The Impact of Health Care Reform on Employers

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

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

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

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

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

6. “Pay or Play” • House • 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 • 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.

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

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

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

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

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

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

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

14. Example of Assessment - Company A • Data • 125 Full Time Employees; • HMO coverage for full time workers (30 hours per week) after 90 days of continual employment; • Employer pays 60% of health care premium. • Impact • HELP Committee – “play” requirement met: • Employer pays 60% of premium for all full time workers. • Finance Committee – employer offers affordable coverage. • House – fails to meet “play” requirement = PAY • 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. Example of Assessment - Company B • Data • 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 • HELP Committee – fails to meet “play” = PAY • Employer must pay $750 x 44 FTE = $33,000, plus • $375 x # of part time employees • Finance Committee – employer offers coverage • But is not required to offer coverage = small employer (<50 FTE) exemption. • House – fails to meet “play” requirement = PAY • 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.

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

17. Where We’ll Fall Short • House: Most will “Pay” Only 5 out of 27 Facilities meet the “play” requirements Sticking point: • Required to pay 72.5% of premium for individuals; AND • 65% of premium for families.

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