Health Care in the WorkplaceDR. ALICE LOUISE KASSENS JOHN S. SHANNON CHAIR OF ECONOMICS ROANOKE COLLEGE

The Management InstituteApril 2016

Learning Objectives

By the end of the session, participants will be able to:

▪ Discuss the major sections of the ACA▪ Know the resources available for navigating the ACA▪ Understand the potential economic impact of the legislation

on individuals▪ Understand the potential economic impact of the legislation

on businesses▪ Understand the potential economic impact of the legislation

on the economy

History of health insurance and the employerWhen did employers begin offering as a benefit?

Has the distribution of total compensation changed in the last few decades?

History of health insurance and the employer▪ Emergence of employer based

health insurance with WW II WHY?

▪ Growth through 1980s▪ Decline of 6.3 percentage

points over 1987-2004 period▪ Plateau with minor drop in

Great Recession

What do you think were the drivers behind these trends?

History of health insurance and the employer

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

10

20

30

40

50

60

70

80

90

100

All workers Part-time workers Full-time workers

%

Percentage of workers with access to employer-provided health insurance, private industry, 1991–2012

GROUP CHAT:

Why do you thinkcoverage for part-timeworkers is less than that of full-time workers?

History of health insurance and the employer

Group work:Get into groups and make the following lists: 1. Benefits of employer-based health insurance 2. Consequences of employer-based health insurance

Group question: Would it be ideal to remove the link between employment and health insurance? Why or why not?

PPACAWhat are the major pieces of the legislation?

What resources are available?

PPACA Overview

▪ Individual mandate▪ Employer mandate▪ Affordable Care

Organizations▪ Medicaid expansion▪ Community rating▪ Essential minimum benefits

Individual mandateWhat are the rules?

What are the potential economic impacts for individuals?

Individual mandate

▪ Beginning in 2014, all individuals must buy health insurance with essential benefits (minimum essential coverage)

▪ Self-employed individuals can get health insurance through the state exchanges just as any other individual

▪ If do not buy health insurance, face a penalty (unless have an exemption)

▪ Penalty is the greater of:▪ $95 or 1% of household income over the filing threshold in

2014▪ $325 or 2% of household income over the filing threshold in

2015▪ $695 or 2.5% of household income over the filing threshold

in 2016

Individual mandate

Individual mandate – penalty example

▪ Suppose you are single without children and earn $40,000 per year.▪ The filing threshold for 2016 for

single individual is $10,300▪ The amount over the threshold

is $40,000 - $10,300 = $29,700▪ 2.5% of this is ~$742.50

*Not eligible for tax credit**Economic consequences?*

Pay $742.50 in penalty or at least $2868 per year in premiums

What would

you do?

Sample plan (2016, lowest premium)

NOTE: Plan estimate for female in Roanoke County, single, no dependents, 40 years old, non-smoker, expected income $40,000

Employer MandateWhat are the rules?

What are the potential economic impacts for businesses?

Employer mandate overview

▪ Beginning January 1, 2016 employers with 50-99 FTE employees MUST offer health insurance that is:▪ Affordable▪ Offers minimum essential coverage

OR▪ Pay a penalty

▪ If less than 50 FTE, not penalized if do not offer▪ This is a delay in the employer mandate; employers with

100 or more workers began January 1, 2015

“Pay or play” mandate

Employer mandate

▪ Employers must provide at least 60% of premium costs of employees health coverage

▪ Health coverage purchased for an employee cannot exceed 9.56% of their gross family income for employee only coverage.

▪ Employers must insure their employees if they have over 50 full time workers or they will face a penalty or "shared responsibility fee".

▪ The penalty for large businesses not covering their workers is $2000 per employee and $3000 if they purchase health insurance through the exchange with premium credits

▪ The first 30 workers are excluded from the penalty.▪ High end insurance plans will be subject to a 40% excise tax.▪ Employers with less than 25 full-time workers making less than $50,000

a year may be eligible for cost assistance via premium tax credits.

Affordability

Penalties

Employer mandate

▪ Minimum essential benefits:▪ ambulatory patient services; ▪ emergency services; hospitalization; ▪ maternity and newborn care; ▪ mental health and substance use disorder services,

including behavioral health treatment; ▪ 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

Employer mandate

2015Although firm size determined by FTE, penalty is only assessed on full-time workers (30+ hours per week)

2016

Employer mandate

Acme Industries, a small manufacturing firm, does not currently offer coverage to its 35 full-time employees and 20 part-time employees. The company’s part-time employees work 24 hours per week. One of Acme’s employees, Dave, is between 100-400% of the federal poverty level. Given the facts, what will the employer mandate mean for Acme?

Example 1

Employer mandate

Yes

Employer mandate

Yes

Employer mandate

$10,000

Employer mandate

Try the examples on the handout.

Employer mandate

Determination and application of employer penalty by type of employee

Retrieved from http://www.fas.org/sgp/crs/misc/R41159.pdf 11/13/2013

What types of incentives might

arise?

Employer mandate (less than 50 FTE)

Choices for “small employers”:1. Are not penalized if do not offer point employees to

individual exchanges (www.healthcare.gov) 2. Employers can buy health insurance from Small

Business Health Options Program (SHOP) for 2015 (SHOP opened Nov. 2014)

▪ An online exchange (much like the exchange for individuals)▪ Could quality for tax credits to offset costs (not permanent);

can deduct remainder from taxes▪ Way of attracting new employees increased total

compensation?3. Work with insurance company/broker to buy group

coverage in private market (nothing new)

Employer mandate – more on SHOP

▪ Open to employers with 50 or fewer FTE employees▪ In 2016 this increased to those with 100 or fewer FTE employees

▪ Self-employed can use individual exchange, but not SHOP▪ If offer through SHOP, must offer to all FT employees (30 or

more hours per week)▪ In many states, at least 70% of your eligible employees must

enroll in your SHOP plan▪ Employees sign up using the SHOP webpage after you have

selected a plan▪ Coverage will not take affect until approved by employer

after enrollment period is over

Employer mandate

Group questions: 1. What do you think are the primary concerns for

employers with respect to the employer mandate?2. Have you observed any changes in your place of work? 3. Do you believe that your employer will be impacted by

the employer mandate? 4. How do you think your employer will adapt to the

employer mandate?

5 minute break

Virginia Business Leaders SurveyWhat are Virginia CEOs saying about the impact of the ACA?

Virginia Business Leaders Survey

▪ Survey started in 2015, just started compiling results (preliminary)

▪ Survey of Virginia CEOs of private businesses with at least $5 million in sales (around 2800 once we eliminated doubles)

▪ Mail and electronic▪ Response rate ~ 11%▪ Asked CEOs a variety of questions about overall

economy and their industry▪ Included some questions pertaining to health care

Virginia Business Leaders Survey

Take a few minutes to complete the selected questions. If you are notcurrently a CEO, answer as if you are.

Share your answers with your neighbors. Discuss differences and similarities.

*Do not discuss questions/answers that you feel are too personal.**I will not collect these answers.*

CLASS WORK:

I will share some of the preliminary results when you are finished.

Virginia Business Leaders Survey

Now thinking about the people that work for your company, do you intend to substantially increase, moderately increase, keep about the same, or decrease your workforce between today and the end of 2016?

2.0

33.7

57.5

6.9

Substantially increaseModerately increaseKeep about the sameDecrease

Virginia Business Leaders Survey

Now thinking about other challenges that your company faces, which of the following are you concerned with?

Existing US competitionGovernmental regulation

TaxationForeign competition

Energy costsRisk management

Adverse economic conditionsHealth care costs

Global political instabilitySequestration

Rising supplier costsHuman resources

Cash flowAvailability of equity financing

Ability to obtain suitable financing

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

%

Concerned about health care costs, # employees

Less than 50

50 or more

Less than 30

30-99

100 or more

All

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

%

Virginia Business Leaders Survey

For each of the following national proposals, please indicate whether you support it or oppose it.

Repeal the Health Care Reform Legislation, # employees

020406080

100

66.5 77.2 59.7 78.431.1

24.0 11.120.1

12.0

45.5

9.5 11.7 20.1 9.6 23.4

Support Oppose No Opinion Less than 50 50 or more Less than 30 30-99 100 or more0

102030405060708090

100

67.2 65.0 65.4 68.1 66.7

22.7 26.8 22.226.6 24.6

10.1 8.3 12.4 5.3 8.8

Support Oppose No Opinion

Virginia Business Leaders Survey

Thinking specifically about health care and the ACA, do you expect it to have a positive impact on your business, a negative impact, or no real impact?

8.9

72.4

18.8

PositiveNegativeNo impact

Virginia Business Leaders Survey

Have you made any of the following adjustments due to the ACA?

0.010.020.030.040.0

Increasing benefits to retain employees

Decreasing benefits to cut costs

Offering defined contribution health insurance

Hiring more part-time employees

Reducing the number of hours current employees work

18.5

37.3

29.6

26.4

20.1

28.7

35.8

36.0

31.9

28.0

20.5

33.3

24.8

26.0

22.8

21.1

40.4

41.3

26.6

16.8

26.4

40.0

33.3

36.4

32.1

Less than 50 50 or more Less than 30 30-99 100 or more

Adjustments due to the ACA, # employees

The economyWhat are the potential economic impacts of the legislation on the economy?

The economy

Labor market effects

Current issuesWhat are the current issues being debated?

Current issues

Definition of full time work:30 vs. 40 hours per weekSave American Workers Act 2015HR 30 passed in January 2015

American Job Protection Act 2015S 305 assigned to committee January 29, 2015 (1% chance of being enacted)

Group question: 7% of American workers work 30-34 hours per week while 44% work 40 hours per week.

What are the costs and consequences of redefining full time work under the ACA?

Helpful resources

http://www.kelleydrye.com/publications/client_advisories/1007

https://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-about-Information-Reporting-by-Employers-on-Form-1094-C-and-Form-1095-C

http://www.ncsl.org/research/health/states-pursue-health-compacts.aspx

https://kaiserhealthnews.files.wordpress.com/2011/01/healthref_goldbergls10.pdf

http://services.dlas.virginia.gov/User_db/frmView.aspx?ViewId=3191

http://bipartisanpolicy.org/wp-content/uploads/2015/11/BPC-Health-Improving-Expanding-Coverage.pdf

http://kff.org/interactive/implementation-timeline/

https://shrm.org/hrdisciplines/benefits/articles/pages/hsa-enrollment.aspx

https://www.irs.gov/Affordable-Care-Act/Employers/ACA-Information-Center-for-Applicable-Large-Employers-ALEs

https://www.irs.gov/Affordable-Care-Act/Employers/Types-of-Employer-Payments-and-How-They-Are-Calculated

https://shrm.org/hrdisciplines/compensation/articles/pages/compensation-impacts-play-or-pay.aspx

Thank you

Feel free to contact me –Dr. Alice Louise Kassenskassens@roanoke.edu(540) 375-2428 (office)@RnningEconomist

The PowerPoint presentation will be available on my blog:www.therunningeconomist.blogspot.com