Nonprofits and the Affordable Care Act: 2014 and Beyond

It’s hard to believe we are beginning our fourth year dealing with the Healthcare Reform Law.  With a countless number of changes and delays, many are asking what is next and what do I need to do.  Nonprofits are not exempt from complying with the new legislation, and many board members and executive directors are looking for guidance.

The first question you need to answer to determine to what extent the law affects you is “how many employees do I have?”.  There are three primary size categories. They are:

50 and below (a subset of this category is 25 and below)

• 51 to 99

• 100 and above

If you have 50 or fewer employees, you will not be penalized for not offering coverage.  Employers with 51-99 employees will have to offer coverage beginning in 2016, and companies with 100 or more employees will have to offer coverage beginning in 2015.

One popular provision of the Affordable Care Act (ACA) is the Small Business Health Options Program (SHOP), which is designed to provide companies with 50 or fewer employees group healthcare plans through the state Marketplace (Exchange).  The advantage of the SHOP for some small nonprofits is the Small Business Health Care Tax Credit.  This “credit” acts as a refund for tax-exempt companies and can amount to a maximum of 35% of the premium expenses paid by the organization.  Nonprofits may be eligible for this refund if they meet all the following criteria:

• If you pay at least half of the cost of employees’ single coverage for healthcare

• If you have 25 or fewer employees (employers below 10 employees are eligible for the maximum refund)

• If you pay less than $50,000 in average wages per employee

• If you have your health plan through the SHOP

This provision has garnered popularity among small nonprofits because employee wages are typically lower than average, making them eligible for some refund.  Nonprofits typically make large contributions to their employees’ healthcare coverage making them eligible for a sizable refund.

With the launch of the state Marketplace, nonprofits are asking if it’s best to discontinue their group coverage and have employees access the individual Marketplace.  Many factors have to be considered when determining if this is beneficial as a whole.  Among those are the following.

• Premiums are paid with after-tax dollars in the Marketplace

• The company loses the deduction (or credit) if there is no group plan

• Employees get no company subsidy for premiums in the Marketplace

• If an employer gives a stipend in lieu of contribution for the group medical plan, there is income tax to pay by the employee and the employer pays additional social security and Medicare tax

• Some plans in the marketplace have smaller networks and pharmacy formularies

• Larger nonprofits will be subject to the “A” tax (pay or play tax)

• Employees may be eligible for a government premium subsidy as well as reduced cost-sharing of the plans in the Marketplace

With the Marketplace being so new and having all of these factors to consider, most nonprofits are keeping their group plans in place for the coming year. 

We are finding that nonprofits with less than 10 employees are more likely to send their employees to the Marketplace instead of keeping a group plan.  It makes sense with smaller nonprofits because it reduces the administrative responsibilities and liabilities.  It is also easier to determine what route is best for employees of smaller companies because they are usually in one location.

Regardless of the size of your nonprofit organization, you will most likely have employees that have decided to remain uninsured.  It is important for those employees to understand that this year marks the first year in history that having medical insurance is required by law.  The fee in 2014 is 1% of your yearly income or $95 per person for the year, whichever is higher.  The deadline to enroll in a qualified healthcare plan was March 31, 2014, however there are so many exemptions that it shouldn’t be hard to avoid the penalty.  A few of the hardship exemptions  include filing bankruptcy, belief that insurance is unaffordable for you,  eviction or facing foreclosure, experiencing a fire, flood or other natural disaster or receiving a shut-off notice from the utility company.  To see all of these exemptions, visit https://www.healthcare.gov/exemptions/. 

With the Affordable Care Act comes a tidal wave of new rules, administrative responsibilities and things to know.  Below is a handy checklist of things nonprofits need to know for 2014.

• No waiting periods longer than 90 days

• Small group health plans (50 and below) have to cover 10 categories of Essential Health Benefits (EHB)

• The six new taxes and fees imposed by ACA

  • Patient-Centered Outcomes Research Institute (Comparative Effectiveness) Fee

  • Annual Health Insurance Industry Fee

  • Transitional Reinsurance Program Assessment Fee

  • Risk Adjustment Program and Fee

  • Marketplace User Fees

  • Cadillac Excise Tax

• You can reward employees up to 30% of premium for participating in wellness programs (50% for tobacco-based programs)

• Small group health plans are community rated with age-banded rates and higher rates for tobacco users

There are a few things nonprofits need to continue to do to maintain compliance.  For instance:

• Provide a Summary of Benefits and Coverage (SBC) to all enrollees

• Provide a written notice about Health Insurance Marketplaces

• Deliver all model notices including:

  • Medicare Part D Creditable/Non-Creditable Notice

  • Women’s Health and Cancer Rights Act Notice

  • State Children’s Health Insurance Program (SCHIP) Notice

There’s no doubt that the cost of healthcare is still on the rise.  With more options to consider than ever before, it’s important to evaluate every avenue to determine what the best fit is for your organization.  The need for administrative support and training has increased the demand for insurance brokers to provide compliance services and ongoing legislative communication.  From self-insuring to buying on the SHOP, it’s a different world with new risks and rewards, so choose wisely.  

By Mike Mewbourne
Principal/Benefits Consultant
Certified ACA Advisor
Pritchard & Jerden, Inc.
404-643-9119
[email protected]