ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Health Care Reform Law BRAD D. STEELE VP of Gov’t Relations & General Counsel National Club Association th Street NW, Suite 450 Washington, DC

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS National Club Association Our Mission: “To defend, protect and advance the interests and well-being of private social and recreational clubs” NCA makes sure the private club industry’s voice is heard –On Capitol Hill, –In the agencies, –In the statehouses, and –In the courthouses

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS Congressional Action in 2010

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Insurance reforms –Insurers may not have annual limits on benefits (2014) Insurers may not have lifetime limits or “unreasonable” annual limit on benefits –Insurers must accept everyone regardless of a pre-existing condition (2014) Insurers must accept children 19 and younger with pre- existing conditions –Insurers must renew coverage on individuals even if they suffer health problems during the year (2014)

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Insurance reforms –Insurers must place a limit on annual out-of- pocket expenses – includes coinsurance costs (2014) Deductibles for those in the small group market may not be more than $2,000 for individual plan and $4,000 for family plan –Insurers may not look at gender or past claims to determine yearly rates (2014)

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act American Health Benefit Exchanges –Each State must have an Exchange that offers “qualified health plans” –An Exchange must: Certify that offered plans meet gov’t requirements Provide a comparative analysis of plans Provide cost information for each plan Assign a rating to each plan –An Exchange may operate in more than one State

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act American Health Benefit Exchanges –Clubs with 100 or less employees may use the Exchange to purchase ins. for their workers Small Bus. Health Options Program (SHOP Exchange) States may allow clubs with 100+ into SHOP in 2017 –An employer may select the level of coverage and employees may select any plan within that level –A health ins. provider in small group market must consider all enrollees – those in the Exchange and not – to be members of a single risk pool

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act American Health Benefit Exchanges –Clubs must notify employees about Exchange: (2013) What services it provides, How to contact it, That they may be eligible to get a tax credit or subsidy, and That they may lose the employer’s contribution, but that any payment they make for ins. will be tax exempt Each State’s Exchange must be up by 2014

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandates on private clubs –Clubs with 50+ employees must provide breaks for a nursing employee to express milk (2010) As often as needed and for as long as needed For 1 yr. after the child’s birth –Must provide a location that is shielded from view and free from intrusion for the breaks A bathroom/locker room will not suffice Clubs don’t have to dedicate a specific room, but must designate space to be made available when needed –Clubs with less than 50 are exempt But must prove “undue hardship” – difficulty and expense

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandates on private clubs –Clubs must provide these breaks to non-exempt employees (exempt employees not covered) Not required to pay the employee during these breaks (usually breaks of less than 20 are paid) –This federal law does not trump state laws If state law requires more or if state laws covers exempt employees, then follow state law –Enforced under the Fair Labor Standards Act Penalties could include injunction, possible $1,100 fine and attorney’s fees

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandates on private clubs –Must disclose total health plan cost on employee’s W-2 (delayed to taxable year issued 2013) –Must file with the IRS and send to each corp. a 1099 for payment of goods or services totaling $600 or more throughout the year (2012) No filing needed if payment is to a tax exempt corp. Rep. Dan Lungren (R-Calif.) and Sen. Mike Johanns (R- Neb.) filed companion bills to repeal the 1099 mandate –Both chambers rejected the measure –Sen. Mary Landrieu (D-La.) said it was a mistake to include this mandate in the health care bill –Pres. Obama may be more agreeable to the repeal

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandates on private clubs –Clubs with an average of 50 full-time employees during the last year must offer insurance to their full-time employees –“Full-time employee” is one who is employed on average at least 30 hours/week during any month –Part-time employees are to be counted when determining if your club has 50 full-timers Take the total hours worked by part-timers in a month and divide by 120 then add that number to the number of full-timers to see if you reach 50 Part-timers are counted but you don’t have to offer ins.

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandates on private clubs –Clubs that meet the 50 full-time employee threshold and don’t offer insurance will be fined up to $2,000 per full-timer (less the first 30) if 1 employee enrolls in an Exchange plan and is entitled to receive a tax credit or subsidy –Clubs that meet the threshold and do offer insurance can be fined up to $3,000 for each employee who Enrolls in an Exchange plan and is entitled to receive a tax credit or subsidy

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employee eligibility for tax credit or subsidy –For clubs that don’t offer, eligibility is based on: Whether an employee’s household income is no more than 400% of FPL ($88,200 for a family of 4) –For clubs that do offer, eligibility is based on: Whether an employee’s household income is no more than 400% of FPL ($88,200), and His premium cost is more than 9.5% of that household income ($8,380) – “unaffordable” or The offered health plan pays less than 60% of health care costs (not at least a Bronze plan) Any unused tax credit is refundable

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Free Choice Voucher –Clubs that offer must also provide a “Free Choice Voucher” to certain employees: Those who have a household income of no more than 400% of FPL ($88,200), and Whose premium cost is between 8% and 9.8% of that household income ($7,100-$8,600), and Who have turned down the club’s ins. plan –The club still pays its premium contribution and the employee may keep any excess after paying for ins. from the Exchange –No $3K penalty to the club

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Free Choice Voucher example: –Employees’ ins. contribution is $5K; club’s is $10K –1 makes $100K, stay-at-home spouse with 2 kids They make above 400% of FPL and the ins. cost is 5% of household income –1 makes $40K, spouse makes $20K with 2 kids They make less than 400% of FPL and the ins. cost is 8.3% of household income –Club must offer “Free Choice Voucher” if the 2nd employee declines ins. –Do you keep this or increase his contribution above 9.8% & pay $3K or drop ins. & pay $2K?

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Seasonal Workers –If a club has 50 full-timers, then its full-time seasonal workers must be offered insurance –If a club has less than 50 full-timers, but seasonal workers push it over the threshold, then The club will have to offer insurance if it reaches the threshold for more than 120 days The club will not have to offer insurance if it reaches the threshold for 120 days or less –“Seasonal worker” is one who performs labor or services on a seasonal basis

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Probationary Periods –Clubs with 200 or less employees May have up to a 90 day probationary period for new full- time employees before offering insurance –Clubs with more than 200 full-time employees May not have a probationary period and must automatically enroll new full-timers in its insurance plan All of these employer mandates begin 2014

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandate example # 1: –A club has 45 FT and 20 PT (working 15 hrs/wk) –20 x 15hrs/wk = 300hrs/wk; 300hrs/wk x 4 weeks = 1,200hrs/month; 1,200/120 = 10 –So, 20 PT = 10 full-time equivalent (FTE) workers –10 FTE must be added to the 45 FT = 55 –With 55 FTE, the club must offer ins. to the 45 FT or be fined $2,000/FT But, first 30 FT are excluded from the fine

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandate example # 2: –Same club with 45 FT and 20 PT (55 FTE) –The club also employees 25 FT seasonal workers It does not matter how long the seasonal workers will be at the club –Since the club has more than 50 FTE, those 25 seasonal workers are treated as regular FT –So, 45 FT + 25 FT = 70 FT and the club must offer ins. to those 70 or be fined $2,000/FT But, the first 30 FT are excluded from the fine

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Employer mandate example # 3: –Club has 45 FT and 25 FT seasonal workers –If the seasonal workers are at the club for more than 120 days, then they are to be included in the FT number –So, 45 FT + 25 FT = 70 FT and club must offer ins. to all 70 FT or be fined $2,000/FT But the first 30 are excluded from the fine –If they are there for 120 days or less, then they are not added to the 45 FT Since the club has 45 FT, then no ins. must be offered

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act New and increased taxes on club members –A new 3.8% tax on interest, investment & dividend income for those making $200K/$250K (2013) This is on top of capital gains tax and income tax –Medicare payroll tax increased by.9% for those making $200K/$250K (2013) Clubs need to budget for a potential decrease in revenue –With the payroll tax increase alone, a club with 50 families at $250K could lose over $100,000

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act Indirect fees and taxes on private clubs –A fee on drug manufacturers for all items sold (2011) –A 2.9% tax on medical device makers for all products sold (2013) –An insurance comp. fee for all policies sold (2014) This alone is expected to cause a 3% premium increase –A 40% tax on policies costing more than $10,200 or $27,500 (2018) All of these new costs will likely be added to insurance policy premiums

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act “Grandfathered” health plan regulations –A plan in existence & covering at least 1 employee on 3/23/10 is a grandfathered health plan –As long as it retains its grandfathered status, it is exempt from compliance with the new law Sec. 105(h) of IRC –To maintain that status, a club must ensure: The plan stays the same year in and year out; There is a statement describing it as “grandfathered” in any and all plan materials distributed to employees; and There are records detailing the terms of the plan to verify, explain or clarify its grandfathered status

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act A club will lose its grandfathered status if it: –Eliminates some of a plan’s benefits –Increases the coinsurance percentage –Increases the deductible or out-of-pocket limit by more than is allowed under a gov’t formula –Increases the co-payment by more than is allowed under the gov’t formula –Decreases its premium contribution percentage by more than is allowed under the gov’t formula

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act A major factor outside of a club’s control may cause it to lose its grandfathered status –Ins. providers will alter plans to conform with the law so the same plan may not even be available for renewal Sen. Michael Enzi (R-Wy.) filed a Resolution of Disapproval to remove these regulations –The Senate voted it down It will be hard to “keep the plan you like” –HHS says 69% of all businesses and 80% of small businesses will likely lose their insurance

ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS The Patient Protection and Affordable Care Act A wild ride in DC –On 12/24/09, the Senate passed it Last Christmas Eve vote – 1895 Most time on a measure since Declaration of War - WWI –On 3/21/10, the House passed it (3/19…) –The President signed it into law 3/23/10 The slim margins of victory are telling Even with the Republican wins, no major changes will be made but some small victories now seem possible

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