HOW HEALTHCARE REFORMS WILL AFFECT NONPROFITS

 By Miriam Raftery

July 5, 2012 (San Diego’s East County) –Among the least understood aspects of the Affordable Care Act are the benefits that it offers to nonprofit organizations.  Smaller nonprofits have potential to reap benefits, along with their employees—without the potential penalties facing some for-profit employers.

East County Magazine contacted the new Health Law Guide for businesses site to ask how the law will impact nonprofit organizations.  Here is the response that we received:

The ACA extends benefits to non-profit employers as well as “for profit” employers. While most provisions apply to both sectors equally, the small business health care tax credit applies differently:

·        Tax credits: Phase I of the tax credits covers 2010 through 2013. In Phase I,  nonprofits with between 2 and 10 employees with average wages below $25,000  qualify for the maximum tax credit of 25 percent of the employer’s share of the  premium. This tax credit is phased out to nonprofit organizations with fewer than 25 employees and average salaries of $50,000. Nonprofits that pay at least 50  percent of the total premium qualify for the tax credit. Nonprofit organizations  take their tax credits by paying lower payroll taxes. 

Phase II of the tax credits is for two executive years beginning in 2014. The same criteria  applies for eligibility as Phase I. However, the maximum tax credit is raised to 35  percent. The tax credit in Phase II, however, can only be taken for two years.

OTHER PROVISIONS of the ACA that apply to both "for profit" & non-profit employers include:

·        Unlike large employers, small nonprofit organizations (those with 50 or fewer  employees), will not pay a penalty if they do not offer their employees health insurance benefits.

·        Beginning is 2014, small nonprofit organizations will be eligible to purchase health insurance through the health exchanges. The health exchanges are  market places where small employers can compare health insurance plans and  choice the plan best suited to their needs. The exchanges will simplify the  process of buying health insurance, promote competition and lower costs.

·        Beginning in 2014, insurance companies will be prohibited from raising the  premiums of nonprofit organizations just because one or more of their employees  had a serious medical condition and used their health insurance benefits.

·        Medical loss ratios: An insurance company that has a medical loss ratio of 80  percent is paying 80 percent of the premium they collect on claims and quality  improvements and 20 percent on administrative costs (85 percent in large group plans). Beginning in 2011,  insurance companies were required to report their medical loss ratios and this year, insurance companies that do not achieve a medical loss ratio of 80 percent  must rebate the difference to their small business customers, including small  nonprofit organizations.

For more information, please visit the Resources page on http://healthlawguideforbusiness.org.