value (bronze), employee contribution is ≤ 9.5% of the employee’s W-2 wages • If your employee earns $28,000 per year, they may pay a maximum of $222/month for their share of the premium • If an employer chooses not to offer coverage to their employees, the employer will be charged a penalty if: • An employee enrolls in an individual Exchange plan AND qualifies for a federal subsidy (income less than 400% FPL) • Penalty = $167 per month per full time employee (less 30 full time employees)

5. Large Employers and Full Time Employees • Large Employer for Purposes of Penalty: • Average of 50 or more full time employees on business days during the preceding calendar year • A business can claim an exemption from large employer status if: • The total number of full time employees only exceeded 50 for less than 120 business days, OR • If the full time employees in excess of 50 were all seasonal employees • Full time employee: An employee who worked, on average, 30 hours per week during the calendar year

6. Who is considered an employer? • Sec 414 (b): Employees of a controlled group of corporations are treated as though they are employed by a single employer • Sec 414 (c): Employees of partnerships, proprietorships, etc, that are under common control are considered employed by a single employer • Sec 414 (m): Employees of an affiliated service group or organization (e.g. groups that are shareholders or regularly perform services for another organization, including managerial services) are employed by a single employer • Sec 414 (o): The Secretary of the Treasury may provide additional regulations to prevent the avoidance of employee benefit requirements through the use of separate organizations, employee leasing, or other arrangements

7. Who is an employee? • Common Law of Agency Principles for the employee-employer relationship • You have the right to control and direct the individual who perform the services provided • You have the right to discharge the individual • The individual is economically dependent on the business for whom they are providing services

8. How an Exchange Works • General process for purchasing coverage in the SHOP: • Employerlogs into Exchange website • Employerenters basic information about employees who will be offered coverage • Employer sets parameters for plan options • Employee logs in using “access code” from their employer • Employee views all options that the employer has chosen for them and the premium they will pay after their employer’s contribution is deducted • Employee chooses option and completes enrollment • There are four potential purchasing models for the Exchange...

9. Note on Exchange Purchasing Models • Federal regulations proposed a defined contribution model for Exchange plans • Currently, defined contribution is 50% of employee premiums for small group plans in Delaware • However, no specific contribution requirements have been issued for the Exchange • The following models include examples of employer contributions and do not propose a specific employer contribution level

10. One Carrier, One Plan Employer chooses one plan and pays 50% of premium, or $207.

11. One Carrier, Multiple Plans

12. Multiple Carriers, One Plan Level

13. All Carriers, All Plans Employer share is fixed at $207 (50% of Silver Level Plan from Carrier B) and employee pays the difference

14. All Carriers, All Plans Employer share is fixed at $167 and employee pays the difference

15. Employer Affordability Safe Harbor • 9.5% affordability is based on Box 1 of the W-2 for that employee from you (as an employer), not on the employee’s total household income. • Affordability is based on self-only coverage. • If an employee chooses to enroll in coverage through their employer, even if it doesn’t meet the affordability standard, no penalty would apply.