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American General Life Companies FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC 1 February 2013 Big Changes for Small Businesses Jay Drucker,

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Presentation on theme: "American General Life Companies FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC 1 February 2013 Big Changes for Small Businesses Jay Drucker,"— Presentation transcript:

1 American General Life Companies FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC 1 February 2013 Big Changes for Small Businesses Jay Drucker, VP of Accident & Health Products

2 Why Offer Health Insurance? 2 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Employers offer health insurance as a means to attract and retain quality employees. Group insurance allows employees and their families to obtain health insurance without underwriting.

3 Health Care Reform: Patient Protection & Affordable Care Act 3 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Fact: Effective January 1, 2014, Employers with < 50 employees are NOT required to provide health insurance for their employees.

4 New Alternative to Providing Health Insurance 4 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC A defined contribution or money purchase approach vs. providing traditional group health insurance

5 How Does Defined Contribution/ Money Purchase Option Work? 5 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC In lieu of contributing/providing traditional group health plan to employees: –small employer can increase employees wages equal to their current contribution –employee can purchase coverage through a private or public health insurance exchange

6 What are the Benefits of This Approach? 6 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Small Employer Advantages: –Out of the Insurance business –No administrative expense –No employee complaints about: –benefit structure of plan –claims handling Employee Advantages: –Freedom to choose a plan that best fits their needs –Reduced out-of-pocket expense if they quality for premium subsidies

7 An Example of Defined Contribution Approach 7 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Small Employer:Employee: Widgets Inc.John Smith Less than 50 employeesMarried with 2 children Household annual income of $60,000

8 Defined Contribution Impact to COMPANYS Bottom Line 8 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Total cost of group health insurance for family of 4 is $1,000/month Current company contribution is $300/month (employee's portion is the remaining $700/month) January 1, 2014: Defined Contribution/No Group Plan Provided Increase to John's salary$280/month Additional SSI (6.2%) + Medicare (1.45%)$21.42/month Total cost to company$301.42/month Difference between providing traditional group health coverage ($300/month) and providing defined contribution ($301.42/month) is only $1.42/month

9 Additional Funds Available to Employees for Health Insurance 9 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Total cost of group health insurance for family of 4 is $1,000/month Current employee contribution is $700/month (companys portion is the remaining $300/month) January 1, 2014: company provides John: –additional $240/month ($280 - $40 income tax) What is Johns contribution?

10 Federal Subsidy Calculation 10 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Johns household income is between % of fed poverty level Contribution capped at 9.5% of his household income of $60,000 = $475 per month Balance of health insurance cost is paid through a federal tax subsidy* *Family of 4 maximum household income eligible for a subsidy ~ $92,200/year Based on Federal Poverty Guidelines

11 Defined Contribution Impact to EMPLOYEES Bottom Line 11 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Current employee contribution is $700/month (group health insurance) January 1, 2014, company discontinues group health, provides extra income to employee to purchase insurance via the exchange *Johns max contribution via exchange is $475/month – rest of cost is covered by a federal subsidy January 1, 2014: Defined Contribution/No Group Plan Provided No company group health ins. contribution+ $700/month Extra income from employer minus taxes+ $240/month Cost of insurance via exchange- $475/month Total monthly employee savings$465/month Employee has an additional $465/month in their pocket!

12 If Company Provides Group Health, No Defined Contribution 12 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Employees options for health insurance include: –Continue companys group health insurance plan (approximately $700/month) –Opt out of companys group plan & buy coverage through an exchange Employee would not have employer contribution through pay increase Employee responsible for full cost of insurance from exchange Group Health Provided No DC/Opt out of Group Plan DC Offered / No Group Plan Employee cost: group plan$700/month$0.00 Extra income (no grp plan)$ $240/month Employee cost: exchange$0.00$475/month Total cost to employee$700/month$475/month$235/month Lowest cost to employee is the defined contribution option.

13 Win/Win Proposition 13 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC No additional cost to small employer Company no longer administers a small group health plan Employees may have significant reduction in out-of-pocket expense

14 What if Employees Income Exceeds Federal Subsidy Qualification? 14 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Widgets Inc. raises Johns pay Johns household income now exceeds federal subsidy level John can reduce out-of-pocket expense with less expensive health plan via exchange

15 Be Ready on January 1, FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Whether you support it or not, Healthcare Reform becomes effective January 1, Small business owners have opportunity with new approach to benefit both the employer and employees.

16 Additional Resources from American General 16 FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC Contact your Regional Vice President: –Bob Clancy, Western US Regional Vice President: (888) –Jamie Leon: Eastern US Regional Vice President: (443) Health Care Reform Video Series on You Tube:

17 Important Information The underwriting risks, financial and contractual obligations and support functions associated with products issued by American General Life Insurance Company (AGL) are its responsibility. AGL does not solicit business in the state of New York. Policies and riders not available in all states. Important Note: Prior to soliciting business, be certain that you are appropriately licensed and appointed with the insurer and that the product has been approved for sale by the insurer in that state. If uncertain, please contact your American General Life Companies representative for assistance. American General Life Companies, is the marketing name for the insurance companies and affiliates comprising the domestic life operations of American International Group, Inc., including American General Life Insurance Company. ©2013. All rights reserved. AGLC FOR PRODUCER USE ONLY-NOT FOR DISSEMINATION TO THE PUBLIC


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