Navigating Health Care Reform: Guidance for Small Businesses & Individuals

NAVIGATING HEALTH CARE
REFORM
Michael P. James, JD, MBA, CSSGB
Phone: (517) 377-0823
(313) 237-7300
Email: mjames@fraserlawfirm.com
www.linkedin.com/in/MichaelJamesLaw
© 2014 Fraser Trebilcock
Davis & Dunlap, P.C.
Guidance for Small Businesses and Individuals

Why is Health Care Reform
So Complicated?
 Does health care reform apply to my business?
 What is it going to cost me?
 Do I have to provide health insurance to my
employees? Are there penalties?
 Will the changes ever stop?
 It’s just too confusing…
 Am I missing something….?
 Who can I turn to for help?

Be Prepared for
Health Care Reform
 Health Insurance Marketplace/Exchange Overview
 Are You a Large or Small Employer?
 Secret Cash Bonus for Small Employers.
 Develop a Strategy.
 HCR Checkup for Your Business.
 Develop a Compliance Program.

The Patient Protection &
Affordable Care Act (ACA)
 Became law in March 2010.
 Supreme Court upholds constitutionality of ACA
June 2012.
 ACA creates:
 Individual Health Insurance Mandate;
 Employer Responsibility Requirements; and
 Small Business Health Care Affordability Tax Credits.

Health Insurance
Marketplaces / Exchanges
 Health Insurance Marketplaces / Exchanges
 Open enrollment: October 2013…..
 Plans go into effect: January 2014
 Enrollment Deadline: Monday, March 31, 2014 !!!

Platinum
88-92% AV
Gold
78-82% AV
Silver
68-72% AV
Bronze
58-62% AV
Marketplace Metals
 ACA uses “Metal Levels” to
standardize insurance products
offered on exchange to individual
and small group markets.
 Based on actuarial values.
 The percentage of total average
costs for covered benefits that a
plan will cover.
Health Insurance
Marketplaces

Essential Health Benefits
1) Ambulatory Patient Services
2) Emergency Services
3) Hospitalization
4) Maternity and Newborn Care
5) Mental Health & Substance Use Disorder Services; Behavioral
Health Treatment
6) Prescription Drugs
7) Rehabilitative and Habilitative Services and Devices
8) Laboratory Services
9) Preventative Wellness Services and Chronic Disease
Management
10) Pediatric Services, Including Oral and Vision Care
Health Insurance
Marketplaces

How Does it Work? - What You See
Health Insurance
Marketplaces

How Does it Work? - Behind the Scenes
Health Insurance
Marketplaces

How Does it Work? - Enrollment
Health Insurance
Marketplaces

What is going on with the
Marketplace?

ACA Individual Health
Insurance Mandate
 The individual health insurance mandate requires nearly all
Americans to purchase and maintain health insurance.
 Qualified coverage evidenced through tax returns.

ACA Individual Health
Insurance Mandate
 If an individual fails to have minimally essential coverage, he
or she will be required to pay an excise tax.
2014:
Penalty is $95 per adult and $47.50 per
child (up to $285 for a family) or 1.0% of
family income, whichever is greater.
2015:
Penalty is $325 per adult and $162.50
per child (up to $975 for a family) or
2.0% of family income, whichever is
greater.
2016 and Beyond:
Penalty is $695 per adult and $347.50 per
child (up to $2,085 for a family) or 2.5% of
family income, whichever is greater.

Are You a Large
or Small Employer?
How do you Determine Your FTEs?
 1) Evaluate employees’ monthly hours for each month:
 Number of full-time employees working 130 hours or more in a month
+
 Total part-time hours in a month / 120
 2) Add the monthly calculations.
 3) Divide total monthly calculations by 12.
 4) Round down to the nearest whole number.
The FTE is the average of each monthly calculation across the
preceding calendar year.

 Employees?
 Seasonal Employees?
 Independent Contractors?
 Owner of Business?
 Family Members of Business Owner?
 Employees of Other Businesses You Own?
Are You a Large
or Small Employer?
Which Employees Count Toward FTEs?

Are You a Large
or Small Employer?
Seasonal Employees Redefined
 A “Seasonal Employee” is an employee in a position for which the
customary annual employment is 6 months or less. The seasonal
period should begin around the same part of the year each year.
 Seasonal employment may be extended under certain
circumstances.
Bona Fide Volunteers
 Government entities and 501(c) organizations with tax-exempt
volunteers do not need to count the hours of service provided by
bona fide volunteers when determining their status as a large or
small employer under the ACA.

ACA Employer Responsibility
Under 50 FTEs
 There is no insurance
requirement.
 Employers do not have to
offer insurance.
 However, if health insurance
offered, must meet Essential
Health Benefits and metals.

Small Business Health
Option Programs
Small Business Health Option Programs
(SHOP)
 Open to all small businesses in 2014.
 Must have 50 FTEs or less.
 In 2014, employer chooses one insurance product for all employees.
 In 2015, employer picks the metal level, employees choose the
insurance product.
 In 2016, SHOP expands to businesses with up to 100 FTEs.
 In 2017+, States have option to expand SHOP eligibility to large
groups.

Secret Cash Bonus
for Small Employers
Small Business Health Care Tax Credits

Secret Cash Bonus
for Small Employers
Potential Tax Credits 2010 - 2013
For-Profit
Up to 35% of employer
contribution to
employees’ health
insurance premium
Non-Profit
contribution to
employees’ health
insurance premium

Secret Cash Bonus
for Small Employers
Potential Tax Credits 2014 - 2016
For-Profit
contribution to
employees’ health
insurance premium
Non-Profit
contribution to
employees’ health
insurance premium

Secret Cash Bonus
for Small Employers
Requirements
< 25
Employees
Average
Employee
Wages
< $50,000
Employer must
contribute at least
50% of premium
cost

Secret Cash Bonus
for Small Employers
Requirements
Maximum credit available to employers with 10 or
fewer FTEs and average annual wages of $25,000 or
less.
 For each FTE above 10 FTEs, the credit is reduced by 1/15.
 For each $1,000 above $25,000 in average wages, the credit
is reduced by 1/25.

Secret Cash Bonus
for Small Employers
Which Employees Count?
 Seasonal Workers
 Leased Employees
 Owner of Business
 Family Members of Business Owner

Secret Cash Bonus
for Small Employers
Members of a controlled or an affiliated service group may
be treated as a single employer for tax credit purposes.
Which Employees Count?

Secret Cash Bonus
for Small Employers
Calculating the Number of Employees
Calculating FTEs for Tax Credit Purposes - Three Methods:
1) Actual Hours Worked + Paid Leave
 Limit of 2,080 hours per employee, per year
2) Days-Worked Equivalency + Paid Leave
 8 hours for each day
3) Weeks-Worked Equivalency + Paid Leave
 40 hours for each week
Add up the total hours of service the employer pays wages to
employees and divide by 2,080. Round down.

Secret Cash Bonus
for Small Employers
Calculating Average Employee Wages
1) Add up the total wages paid by employer during the tax year.
2) Divide total wages by the number of FTEs for the year.
3) Round down the result to the nearest $1,000.
The employer’s average wages are $24,000 ($245,786 / 10 =
$24,578.60, rounded down to the nearest $1,000).
Example: In 2013, an employer pays a total
of $245,786 in wages and has 10 FTEs.

Secret Cash Bonus
for Small Employers
Calculating Employer Contributions
1) Employer must pay at least 50% of coverage.
Employer pays at least 50% of the premiums
for each employee enrolled in health
insurance coverage offered by the employer.
Uniformity Requirement:
 The employer is not required to pay the same percentage of the
premium for each employee.
 Required to be at least 50% of the premium for single
coverage; does not have to pay 50% of premium for more
expensive coverage options.

Secret Cash Bonus
for Small Employers
Uniformity Requirement Example:
Employer has 9 employees:
 6 enrolled in single coverage.
 3 enrolled in family coverage.
Premium Single: $ 8,000
Premium Family: $14,000
Employer pays $4,000 per
employee:
• 50% of the premium for
single coverage for each
employee enrolled in
single or family coverage.
• Employer has satisfied
uniformity requirement.

Secret Cash Bonus
for Small Employers
2) Payments must be made under a qualified arrangement.
Only premiums paid to a health insurance issuer.
 Major medical plan, dental, vision, etc.
 Each plan must meet requirements.
Payments that do not count:
 Portion paid by employees;
 Premium payments under a salary reduction
arrangement;
 Employer contributions to HRAs, FSAs, and HSAs.

Secret Cash Bonus
for Small Employers
3) Cap on the amount of employer’s premium payments that
toward tax credit.
Employer’s premium payments may not be
more than the average premium for the
small group market in the state where the
employer offers coverage.
2013 Michigan: Average Premiums for
Small Group Markets
 Single: $ 5,569
 Family: $ 13,256

Secret Cash Bonus
for Small Employers
Cap on Premium Payments Example:
# of
Employees
Type of
Coverage
Total
Premiums
MI Avg.
Premium
Employer
Pays 50%
50% of MI
Avg.
4 Single $6,000 $5,569 $3,000 $2,785.50
5 Family $14,000 $13,256 $7,000 $6,628
The premium payments for each employee exceed 50% of the
average premium for the small group market in Michigan.
The value of premiums that can be used to compute the credit
is: $44,282 [($2,785.50 x 4) + ($6,828 x 5)].

Summary
1) Determine the employees who count toward the credit.
2) Calculate the hours of service for these employees.
3) Calculate the number of the employer’s FTEs
4) Calculate the average annual wages paid per FTE.
5) Calculate the relevant employer contributions.
Initial Amount of Credit (Contribution x Percentage)
- Reduction for FTE in excess of 10
- Reduction for avg. wages in excess of $25,000
Total Small Business Health Care Tax Credit
Secret Cash Bonus
for Small Employers

Secret Cash Bonus
for Small Employers
How to Claim the Credit
 Tax-exempt employer:
 Form 990-T with attached Form 8941 showing calculation of credit.
 Other employers:
 Claim the credit on income tax return, use attached From 8941 showing
calculation of credit.
 Credit may be able to be used to offset Alternative Minimum
Tax liability.
 The tax credit can be reflected in determining estimated tax
payments for the year.
 The credit affects an employer’s allowable deduction for health
insurance premiums; deduction is reduced by amount of credit.
 Credit does not affect employer’s employment tax payments.

What Strategy Works
for Your Business?
Provide
Health
Insurance
Send
Employees to
Exchange

Make Your
Employees Love You
 Involve employees in decision-making process?
 Communicate with your employees:
 If providing coverage?
 Providing coverage despite not being required to do so.
 Culture of business; potential advantage over competitors.
 If not providing coverage?
 Cost to business; other forms of assistance.
 Be prepared to assist employees with federal exchange.

Make Your
Employees Love You
Health Insurance Marketplace Notice
 An employer is required to provide notice of the availability of
the Exchange, informing employees that:
 1) the existence of the Marketplace;
 2) that employees may be eligible for a subsidy under the
Marketplace if the employer’s share of the aggregate cost of
benefits is less than 60%; and
 3) that if the employee purchases a policy through the
Marketplace, he or she will lose the contribution to any health
benefits offered by the employer.
 Notice must be provided to each employee at the time of hiring.
 For existing employees, the notice must be given no later than
October 1, 2013.

Health Care Reform
Checkup for Your Business
 Is your business compliant with all the current health care
regulations?
 Many regulations went into effect in 2012 and 2013. Have you
made the necessary adjustments?

Fraser Trebilcock Davis & Dunlap, P.C.
124 W. Allegan Street, Suite 1000
Lansing, Michigan 48933
www.fraserlawfirm.com
Phone: (517) 482-5800
Fax: (517) 482-0887
Fraser Trebilcock Davis & Dunlap, P.C.
One Woodward Avenue, Suite 1550
Detroit, Michigan 48226
www.fraserlawfirm.com
Phone: (313) 237-7300
Fax: (313) 961-1651
Michael P. James, JD, MBA, CSSGB
Phone: (517) 377-0823
(313) 237-7300
Email: mjames@fraserlawfirm.com
www.linkedin.com/in/MichaelJamesLaw
© 2014 Fraser Trebilcock
Davis & Dunlap, P.C.
Fraser Trebilcock
Health Care Reform
www.mihealthcarelaws.com

Navigating Health Care Reform: Guidance for Small Businesses & Individuals

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Navigating Health Care Reform: Guidance for Small Businesses & Individuals