Presented by: Karen R. Harned, Esq. National Federation of Independent Business March 25, 2014 1.

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Healthcare UpdatePresented by: Karen R. Harned, Esq.

National Federation of Independent BusinessMarch 25, 2014

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NFIB—Who We Represent

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Small Business& Health Insurance

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Most Important Small Bus. Problem by Year: (Rank Out of 75 Possible Problems)

YearCost of Health Insur.

RankLocate Qualified Empl.

RankObtain Short-Term Loans

Rank

2012200820042000199619911986

#1 1 1 1 1 1 1

#32 12 11 3 11 20 23

#58 72 70 69 64 53 54

Source: NFIB Research Foundation, Problems and Priorities

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Percent Small Businesses Offering Health Insurance by Firm Size and Year: 2000 - 2013

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

20

40

60

80

100

3-9 Empl. 10-24 Empl. 25-49 Empl. 50-199 Empl.

Source: Kaiser Family Foundation.

Perc

ent

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Employees 18 – 64 With Selected Sources of Health Insurance by Employer Type: 2012

Self-Empl. < 100 Empl. 100 - 999 Empl.

1,000+ Empl.

Public Sect.0

5

10

15

20

25

30

35

40

45

50

TotalOwn-NameDepend.Ind. Pur.PublicUninsured

Mill

ions

Source: EBRI estimates from CPS

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Health Insurance Premiums:Over Time and for Small Business in 2013

29%

6%

6%19%

29%

9% 2%

Premiums

In-creased

Same

Decrease

Increased By: <5% 5-9% 10-19% 20-34% 35+%

Source: NFIB Research Foundation.

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Average Small Group Premiums By State (IRS Data)

2010 2011 2012 2013

Employee-Only Family Employee

-Only Family Employee-Only Family Employee-

Only Family

SC

$ 4,899 $11,780 $ 5,036 $11,780 $ 5,244 $12,243 $ 5,351 $12,473

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• 79 percent of small business owners purchase their employer sponsored health insurance through an agent or broker

Small Business & Health Insurance

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Small Business Under the “Affordable” Care Act

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Source:NFIB Research FoundationLongitudinal Survey 2013

NFIB.com/ACAgraph

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Small BusinessHealth Care Survey Results• “Aggregation rules” may impact as

many as 150,000 small businesses

• Employees requested small employers to begin offering employee health insurance in 4 percent of non-offering firms in the last 12 months 14

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• 84% of small business owners have health insurance; 15% don’t

•35% -- business’ plan •30% -- individual plan •19% -- spouses’ plan

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Small BusinessHealth Care Survey Results

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• 1-2% fewer small businesses offered insurance in 2013 as compared to 2012

• Statistic conceals larger firm by firm churn• 9% offering in 2012 dropped coverage• 5% not offering added coverage

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Small BusinessHealth Care Survey Results

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• Small employers often pay the entire health insurance premium for their employees

• 40% for individual coverage• 27% for family coverage• 21% for plus-one coverage

The more employers pay (on a percentage basis), the more likely employees are to participate

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Small BusinessHealth Care Survey Results

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• 13% plan to cut the hours of part-time employees in 2014. However, no more than half of these planned cuts are associated with the Affordable Care Act.

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Small BusinessHealth Care Survey Results

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• Small Businesses are very uncertain about how ACA will impact their business

• This is the first report in a planned series of three annual reports based on a longitudinal survey of more than 921 small employers

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Small BusinessHealth Care Survey Results

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Group Health Insurance Under the ACA

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Complexities• Visible to Small Business Owner• The 50 Full-Time Employee Count• What is an Employee? – The Hours Count• What is an Employer? – Aggregation Rules

• The Temporary Tax Credit – Much Ado About Little• Loss of Existing Policies• Added Paperwork

• Not Visible to Small Business Owner• Full Range of Offering Arrangements• Operation of SHOP Exchanges (with Exceptions)• Back-End (e.g., Change and Reduction in Networks)

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ACA Cost Drivers for Small Firms• Most, but not all, in the fully-insured market will face

substantial increases, particularly in 2014• Community Rating• Minimum Benefit Package• HIT Tax• Supply and Demand Issues• Medical Inflation (Technology, Etc.)

• Forced to Change Plans to Obtain a “Qualified Plan” • Unknown Number

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Small Business Owner Options

• Purchase -- Old-Fashioned Way • Purchase -- New-Fangled Way (SHOP Exchanges)

• Self-Insure• Move to a Defined-Contribution* Type Plan• Eliminate (Have No) Coverage*taxable income

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SHOP Exchange Purchases• Small Group (<50 Employees) Purchasing Mart• Transparency• More Competition

• Theory, State-Based; Practice, Feds Run 36• Promised Operation by 2015; Delayed One Year• SHOPs Must Offer “Qualified Plans”• State SHOP Choices• Employer-Sponsored Plans (like now)• Employer Chooses Plan Level; Employee Chooses Plan Within

the Level• Employer Contributes Flat Amount; Employee Chooses Plan

• Groups Up to 100 Employees Melded into SHOP by 2016

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Self-Insurance• Benefits – (Can Be) Much Cheaper • Not Subject to ACA Minimum Benefits, Comm. Rating, or HIT• Not for Everyone• Small Groups Difficult to Individually Underwrite• Poor Cash Flow• Unhealthy, Older Employee Population• Low Risk Tolerance

• Status• About 4-6 Percent of Small Employers Now Self-Insure• Increased Interest; 4 Percent “Highly Likely” to Switch;

7 Percent “Somewhat Likely”• Fear – Too Many Good Risks Will Self-Insure • Reinsurance Attachment Points – Feds vs. States

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Defined-Contributions*:The Logical Way Out • Relevant Influences

• Continuing Unsustainable Prices Increases• Limits on Deductibles• Competition for Employees• Individual Mandate; Individual Exchange; and Roll- Out of HealthCare.gov• Escape a Time-Consuming HR Function• Currently Infrequent; About 14 Percent

• Most Likely to Occur in Low-Paying Firms• Reasons – 1. Individual Subsidies, 2. Tax Exclusion

*taxable income

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Incentives for a Defined-Contribution*: Three Hypothetical Examples

Out of Exchange In Exchange Beneficiary

Low Income Employee #1 Plan Cost Employer’s Share Employee’s Share Government’s Share

$1,000 Mo. 750 250 0

$1,000 Mo. 575 125 300

+$175/Emp./Mo.+$125/Mo.-$300/Emp./Mo.

Low Income Employee #2 Plan Cost Employer’s Share Employee’s Share Government’s Share

$500 Mo. 500 0 0

$500 Mo. 400 -50 150

+$100/Emp./Mo.+$50/Mo.*-$150/Emp./Mo.

High Income Employee Plan Cost Employer’s Share Employee’s Share Government’s Share

$1,500 Mo. 1,000 500 0

$1,500 Mo. 1,500 500 0

*New Take-Home

No Change No Change No Change

*taxable income

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Recent Major Reversals and Pivots• Downsizing SHOP Options to One Plan• Postponement of Employer Mandate•Weakening of Individual Mandate• Elimination of Penalties for Failure to Notify• Postponement of SHOP• Tax Credit Only for Those Who Use

SHOP – Revisited• Request for Comments on Attachment Points for Reinsurance

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Possible Policy Changes• House continues to vote on piecemeal repeal or

relief efforts - March votes included a delay of the individual mandate and changing the definition of full-time employee (for the employer mandate) from 30 hours per week to 40 hours per week

• Senate - Harry Reid says he will allow votes on Democratic ideas.

• Administration continues to delay, provide "transition relief," and extend extensions on requirements

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Small Business Policy Objectives• Repeal the Affordable Care Act• Eliminate Health Insurance Tax• Eliminate Employer Mandate• Change 30 hour work week to

traditional 40 hour work week

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How Can You Help Small Businesses Struggling to comply with the ACA?

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Questions?NFIB Healthcare Reform Resource Center - http://www.nfib.com/business-resources/healthcare

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Speaker ContactKaren Harned• Executive Director, Small

Business Legal Center• National Federation of

Independent Business (NFIB)

• [email protected]• (202) 314-2061