Every day we are invited to another round of speculation and over-analysis about the projected impact of health care reform law. Although the Patient Protection and Affordable Care Act, or PPACA, is in its fourth year of existence, due to the scheduled nature of most provisions the total effect PPACA will have on individuals and businesses remains a point of speculation. In addition, Federal agencies continue to define specific phrases and terms from the original law on a regular basis, at times raising more questions than answers.
Despite this, there are some core tenets that are “known known’s” regarding the responsibilities of individuals to find coverage and for some employers, to offer coverage. “Responsibilities” in the law are more commonly referred to in the media and among the public as “mandates.” This article will summarize some of the key features of the individual and employer mandates and list some items that require more immediate attention.
The individual mandate requires heads of household to have essential health coverage for both themselves and all dependents through a qualified health plan or pay a penalty. Dependents for PPACA purposes are children and not spouses. This mandate is effective January 1, 2014. Individuals who do not have coverage for some or all of 2014 will be assessed a penalty that is the greater of $95 or 1% of household income. The penalty will be assessed annually and will be for the proportion of the time for which there is a lack of coverage. Although this penalty is low compared to the cost of coverage, it will increase each calendar year.
Enrollment for the government facilitated marketplaces begins October 1, 2013. Although PPACA is written so government facilitated marketplaces are to be managed by each state, this has not materialized and in the majority of states the marketplace will be managed by the Federal government. Individuals may be eligible for premium subsidies and cost sharing reductions on the marketplaces depending on household income and size. The viability of the marketplaces, and the premiums to be charged on the offered plans, remain a source of frequent speculation.
PPACA divides employers into two groups: applicable large employers with over fifty full-time equivalents and small employers that have fewer than fifty full-time equivalents. Full-time equivalents include those employees who work over thirty hours per week plus the product of a calculation involving the remaining part-time employee hours. Once employer size has been determined, an employer can proceed with the relevant compliance provisions described below. There are unique strategies available to groups of either size that can be discussed with a good benefits advisor.
Employers with over fifty full-time equivalents must offer affordable coverage to substantially all full-time employees to avoid paying one of two penalties; one penalty for not offering coverage and one for offering coverage that does not offer a minimum value and/or is unaffordable. The enforcement of employer responsibility penalties has been delayed from January 2014 to January 2015. Applicable large employers may delay implementing coverage options that are affordable or extending coverage to all full-time employees, but it is wiser to continue to take steps toward full compliance and to view 2014 as a dry run before the now 2015 applicable penalty year.
Employers with fewer than fifty full-time equivalents are not subject to either of the above penalties. These employers will want to consider why they offer coverage now and whether that reasoning stands in spite of the law and potentially more regulatory headaches. If they continue coverage, they will need to determine if that coverage is still advantageous to employees who may be eligible for premium subsidies on the government sponsored marketplaces.
All employers need to check with their benefits advisors and insurance carriers to determine if their current health plan is grandfathered and if the benefits and coverage offered is compliant with PPACA’s many market reform provisions such as no annual limits on essential health benefits or maximum out of pocket charges. These market reforms, with few exceptions, apply to most health plans and certain provisions are already effective. Employers should also check with carriers or their advisor as to which party is responsible for the payment of certain plan fees that are due starting next year.
In addition, any employer subject to the Fair Labor Standards Act (FLSA) must provide a notice to each employee prior to October 1, 2013 that describes the government sponsored marketplaces and the subsidies offered. This notice shall include information about the employer sponsored plan, if applicable, and the affordability of that plan. The U.S. Department of Labor has provided two templates of this notice; one for employers with a qualified plan and one for employers that do not offer a plan.
PPACA does far more than simply change the benefits industry and the way health care is purchased, and instead it is a total business issue that deserves careful analysis. Although regulations continue to be released and the large employer penalties have been delayed, there still remains significant work to do to be in compliance with PPACA as well as other benefits legislation. Employers need to stay educated and prepared by frequently checking for updates from the government, staying in touch with their health plan provider and most importantly seeking the advice of an informed benefits advisor who can provide regular updates and creative strategies to ensure that you continue to offer benefits to your employees that are both competitive and compliant.
Brown and Brown of Indiana