“Cost Effective ACA Solutions” Solutions for health insurance scenarios in the new ACA world NAIFA - Dallas March 27, 2014

Agenda The Texas Health Insurance Pool Subsidies Cost Sharing Reductions Health Insurance Tax Credits Different Scenarios Self funded group health Q&A

ACA Observations: Keep in mind, implementing the ACA will take many years The law has gradually been implemented since March is more like a practice round will be more polished Carriers will be better prepared next OEP Certification and training will be more robust The ACA will not be repealed under Obama’s administration Health insurance remains the only thing, by Federal law, that people must own, or face a penalty

TX Health Insurance Pool Ends

Here is a tip or two… Know how to calculate subsidies Know how to complete a HIM subsidy application No health questions Instead, Personal Identifiable Information (PII) questions Know how to calculate Health Insurance Tax Credits for groups of 2-25 Use HITCs to prospect small groups of 2-25 lives

Subsidies 101 Kaiser Family Foundation Calculator Based on household income and family size Who all makes up the household income? Based on estimated 2014 income What happens if your estimated income is higher? What if it is lower? How will this impact the subsidies and/or Cost Sharing Reductions?

Calculating subsidies is very easy!

Open and review the “Notes” when you scroll down this page

Scroll down further for important FAQs

<250% Federal Poverty Level = CSRs or Cost Sharing Reductions Think of how “low income subsidies” work within the Medicare Savings Program (MSP) Similar to the MSP, a person at or below the 250% FPL is eligible for cost sharing on the Silver Plan

Health Insurance Tax Credits Available up to 25 FTEs Up to a 50% tax credit for groups up to 9 FTEs Tax credit reduces at 10 or more FTEs Employer must pay at least 50% of the FTE’s premium Must register for a SHOP plan at Average wage must be less than $50,000 May exclude owners from calculating average wage

HITC info at

4 Person HVAC Group Scenario: You are the CEO, you have three employees Employee #1 $35,000 (HVAC Repairman) Employee #2 $30,000 (HVAC Repairman) Employee #3 $30,000 (HVAC Repairman) Total payroll is an average of $31,667 per employee The CEO’s earnings do not weigh in this calculation This group is eligible for up to a 50% Health Insurance Tax Credit Must purchase via SHOP Exchange Premiums may be offset in the form of a lower tax obligation due to the HITCs

How would you handle this situation? Salon Manicurist that makes $7.25 per hour, plus tips Gets paid $ per week (7.25 = x 30 hours) Gets paid for 52 weeks ($11,310 per year) Only claims $11,310 Does not report cash tips $11,400 is the “magic number” for one person $94,200 is the magic number for a family of four Is this person eligible for Medicaid?

Answer – no Medicaid. Why? Because Texas did not expand our Medicaid via the ACA, the Manicurist is not eligible for Medicaid So what can you do to help? Encourage the person to report more income (cash tips that were not reported) and get the income to at least $11,400

Kaiser Family Foundation Subsidy Calculator $11,310 in 2014 estimated income is not going to generate any subsidies.

Raise the estimated income to above $11,400 Adding an additional $190 of 2014 estimated income now generates a premium subsidy of $2,557 resulting in a $19.17 monthly premium ($230 annually)

What about this? Husband, wife and one dependent child Husband does not pay taxes Mom files her return and claims a child as a dependent How do you calculate household income, with or without the husbands income?

Single Female age 20 Works as a waitress/bartender Claimed income of less than $15,000 in 2013 Eligible for subsidies? Eligible for CSRs (Cost Sharing Reductions)? In 2013 had a $5,000 deductible for $171 Now has a Silver plan with a $500 deductible via cost sharing reductions Is she better off or not?

Regarding the 9.5% affordability test, does this include the dependents and the employee’s cost? No. Employer coverage is considered affordable if employee’s share of the annual premium for self-only coverage is no greater than 9.5% of annual household income Employees and their dependents who are offered employer-sponsored coverage that’s affordable and provides minimum value won’t be eligible for a premium tax credit

The Great Unintended Consequence within the ACA And solutions to fix it.

Don’t lose the subsidies! If the employee is offered affordable coverage, the dependents lose their subsidies – an unintended consequence! Solutions may include: Give the employees a raise and let them buy health insurance via the exchanges Drop the group health plan and establish a defined contribution and/or Section 125 POP strategies Keep the group and pay for the dependents in exchange for lower wages Drop the group health plan and forget the whole mess

Employee: affordable health insurance is offered from the Employer The employee may either accept coverage or decline Family of 4 $1,000 monthly premium for a 70% AV (Silver) plan Eligible for a $500 per month subsidy based upon their household income Just lost a $6,000 subsidy Employee gets covered, the dependents do not What is the best strategy to handle this problem?

Employee - affordable health insurance is not offered by the Employer May be eligible for subsidies Remember the dependents! Can the employer offer a raise to buy a QHP? Yes, but… Employer will pay additional payroll tax Employee will pay income tax Section 125 deductions or Section 105 Pre-tax benefits Employer could offer supplemental plans to offset a HDHP

Find the subsidies Family of 4, $60,000 estimated 2014 income, subsidies cover 41% of annual premium

Answer this: Family of four: has two daughters that are 22 year old twins the twins file their own income tax returns are not covered as dependents under their parents income tax return but they live in the same house How do you calculate the household income and how many are counted for subsidy calculation?

Answer: It is all about the tax return If the twins file separate income tax returns, each are counted as a one life family and only their income is considered for subsidy calculations Think about this as “the roommate rule”. If you have two 24 year olds sharing an apartment, each are filing their own tax return, and they are not related, what is the difference in a family who lives together and files separate returns?

Market Your Agency Have you ever met a business owner that wants to pay for things on a pre-tax basis? The concept of HITCs is attractive The New R&D = “Rip-off and Duplicate” Use the government approved marketing pieces and educational info Copy/Paste from

The $0.60 Marketing Plan First Class stamp is $0.46 One page of your letter head and one envelop is $0.08 One record customized to your demographics is $0.06

“R&D” Use your letterhead and go copy and paste this info. Send it to employers.

The $0.60 Marketing Plan Mrs. Business Owner 233 W Main St Lewisville, TX Under the Affordable Care Act, your business may qualify for up to 50% employer Health Insurance Tax Credits if: You have fewer than 25 full-time equivalent employees Your employees make an average of about $50,000 a year or less You must pay at least 50% of your full-time employees' premium costs. (You don’t need to offer coverage to your part-time employees or to dependents.) Starting January 1, 2014, the Health Insurance Tax Credit (HITC) is worth up to 50% of your contribution toward employees' premium costs (up to 35% for tax-exempt employers).

How do handle a Sole Proprietor? Just one individual? Are there dependents? Is this a husband & wife group? Are there employees? Should you offer the employees a stipend to buy a QHP via the HIMs?

Small business with two employees Different scenarios present different needs and require different solutions: Is this a husband and wife? An Entrepreneur and one employee? A new company? With young business owners? How will the 3:1 age slope impact younger people? What about the Catastrophic plan for people <30 years old? Or “downsized” baby boomers?

Did you know… People who turn age 65 do not have to take Medicare Parts A & B? If a person delays their social security and declines both Parts A & B, they will not be “in the system”. Therefore, the person may keep their high deductible health plan and continue to contribute to a health savings account. So how does this change your recommendations if you have an actively at worker, smart baby boomer aging into Medicare?

Owners: Ma and Pa, over age 65, <19 lives Should they stay on the group? Do they have an HSA in place? Do they have to take Medicare? Should they take Medicare? TEFRA – Secondary Payer Rules Apply 19 FTEs or fewer: Medicare is the Primary Payer 20 FTEs or more: the group health plan is primary

Business Owner Aging in to Medicare Get the entire picture Is the group above or below 20 lives? What options are available for the dependents who are not Medicare eligible? State continuation COBRA Other group health plan Individual major med Short term major med Are the dependents eligible for subsidies?

Foreign Nationals Over Age 65 Do they qualify for Medicare? Must be in the USA at least 5 years to be considered eligible Will need to buy both Parts A&B – usually in excess of $10,000 per year Find out - are they documented immigrants? If they are not eligible for Medicare, and they are documented immigrants, they are eligible to apply for an ACA plan and receive subsidies.

Self funding Self funding allows you to keep the savings when your group is healthy Self-funded plans are subject to ERISA ERISA plans may be exempt from some of the new Federal ACA regulations Employer gains the flexibility to choose a funding option for their claim fund. Choose from “Full Pay” level funding, “Partial Pay”, or “Pay As You Go” funding

Self funding - ERISA Self-funded health plans are primarily governed by federal ERISA laws (ERISA is the Employer Retirement Income Security Act which governs employee welfare plans). ERISA establishes minimum standards for retirement, health and other welfare benefit plans. ERISA plans do not have to follow state benefit mandates resulting in lower costs and expenses

ERISA and SPDs To the employees, the ERISA plan of benefits is described in the Summary Plan Description (SPD) The SPD is the standard health benefit plan description employees are used to seeing with a fully insured plan. An SPD is provided to each insured employee detailing their benefits.

Self-funded plans: pros and cons Pros More control over health plan expenses May avoid certain ACA fees, like the new health insurance tax EHBs are not required No 3:1 Age Slope to consider Many new plans allow minimum group size down to 5 lives Cons Employer may have higher costs in years where claims expenses exceed expected costs

Short Term Major Medical “Whoops, I missed the deadline. Can I still get coverage??” Affordable, catastrophic coverage Is not Guarantee issue Is not considered a QHP Does not cover pre-ex conditions But still, it does the trick of protecting against an expensive claim

Q&A Complete your evaluation forms and turn them in please!