Small Business Conversations
What are the conversations today and what will
they be in the future as health care reform takes
hold in the small business community?
Scott Lyon, Vice President, Small Business
Association of Michigan
Key Elements of Health Care
Reform
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Medicaid and CHIP Expansion
Premium Subsidies for Lower Income
Health Insurance Exchanges
Insurance Market Reforms
Individual and Employer Responsibilities
Quality and Delivery System Reforms
Why Reform?
 Increasing Cost of Health Care Driving Insurance Premiums
Higher
 Erosion of Employer Sponsored Health Insurance
 Increasing Number of Uninsured
 Rapid Growth in Medicaid Costs and Enrollment
 Pressure on Budgets
Rising Costs Have Driven a Steady Erosion of
Employer Sponsored Plans
 Share of all Firms offering health insurance:
– 69% offered in 2000
– 60% in 2009
 Share of small firms (3 – 6 employees)
– 57% offered in 2000
– 46% in 2009
The above has driven a steady increase in the number of the
uninsured across the country and in Michigan
Source: Kaiser/HRET Survey of Employer Sponsored Health Benefits 2000-2009
The Employer Group Health
Insurance Market
1. One Employee Groups
Individual or Group Market – Fully Insured
2. 2 – 49 Employee Groups
Customers
Group Market – Fully Insured, FSAs, HRAs, HSAs
3. 50 – 99 Employee Groups
Group Market, fully-insured, some partial self-insurance, FSAs,
HRAs, HSAs
4. 100 – 499 Employee Groups
Fully Insured, ASO, Self-Insured, etc
5. 500 + Employee Groups
Self-Insured
So, what is the conversation in the
small business community?
 The same as it has been for at least 25 years
 Small businesses need access to affordable health
insurance for themselves, their families and their
employees…
 The rising cost of health care, and therefore health
insurance premiums, continues to be the number one
conversation/concern
So, what is the conversation in the
small business community?
Small Business Tax Credits – treating the symptom…
2010 Tax Year Part I – 2014 Part II – 2 years
Tax credit equal to 35% (50% in Part II) of the employers health insurance costs, if:
– 10 or fewer full-time equivalent employees
– Average annual wages of less that $25,000 (not including owner’s or owner’s family
member wages)
– Employer pays 50% or more of the premium
– Part II – Must Purchase via Exchange
• Companies with between 11 and 25 workers and an average wage of less than $50,000
are eligible for partial credits
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If currently offer – Qualify or Not? Or just maintain plan…
If do not offer, is the incentive enough to begin?
So, what is the conversation in the
small business community?
2011
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Over the Counter Drug Exclusion: Over the counter drugs are excluded from eligibility for
Section 125 flexible spending accounts
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W2: All employers must include on their employees W2s the aggregate cost of employer
sponsored health benefits. Why is this requirement out there. Taxing benefits?
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Simple Cafeteria Plan: A new vehicle for small businesses to provide tax-free benefits to
their employees by lowering the administrative hurdles of sponsoring a cafeteria
plan. This provision also exempts employers who make contributions for employees
under a "Simple Cafeteria Plan" from nondiscrimination requirements. Available to
companies with fewer than 100 employees
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Note: just like regular 125 plans, SIMPLEs cannot cover a sole proprietor, S Corp, 2% or greater shareholder,
partnerships, or LLC treated as a partnership.
1099 – MISC Reporting: Track payments to individuals and corporation for services and
goods.
So, what is the conversation in the
small business community?
2011
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Section 125 Limits: Section 125 flexible spending accounts contributions are limited to
$2,500 per year
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Tax Change: Threshold for deducting unreimbursed medical expenses from federal taxes
increases from 7.5% to 10%
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Medicare Tax Rate: For individuals who earn $200,000+ (family $250,000+) the
Medicare tax rate will increase by .9% (1.45% - 2.35%) – for employee share only and a
3.8% tax on unearned income
So, what is the conversation in the
small business community?
2014
 Individual Mandate - Requires all U.S. citizens and legal residents to have qualifying
health coverage or face a penalty if they do not. Those under FPL or those that do not file
a tax return – no penalty
 Employer “Mandate”/Free Rider - Employers with more than 50 employees must
offer either “affordable” coverage or potentially be subject to a “free rider” penalty.
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What is the penalty?
What is the calculation to determine 50 or more?
How often do I need to make the calculation?
Should I keep my business below 50 employees?
 Does the Mandate make employer sponsored insurance more or less
valuable as an employee benefit?
So, what is the conversation in the
small business community?
2014
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Free Choice Voucher - Employers are required to provide any employee with income under
400% of federal poverty level and whose share of premium exceeds 8%, but is less than
9.8%, of their household income and who choose to enroll through the exchange with a
“free choice voucher”. The voucher would be equivalent to the premium you would have
paid had the employee enrolled in your plan.
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Who will be responsible for the calculations?
How often will calculations be made?
Health Insurance Exchanges: State based American Health Benefit Exchanges and Small
Business Health Options Program (SHOP) where individuals and small businesses with up
to 100 ees can purchase qualified coverage. (states can limit to 50 ees until 2016)
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Who in Michigan is thinking about their structure?
One Exchange or Two Exchanges?
Role of Agents and Brokers?
So, what is the conversation in the
small business community?
2018
 Cadillac Tax
– An excise tax on insurers or employer health insurance plans with aggregate values
that exceed $10,200 for an individual and $27,500 for a family takes effect.
– Tax is indexed to the CPI-U beginning in 2020
– Cadillac Tax is 40% of the value above the threshold.
 Have you done the math? We have…