What Healthcare Reform Means For Nonprofits

The Patient Protection and Affordable Care Act, signed by President Obama on March 23, and the Health Care and Education Reconciliation Act of 2010 takes significant steps toward making health insurance more affordable for nonprofits.

According to the National Council of Nonprofits, two key provisions of healthcare reform include:

Small Employer Credit: Provides a tax credit that will allow small nonprofit employers (25 employees or fewer, average wages less than $50,000 per year) to deduct 25% of qualified health costs from 2010-2013 and 35% of qualified costs for 2014 and onward for up to two-years from their withholdings tax liability.

Wellness Programs: Provides grants for up to five years to small employers that establish wellness programs. Provides technical assistance and other resources to evaluate employer-based wellness programs. Permits employers to offer employees rewards—in the form of premium discounts, waivers of cost-sharing requirements, or benefits that would otherwise not be provided—of up to 30% of the cost of coverage for participating in a wellness program and meeting certain health-related standards. The reward limit may be increased to 50% of the cost of coverage if deemed appropriate.

For nonprofits, the tax credit will "apply the credit to certain payroll taxes, like the money withheld from employee checks for Medicare" according to The Chronicle of Philanthropy.

The Chronicle also notes that larger nonprofits will be affected by a provision in the reconciliation bill that will "stiffen the penalty for certain employers with more than 50 workers that do not offer health insurance. If at least one of a group's full-time workers must rely on subsidies to buy insurance, the employer would be fined $2,000 for each of its full-time workers."

UPDATE: Thanks to a recent report from the Commonwealth's Joing Committee on Public Health, the Council has become aware of additional provisions that may affect some nonprofits:

Requires employers to provide a reasonable break time and a suitable place, other than a bathroom, for an employee to express breast milk for her nursing child. Excludes an employer with less than 50 employees if such requirements would impose an undue hardship. (Effective Date Not Specified)

Makes appropriations for FY2010-FY2014 to expand state aging and disability resource centers.

Establishes a voluntary insurance program that provides an average of $50 per day to purchase community living assistance services and supports. (Effective 2011)

Relevant Changes to MassHealth

Requiring Medicaid coverage for tobacco cessation services for pregnant women. (Effective October 1, 2010)

6% increase in federal reimbursement for community based attendance services & support
(Effective October 1, 2010)

Relevant changes to Medicare

Allocate $10 million per year for five years to continue the Aging and Disability Resource Center Initiatives (Funds appropriated for fiscal years 2010 through 2014)

Medicare will now provide an annual wellness visit that includes a risk assessment and a 5-10 year personalized prevention plan with no co-payment or deductible.

New Government Agencies

Establishes seven new offices of minority health within Health and Human Services agencies.
(Effective upon enactment)

Creates a non-profit patient centered outcome research institute to advance comparative effectiveness research. (Effective upon enactment)

Create the State Balancing Incentive Program to provide enhanced federal matching payments to eligible states to increase the proportion of non-institutionally-based long-term care services. (Effective October 1, 2011 through September 30, 2015)

Provides competitive grants to community based organizations and state and local agencies for community-based preventive and wellness activities. (Funds appropriated for 5 years beginning in 2010) Grants available for:

increasing healthy food options, physical activity opportunities and wellness curricula in schools;

creating the infrastructure to increase access to nutritious foods and healthy living;

increasing access to physical activity;

increasing access to smoking cessation;

improving social and emotional wellness;

enhancing safety in a community;

addressing chronic disease priority area identified by the grantee;

worksite wellness programming and incentives;

working to highlight healthy options at restaurants and other food venues;

prioritizing strategies to reduce racial and ethnic disparities, including social, economic, and geographic determinants of health; and

addressing special populations needs in both urban and rural areas

Read more about how the health insurance reform bills and how they will impact nonprofit organizations with resources from TD Insurance.

The Council is pleased to offer further details on the bill courtesy of our Endorsed Business Partner, TD Insurance, who has offered discounted employee benefits and commercial insurance solutions to our members for more than 30 years.

According to TD Insurance's early analysis:

The most pressing and short term issue for Mass employers involves the limitation of FSA contributions at $2500 and whether that begins in 2011 or 2013.

The New Law: The Basics

Most people will be required to have coverage or pay a fine, similar to the Mass State Health Care Law.

There will be tax credits for low income earners (defined as 133% of federal poverty level)

The penalty would be the greater of $95 or 1% of income for an individual and by 2016 this would rise to the greater of $695 or 2.5% of income, families would be limited to $2,085

A state based internet markets/health insurance exchanges will be created where people can shop for insurance (similar to the Mass Health Care Connector Exchange that currently exists)

No longer can any health plan limit coverage for Pre-existing conditions

While employers will NOT be mandated to offer coverage, any employer over 50 employees will be subject to tax/penalties if they do not offer a minimum level of coverage (similar to Mass Law)

Many individuals will get purchasing help from the government through sliding-scale tax credits that would subsidize the cost of premiums. It appears this will apply to those without access to employer plans and can be as high as 400% of federal poverty level (Mass currently provides subsidies up to 300% of FPL) Small businesses would get tax credits to help them provide insurance for workers.

Key Points:

The law prohibits health plans from rescinding coverage from enrollees once they have been covered.

Qualified health plans must sell insurance to anyone who wishes to purchase.

Premiums may vary only on the basis of family size, geography, age, and tobacco use.

Dependent children can remain on their parents' health insurance plans until age 26.

No more Lifetime limits on amounts spent on care or particular conditions. This will cause needed adjustments in the reinsurance market

Employer Mandates:

Companies with more than 50 employees that do not offer affordable insurance would have to pay a $750 fine for every person they employ if at least one worker receives coverage through the exchange.

Construction Industry Employers with 5-50 full-time employees and whose annual payroll is in excess of $250,000 will be subject to a penalty of $750 per employee if they fail to offer health care to their employees.

A key question yet to be answered, an employer with multiple businesses, such as multiple dealerships, is this one or multiple businesses?

Small Business Exemption/Credit:

Companies with fewer than 50 workers will not face any penalties if they don’t offer health insurance.

25 or fewer employers they can qualify for tax credit if the average wage is $40,000 and less.

Tax credits of up to 35% of the cost of premiums will be available this year and the credits will grow to 50% in 2014.

Voucher: Workers who qualify for an “affordability exemption” due to low income but do not qualify for tax credits can take their employer contribution in lieu of coverage through the employer’s group plan and join an exchange plan. This is similar to Mass employer having to provide a section 125 pre-tax vehicle to allow employees to purchase coverage through the Connector exchange even if they are not eligible for the employer plan.

Revenue Generating Provisions:

Excise Tax on “Cadillac Plans”: A 40% excise tax would be imposed on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for individual coverage and $27,500 for family coverage, indexed to the consumer price index for urban consumers (CPI-U) plus one percentage point (would not start until 2018).

Taxes on High Income Individuals: Two new taxes that will be imposed on single taxpayers with income in excess of $200,000 and couples filing jointly with incomes in excess of $250,000 – (1) A 0.5% increase in FICA payroll taxes; and (2) a 0.9% increase to the Medicare tax on wages.

Treatment of HSAs and MSAs: The tax on distributions from a health savings account or an Archer Medical Savings Account that are not used for qualified medical expenses would be increased to 20% of the disbursed amount used for non-qualified medical expenses (currently the tax penalty is 10%).

FSA Contributions: The amount of contributions to a flexible spending account (FSA) for medical expenses would be limited to $2,500 per year, adjusted for inflation (under the currently passed bill this would start for plan years after 12/31/10, right around the corner. In the reconciliation bill this would not start until plan years after 12/31/12).

New Taxes and Fees for Various Sectors of the Health Care Industry: $2.3 billion annual fee on the pharmaceutical manufacturing sector; $2 billion annual fee on the medical device manufacturing sector; an annual fee imposed on all health insurers based on their market share; and a 10% sales-type tax on indoor tanning services.

Taxation of Retiree Drug Subsidies: Eliminates the deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees.

For more information on healthcare reform, you can visit the government's Health Reform website, or to find out how you can take advantage of discounted Delta Dental, Property & Casualty, and other benefits, please contact Michelle Martone or view http://providers.org/tdinsurance for more information.