Health Care Reform – What Employers Should be Thinking About Now

by Stinson Leonard Street - Employee Benefits & Compensation
Contact

[author: Jewelie Grape]

Beginning in 2014, the Affordable Care Act will require employers employing 50 or more full-time equivalent employees to offer full-time employees affordable, minimum essential health coverage. If such health coverage is not offered, and if at least one employee receives a premium tax credit on a state or federal exchange, the employer will be assessed a penalty. You may see this referred to as the employer mandate, employer shared responsibility, or the employer pay-or-play mandate.

Some definitions:

50 or more full-time equivalent employees – part-time employees’ hours are considered for the purpose of determining whether a company is above or below 50 employees. Calculating this number can be complex – IRS Notice 2012-58 explains in great detail the safe harbor methods, administrative periods, and look-back measurement periods, as well as how to count ongoing employees, new employees, and variable hour and seasonal employees.

Affordable – An employee’s share of the health plan premium for employee-only coverage does not exceed 9.5% of the employee’s household income.

Minimum essential coverage (also referred to as minimum value) – The health plan is designed to pay at least 60% of the covered health expenses for a typical person.

Premium tax credit – The Affordable Care Act creates subsidies for people with incomes of up to 400% of the federal poverty limit. For 2012, individuals whose adjusted gross income is less than $45,000 and families of 4 whose adjusted gross income is less than $92,000 would be eligible for these subsidies. The premium tax credit can be used on an exchange to purchase health coverage.

Employers are NOT required to offer health coverage to part-time employees (those working fewer than 30 hours/week). Employers with fewer than 50 full time equivalent employees are not subject to the employer mandate but still must provide certain notices to their employees and may need to comply with other specified requirements that will be detailed in additional guidance.

Options in 2014 for employers with 50 or more full time equivalent employees

Employers have choices to make before 2014. They can offer health coverage, or not offer coverage and pay the penalty.  Employers need to be aware that simply offering a health plan does not satisfy the employer mandate – as mentioned above, the health plan must be affordable and offer minimum essential coverage.  Employers can choose one of these four options:

Offer no health coverage.  If at least one full-time employee uses a premium tax credit to access coverage on the exchange (which means the employee has an income of less than 400% of the federal poverty level), the employer will be subject to a penalty of $2,000/year/full time employee, excluding the first 30 employees.

Offer minimum essential health coverage that is not affordable.  If any employee is required to pay more than 9.5% of his or her household income for health coverage, and if at least one full-time employee uses a premium tax credit to access coverage on the exchange, the employer will be subject to a penalty of $3,000/year for each full-time employee who accesses coverage through the exchange. The maximum penalty cannot be greater than what employer would be liable for if it did not offer coverage at all ($2,000/year/full time employee excluding the first 30 employees).

Offer affordable health coverage that doesn’t meet the minimum essential coverage definition.  If an employer’s health plan doesn’t pay at least 60% of the covered health expenses for a typical person, and if least one full-time employee uses a premium tax credit to access coverage on the exchange, the employer will be subject to a penalty of $3000/year for each full time employee who accesses health coverage through the exchange, up to a maximum amount of $2,000/year/full time employee excluding the first 30 employees.

Offer health coverage that is affordable and meets the minimum essential coverage definition. An employer meets its obligation under the Affordable Care Act, and no penalty will be assessed.

Controlled group rules. If an employer has multiple companies, each may or may not be considered separate employers under the Affordable Care Act. For purposes of health care reform, a single employer is defined by the “common control” test under Internal Revenue Code sections 414(b), (c), (m) and (o). In general, this test focuses on direct or overlapping ownership rather than actual control.  If a parent owns 80% or more of the equity in a subsidiary, or if the same 5 or fewer persons own 80% or more of the equity in another company or collectively own more than 50% of both companies, the companies will be considered controlled groups and all employees of the controlled group must be combined together for purposes of calculating whether an employer is above or below the 50 full-time equivalent employee threshold discussed earlier.

Employers need to determine if health coverage is a part of their organization’s value proposition – is offering health coverage important to the employer?  Does the employer need to offer a group health plan to attract and retain productive employees? Employers with 50 or more full-time equivalent employees must decide whether to continue offering group health coverage to their employees, or pay the penalty and have employees purchase coverage through the state or federal exchange. In addition to the penalty the employer would pay, employees might pay more on the exchange than they would for the employer’s group health coverage…if this is the case, will employers cover this additional cost by increasing their employees’ pay? 

I’ll be posting a timeline soon that should assist employers in understanding the due dates of upcoming health care reform requirements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Stinson Leonard Street - Employee Benefits & Compensation | Attorney Advertising

Written by:

Stinson Leonard Street - Employee Benefits & Compensation
Contact
more
less

Stinson Leonard Street - Employee Benefits & Compensation on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.