5. 1. Employer Contribution Requirements – Insurance companies require a minimum percentage of
the premium for each employee that must be paid by the employer, or the entire plan is
cancelled.
2. Employee Participation Requirements – Insurance companies require a minimum percentage of
employees join the group plan, or the entire plan is cancelled.
3. Cost per Participant – Group health plans (SHOP and Self Funded) for 2013 and especially 2014
are facing the greatest increase in the history of U.S. health benefits, due to increasing health
care costs and new coverage requirements imposed by ACA (Health Care Reform).
As mentioned before, employers who eliminate their employer sponsored health benefits would not be
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hurting most employees (over 60% of the workforce ) (KFF) that work for them in the U.S. In fact,
because of the subsidies, many low‐income employees will be able to obtain better health care
coverage, for less out of pocket, through the exchange than from the employer.
Service and blue collar industries that have part time workers that equate to over 50 full time
equivalent employees, offer employer sponsored plans to full time employees and allow part time,
lower‐wage employees (under 30 hours/week) qualify for the exchange subsidies. The challenge here is
that employers will have to estimate and plan for the potential cost they could incur for offering and
contributing to health insurance coverage. This will be difficult since employers have no way of
knowing what their employees’ household incomes are or how many people are in their household.
Employers also will not know if their plan is “affordable” for their employees, because of not knowing
household incomes.
Businesses with fewer than 25 full time employees and average annual wages of less than $50,000
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that pay at least half of the cost of health insurance for their employees are eligible for a tax credit . The
full credit is available to employers with 10 or fewer employees and average annual wages of less than
$25,000. The credit phases‐out as firm size and average wage increases. The credit is capped based on
the average health insurance premium in the area where the small business is located.
In 2014, eligible small businesses that purchase coverage through the state Exchange may receive a tax
credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium.
Employers are eligible to take the tax credit for two years. Tax‐exempt small businesses meeting these
requirements are eligible for tax credits of up to 35% of the employer’s contribution toward the
employee’s health insurance premium.
Businesses with Fewer than 100 employees will be able to purchase coverage through Small Business
Health Options Program (SHOP) Exchanges beginning in 2014. These state‐based exchanges are
intended to allow employers to shop for qualified coverage and more easily compare prices and
benefits. In 2017, states will have the option to allow businesses with more than 100 employees to
purchase coverage through the SHOP Exchanges.
The potential challenge with this option goes back to the minimal essential health benefit requirements
that will be placed on the SHOP exchanges. The states are being required to structure plans as a
benchmark for these exchanges using the top three health insurance plans from the top carrier (s) in
their state. The top three selected plans are by far not going to be the cheapest, using top Actuarial
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8. DC HRA
OPRA HSA
OPRA FSA
PRA
Authority
Reg. 1.125-1 (m)
Regulation 1.125-1 (m)
Reg. 1.125-5 (m)
Reg. 1.125-1 (m)
Tax Code
Sect. 105
Sect. 223 & 125(d)(2)(D)
Section 125
Section 106
Who may Contribute
Employer Only
Employer or Employee
Employee or
Employee (final rules
Employer
pending)
$2,500
Determined by
Maximum Annual
No Maximum
Contribution
$3,250 (single)
$6,450 (family) for 2013
Employer; usually total
compensation
Eligibility
None
Requirements
Must have HSA-qualified
None
None
health coverage ($1,250+
single / $2,500+ family)
Employee must open
No
Yes
No
No
Tax Treatment
Tax-free
Tax-free
Tax-free
Tax-free
Medical Expenses
Health Insurance Premiums
IRC 213(d) Expenses w/ No
IRC 213(d)
Personal Health
Allowed
+ IRC 213(d) as Determined
Employer Limitations
Expenses;
Insurance only
new Bank Account?
but no Personal
by Employer
Health Insurance
Carryover of
Employer Determines
Unused Funds to
(2014 and Beyond/No)
Yes
No
No
Determined by Employer
Yes
No
No
With FSA
Limited-Purpose or Post-
With HRA or HSA
With HRA, HSA, or
Next Year
Portable after
Termination
Cross-Compatibility
Deductible FSA or HRA
FSA
PRIVATE HEALTH EXCHANGE
Private health insurance exchanges or “private exchanges” have been a hot topic of discussion recently.
But what is a private exchange? At its core, a private exchange is a private business – typically operated
by brokers, benefits consultants, or insurers – that sells health insurance (both fully‐insured and self‐
insured) to consumers through an online product.
In general, there are three private health exchange strategies that employers can opt into:
Single‐Employer, Single‐Carrier – Under this strategy, a single‐employer could work with a private
exchange and offer a wide‐variety of fully‐insured or self‐insured group health plans to their employees
through a single insurance carrier or third party administrator funded through an HRA.
Multiple Employers, Multiple Carriers – Under this approach, multiple employers band together,
effectively increasing the employers’ risk pool, and fund – through an HRA – the purchase of fully‐
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