“Size Matters”How different size employer groups might adjust

under the Affordable Care Act (ACA)10/15/13

Agenda

• FTE (Full Time Equivalent)• Individual coverage• What is a large group?• Who says?

• “Pay or Play” - 50+ FTEs• Size Matters – group size influences: Sizes 1-100, 2-50, 2-25, 2-9• Self-funding

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Let’s take a look at the current episode of “As the ACA Changes”

Reality Check!

• Nearly two-thirds of U.S. households earn less than 400% of the federal poverty level, the cutoff point for the subsidies• 49% of the people polled think the ACA has been repealed!• Announced at June 2013 NAHU Convention in Atlanta

But first…

• 1% of the people battling multiple chronic conditions account for 21% of the $1.3T total health care expenses, at an average of $88,000 per person• 5% accounted for 50% of the total• The bottom 50% = 2.8% of the total• Narrow Networks• ACOs

Enrollment issues

• CMS Enterprise Portal• Health Insurance Marketplace Certification• Setting up a user account at www.HealthCare.gov • Getting set up with the carriers• Cigna – Halt! Don’t enroll anyone yet…• Subsidized apps not working for brokers…paper apps?

Medicaid Expansion, Medicare Reductions• Medicare reimbursement levels will go down between 1-3% for

hospital readmissions within 30 days• Medicaid reimbursement is going to Medicare reimbursement levels

starting 1-1-14• “The Arkansas Approach”

Arkansas is taking their Federal funds to expand Medicaid and enrolling this population into ACA compliant health insurance plans

(Note – Texas State Rep John Zerwas, a Houston area doctor, has proposed a similar approach called “Texas Solution”, but it did not move in the last session.)

Some of the ACA Delays• “Pay or Play” moves to 2015

• Employer penalties delayed to 2015• Reporting will not be mandatory until 2015

• Information reporting by employers & health insurers regarding employer-sponsored coverage relative to the individual mandate

• SHOP – Small Business Health Options Program• Was to be a multiple carrier choice• Now one carrier choice per employer in 2014• In Texas, you get BCBSTX or BCBSTX as your option

• Self-reporting to the IRS about status of your QHP in 2014• IRS may still audit• You must still prove you had coverage

People need to know is still in place

• On January 1, 2014, every American is required by law to own a QHP with the EHBs or they will be penalized.• If they cannot afford it, they will be subsidized.• Subsidies are based on the 70% Actuarial Value Plan• a.k.a. – The Silver Plan

• CSR – Cost Sharing Reduction applies at <250% FPL• Must own a 70% AV plan to qualify for CSR

Newly proposed legislation to track

• H.R. 2667 - “Authority for Mandate Delay Act", would create a law that would require the Obama administration to postpone implementation of ACA employer coverage mandate• Introduced by Rep. Tim Griffin, R-Ark.

• H.R. 2575 - Would raise the definition of FTE in the law to be changed to those working an average of 40 hours per week• Introduced by Rep. Todd Young, R-Ind.

What is a FTE = Full Time Equivalent?• Can we all just quit counting and worrying about FTEs for a year?• The generally accepted HR meaning for the "E" in FTE is "equivalent“• FTE is often used to indicate a direct, as opposed to contract, full-time

employee• Example:• Jane is a regular employee, an FTE, W2 wage earner• Ralph works only under contract (1099)

• The term WYE (Work Year Equivalent) is often used instead of FTE when describing the contractor work

FTE

• U.S. federal government, FTE is defined by the GAO as:• “# of total hours worked divided by the maximum # of compensable hours in a

full-time schedule as defined by law”

• For example:• The normal schedule for a quarter is defined as 411.25 hours

• 35 hours per week (52 weeks per year - 5 weeks regulatory vacation) divided by 4• Someone working 100 hours during that quarter represents

• 100/411.25 = 0.24 FTE• 2 employees working in total 400 hours during that same quarterly period represent 0.97 FTE

So what constitutes an individual?

• Could be several unique situations to consider:• Sole proprietor• A dependent child or spouse• Court ordered child(ren) health insurance• An employee that is not offered an affordable QHP• How about a “retiree” not yet age 65?

What about the individual coverage?

• Individual mandate• Presumably, the IRS will monitor compliance with the individual mandate

through self-certification on each individual’s tax return in 2014.

• Health insurance exchanges• Pending further notice, open enrollment began on 10-01-13, for all state-

based, partnership and federally facilitated marketplaces.

What is a “Large Group”

Depends on who you ask…

• Aetna – 2-10 is small group, 101-3,000 is “mid-market” and 3,000 or more is “”public and labor”• BCBSTX – 2-100 is small group, with 2-50 being regulated and 51-100

being non-regulated. 101-2000 is mid-market. 2000+ is Nat’l Accts • CIGNA – 51 +• Humana - ?• UHC – 2-100 is small group, 101+ is large group

50+ life groups

• Will be subject to “pay or play” in 2015, not 2014• W-2 reporting requirements• Still apply for employers that issue more than 250 W-2s.

• Reporting by: (a) employers & (b) health insurers• Regarding• (a) employer-sponsored coverage relative to the individual mandate• (b) pay-or-play reporting

• will not be mandatory until 2015.

“Pay or Play” delayed until 2015

• The individual mandate to have coverage in 2014 or pay a tax penalty is still in place• Individual exchanges are live and “operational” as of 10-1-13• "Pay or Play“ probably won't go away• Now that the administration has postponed the implementation, they have

12 more months to strengthen their resolve, plug all the loopholes and prepare for more stringent enforcement in 2015.

SHOP – Small Business Health Options Program• Intended to offer multiple carriers to one employer group• Example:

• Employee 1 chooses an Aetna plan• Employee 2 chooses a Cigna plan• Employee 3 chooses a UNC plan

• The choice part of SHOP has been delayed until 2015• Example:

• Employees 1, 2 and 3 all have a BCBSTX plan

1-100 life groups

• The ACA defines a small group as 1-100• Is 1 life a group?

• But in Texas, we are still 2-50• SB 1332 preserved the 2-50 size definition of FTEs• Maintains compliance with the ACA• Expires in 2016?

2-50 life groups

• Texas HB 2055 & Texas HB 369• For 2-50 size employers in Texas, nothing has changed• Texas SB 1332

• Businesses with fewer than 50 FTE employees will still have access to the SHOP Exchanges• Small Business Health Options Program

• Approximately 55% of 2-50 size groups in Texas do not offer health insurance today

2-25 life groups

• Health Insurance Tax Credits (HITCs) apply• 1-9 lives = 50% in 2014• 10+lives = shrinking tax credit• HITCs present a great opportunity to work with local CPAs to help

their clients qualify• How do you know if an employer group qualifies?• www.taxpayeradvocate.irs.gov

www.taxpayeradvocate.irs.gov

The Small Business Health Care Tax Credit

Enter info on the employer

Enter info about the group health plan

Results

To claim the credit – IRS Form 8941

2-9 life groups

• Your traditional “Ma and Pa” market• Your bread and butter• You are their HR department• How do we maximize this demographic?• BCBSTX has 36,000 groups between 2-50 lives• Average case size is 9 lives

Typical 2-25 size group

• 1976 started group with one employee• Grew and grew• Now has 18 FTEs• The two owners (“Ma and Pa”) are now ages 65 and 72• Max rated due to pre-ex• How much does it help to have 65+ year olds on the plan?

• Recommend the owners take Medicare?• Will they qualify for HITCs?

Self-funded plans

• New health insurance premium tax does not apply to self funded plans• immediate 3% savings over fully insured plans

• Employers have more say in the design of their health plan to fit to fit their specific group health insurance needs• Improves cash flow• Eliminates carrier profits and risk charges

Self funded plans

• ERISA preemption of state action• ACA does not subject self insured plans to state jurisdiction,

eliminating many state mandates in the process• Specific stop loss• Separate deductible for any individual

• Aggregate stop loss• Protects against an excessive amount of claims expenditures for the entire

plan

Comparison of fully insured vs. self funded• Company A• Fully insured, $1,500,000 total premium• $1,000,000 in claims = $500,000 profit for carrier

• Company B• Self insured• Worst case scenario is $1,650,000 exposure• Pays $240,000 in projected costs (stop loss coverage)• Reserves $1,360,000 in potential claims• If claims are at $1,000,000, Company B keeps the $360,000 remaining in

reserve• Saves $260,000

Wrap up

• 6,200,000 uninsured Texans• 2,200,000 at <138 FPL or lower – not your customers• 4,000,000 left to decide: do I or don’t I enroll?• 1,000,000 probably will• About 13,000 true health agents in Texas to write 1,000,000 or 77

uninsured people per agent• What if only 3,000 actually wrote those 1M?

Questions & comments

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