Illinois Maternal & Child Health Coalition

The Affordable Care Act: What Small Businesses and Nonprofits

Need to Know

Prepared byKathy Chan, Associate Director and Director of Policy and Advocacy

Illinois Maternal and Child Health Coalition

Delivered to Chicago Bar Association, Legal Aid CommitteeBy John Bouman, Shriver Center

April 11, 2013

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Snapshot of Small Businesses

• Overwhelming majority of US businesses have less than 20 employees; many of these businesses include the self-employed

• Smallest businesses struggle to pay for and/or provide employer-sponsored insurance

• Less purchasing and negotiating power• Little to no HR resources• Unpredictable increases in health care costs from

year to year

Illinois Maternal & Child Health Coalition

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Making Health Insurance More Affordable: Tax Credits

• Tax credits currently available – Small businesses or nonprofits with 25 or fewer full-time employee

equivalents – Pay average annual wages of less than $50,000/employee– Provides and covers a portion of the cost of employees' health

insurance• Credit of up to 35% for small businesses and 25% for

nonprofits; goes up to 50% for small businesses and 35% for nonprofits in 2014

• Visit http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers for more information

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Making Health Insurance More Affordable: Market Reforms• In 2014, health insurance pricing limited to geography,

age (limited at 3:1), and tobacco use– Gender and health status can no longer be used to set price

• New and non-grandfathered plans are required to spend at least 80% of premium dollars collected on health care costs; must provide refunds if this minimum is not met

• Annual review of premium rate increases, and if above 10%, must be justified; information can be used by Exchanges to determine plan participation

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Simplifying the Health Insurance Selection Process

• Small Business Health Options Program, or SHOP Marketplace

• For small businesses with less than 100 employees and self-employed individuals

• Requires information to be offered in an easily comparable and understandable manner – “apples to apples”

• Participating health insurance plans must meet minimum standards and offer comprehensive benefits

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Simplifying the Health Insurance Selection Process (cont’d)• Streamlines access to tax credit for small businesses

and nonprofits• Starting in 2017, states may merge individual

Exchange and SHOP and/or allow larger businesses to use SHOP

• Note: State-run marketplaces can limit participation in SHOP to employers with 50 or fewer employees from 2014 through 2016

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Creating More Affordable Options: CO-OPS

• Consumer Oriented and Operated Plans, or “CO-OPs” • CO-OPs are non-profit, member-run health plans set up

through federal, low-interest loans– Land of Lincoln Health, Inc. awarded $160M in federal loans to

operate an Illinois CO-OP– http://www.landoflincolnhealth.org/

• Designed to be an affordable, consumer-friendly, and high-quality health insurance option

• As early as Oct 2013, LOLH may begin to offer coverage for individuals and small employers inside and outside the Marketplace

Illinois Maternal & Child Health Coalition

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Shared Responsibility Provisions for Small Businesses and Nonprofits

• Some businesses will be required to provide affordable, minimum-level health insurance coverage to their employees

• Businesses with 50 full-time equivalents (FTEs), or fewer, are exempt from this provision and are not penalized even if their employees access a tax credit on their own– FTEs are defined as someone working 30 hours or more/week

• Businesses with more than 50 FTEs could face a Shared Responsibility Payment, depending on whether the employer offers insurance, if at least one FTE accesses a tax credit or cost-sharing reduction on his/her own

Illinois Maternal & Child Health Coalition

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Shared Responsibility Provisions for Small Businesses and Nonprofits (cont’d)

• For businesses with >50 FTEs that DO NOT offer insurance, there is a penalty of $2,000/employee, not counting the first 30 employees– E.g. A business in this situation with 55 FTEs would have

to pay $2,000/employee * 25 employees (55 minus 30) = $50,000

– E.g. A business in this situation with 65 employees would have to pay $2,000/employee * 35 employees (65 minus 30) = $70,000

Illinois Maternal & Child Health Coalition

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Shared Responsibility Provisions for Small Businesses and Nonprofits (cont’d)

• For businesses with >50 FTEs that DO offer health insurance, there is a penalty of either $3,000/employee who accesses a tax credit OR $2,000/employee, not counting the first 30 employees, whichever amount is less– E.g. One employee accesses a tax credit on his/her own; the business

would have to pay a $3,000 penalty• Coverage offered must meet “minimum essential standards”

and must not be inadequate or unaffordable – Inadequate is when the plan offered covers less than 60% of the

total allowed cost of benefits– Unaffordable is when the plan costs more than 9.5% of the

employee's household income

Illinois Maternal & Child Health Coalition

Health Insurance Landscape in 2014

Illinois Maternal & Child Health Coalition

New options for coverage Opportunity to shop on the competitive health insurance

marketplace Tax credits – for those with incomes up to 400% FPL

(~$92,000/year for a family of four) New Medicaid limits to cover newly eligible - 138% FPL

(~$20,000/year for family of two) 1.6M Illinois residents will have access to

affordable coverage Over 1M will be eligible to use the Exchange 340,000+ eligible for new Medicaid

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Pending Illinois policy decisions

• New Medicaid – SB26 • Establishing a state-based competitive health

insurance marketplace – SB 34• Authority for rate review for IL Dept of Insurance • Exchange authority – “active purchaser” vs.

“market organizer”• SHOP – include those with 50 or 100 FTEs? • Outreach and enrollment – Navigators and in-

person assistors, training, grantsIllinois Maternal &

Child Health Coalition

Pending Federal policy decisions

• Interim and final rules and regulations–http://www.irs.gov/pub/newsroom/reg-

138006-12.pdf –Comments were due March 18

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Resources

Illinois Maternal & Child Health Coalition