by Jamie Burkart
“Obamacare” is now as much law as it is hot-button issue. While politicians, pundits, and historians will debate the success or failure of the law officially known as the Affordable Care Act (ACA) for decades to come, today business executives have a multitude of new tax laws to comprehend, insurance regulations to sort through, and information that, by law, needs to be provided to their employees.
The focus of this article will be how the ACA may apply to those companies classified under the law as “large business” which are those companies with 50 or more full time-equivalent (FTE) employees. While companies with less than 50 employees have been given tools through the ACA, like tax credits and the new insurance marketplaces, large businesses have been given rules that specify the types of insurance they must provide their employees, limits to their employees’ contribution to their premium costs, and a bevy of new Internal Revenue Service (IRS) forms.
Because of the complexities of the law that were written into the ACA, earlier this year, President Obama’s administration issued a reprieve of the implementation of the ACA for large businesses until January 2015. While this provides a brief respite for corporate managers from the teeth of the law, the ACA is still in route and there are still many changes that you should be preparing for.
1. Employer Shared Responsibility
Beginning in 2015, employers with 50 or more full time/full time-equivalent employees that do not offer affordable health insurance policies that provide minimum value to their full time employees (and dependents) may be required to pay an assessment if at least one of their full-time employees is certified to receive a premium tax credit in an individual health insurance marketplace.
By definition under the law, a full time employee is not just a one person who works more than 30 hours per week for your organization, but the average of the hours worked by any part time or seasonal workers you may have on staff.
The other aspect of the employer shared responsibility portion of the ACA is ensuring that the insurance being offered must pass an “affordability test:” This is defined as an employee having to pay no more than 9.5% of their gross salary towards their health care policy premiums and the coverage being offered must cover 60% of the employee’s health care costs.
Should a company with more than 50 FTE employees not offer insurance to their workers, or if the coverage offered does not meet the ACA criteria, the company can be fined $2,000 for each FTE employee on staff beyond the first 30 workers.
2. Required Reporting to the Federal Government
Also beginning in 2015, large businesses we will need to provide information to the IRS as to whether they are meeting the provisions of the Employer Shared Responsibility Rule as well as confirming that various notices required to be given to employees about the availability of the ACA health exchanges and whether or not the coverage offered by the employer have been distributed according to the standards set by the law. This is all recorded in Section 6056 of the ACA regulations.
The regulations, as they pertain to the reporting requirements, are still being developed in Washington. In September 2013, the Treasury Department posted the proposed rules on the federalregister.gov website. The IRS is welcoming public comments on the rules and they are being accepted until early November 2013.
3. The Maximum Waiting Period for Employer Provided Insurance is 90 Days
Starting in January 2014, employers who offer health insurance benefits to eligible employees must offer coverage within 90 days.
Like many significant portions of the ACA, the rules governing this requirement are still being developed. However, the IRS has provided temporary guidance for employers on their website on how to remain compliant with the law and they will be providing further information in the near future that will clarify and refine this regulation.
4. Transitional Reinsurance Program Fees
In an effort to compensate the health care insurance companies who expect to see an increased amount of high-risk individuals added their customer rolls, the ACA calls for large businesses to pay a $63 per-person, tax-deductible reinsurance fee in 2014.
The law states that the Reinsurance Program will last through 2016 and, as of this writing, have not been set for 2015-2016. While the Health and Human Services Department (HHS) estimates that the fees should be somewhat lower in the upcoming years, the details are still being worked out.
5. Rewards for Instituting Workplace Wellness Programs
The ACA incentivizes employers large and small to create programs to promote healthier workplaces and healthier employees. The rules associated with this part of the ACA begin in January 2014.
Employers who choose to implement workplace wellness programs — encouraging employees to lose weight, lower cholesterol, and quit or reduce tobacco use while following specific guidelines that are still being developed — would be rewarded with a reduction of between 20% to 30% of their cost of their health care coverage. Programs that prevent or reduce tobacco usage, could be rewarded with reductions as much as 50%.
Obviously, the ACA presents many challenges for employers in understanding, implementing, and complying with the new law. The five provisions mentioned here are just some of the changes large businesses will need to deal with as the ACA becomes fully implemented in the next 24 months. Expect tweaks to be made to the law as the theory of how health care reform should work meets the reality of the very complicated, very diverse needs of both individuals and businesses in the real world.