Patient Protection and Affordability Care Act, Health Care Reform, Affordable Care Act and Obamacare are just a few names for the healthcare reform legislation that was signed into law on March 23, 2010. The purpose of the law, simply stated, is to provide health care coverage for approximately 50 million Americans who are uninsured.
This is a complex piece of legislation, which requires staged implementation of the law over a several year period. Since its signing, the law has provided full coverage for services that are preventative in nature, removed pre-existing limitations, removed annual caps on services and expanded coverage to dependent children.
While these may be viewed as enhancements, ultimately we have also seen a corresponding increase to premium as a result of these benefit mandates. The law has imposed additional fees and taxes to all employer sponsored group health plans to assist with funding the law. These mandates have increased the administrative burden on employers to remain in compliance with the health care reform regulations.
The “pay or play provision” in PPACA requires companies with 50 or more full-time equivalent employees to offer health coverage to employees working on average 30 or more hours per week. The coverage must meet minimum essential benefit requirements, be affordable and exceed 60 percent minimum actuarial value (which means that the plan covers at least 60 percent of the total cost of services). If an employer offers plans that do not meet these minimum requirements, they may be subject to a penalty.
On July 2, the U.S. Department of the Treasury announced that it will delay the effective date of the employer “pay or play” penalty until 2015. The reason for the delay is that the Treasury recognizes the difficulty and complexity facing employers to implement this provision, which, if not followed correctly, may result in substantial employer penalties. The extension will allow employers more time to implement the requirements of the regulations, as well as to adapt mechanisms to effectively and efficiently track employee hours.
Although the employer “pay or play” reporting requirements have been delayed, it’s a best practice to continue with good-faith compliance efforts. This delay can allow extra time to better prepare and implement the changes necessary to avoid significant financial penalties.
In 2014, employers will still need to know if the coverage they offer meets minimum value standards and is affordable. If the IRS decides to continue to use the proposed Federal Exchange notice that was released earlier this year, both full-time and part-time employees may have questions about their options.
Employers will need to be prepared to guide employees through the decision of enrolling in the employer’s plan or selecting a plan from the exchange, and whether the employee qualifies for a subsidy. Communications will need to address:
What is delayed?
The “play or pay” provision requires large employers with 50 or more full-time equivalent employees to do the following in order to avoid penalties:
1. Offer minimum essential coverage to 95 percent or more of full-time employees.
2. Offer minimum value (60 percent) coverage to full-time employees. This means that the plan, on average, covers at least 60 percent of the cost of services.
3. Offer affordable coverage to full-time employees. This means that the employee’s premium contribution for single coverage cannot exceed 9.5 percent of their household income. Note: because employers do not have information about an employee’s household income, it is recommended that they consider only the W-2 wages of the employee when determining affordability.
4. Offer coverage to full-time employees, defined as those who work, on average, 30 hours per week or more.
5. Count employees’ hours to determine whether they average 30 or more hours work per week and track eligibility for coverage, enrolling employees who become eligible.
6. Because of the delay, employers will not need to meet these requirements for 2014, but are advised to continue preparations since these rules are expected to take effect for 2015.
What is not delayed?
The delay in the “play or pay” requirement does not affect the insurance market reforms. This means that these requirements are still scheduled to go into effect as of the start of the 2014 plan year (with penalties of up to $100 per person per day for non-compliance). These requirements apply to all plans except as noted:
1. Employers must provide an Exchange Availability Notice for all FT/PT employees by Oct. 1. Notice must be provided whether or not an employer offers a group-sponsored plan. Model notices are available at www.dol.gov/ebsa.
2. Reporting and payment of the PCORI fee by July 31, for plans that ended on or after Oct. 1, 2012 (requirements vary based on funding arrangements).
3. Paying the transitional reinsurance fee, due in January 2015.
4. Providing a Summary of Benefits and Coverage as part of open enrollment, new hire enrollment and change in status enrollment.
5. Reporting health care costs on the employee’s W-2 (employers that issue fewer than 250 W-2s are exempt).
6. Waiting periods cannot be more than 90 days from the date the employee becomes eligible.
7. All pre-existing condition limitations must be removed.
8. 2014 out-of-pocket maximum cannot exceed $6,350 for individual and $12,700 for family coverage.
9. 2014 HSA contribution limits cannot exceed $3,300 for individual and $6,550 for family coverage.
10. Essential health benefits as defined in the law may not have annual dollar limits. Number of visit limits and reasonable medical management techniques may still apply.
11. Grandfathered plans must cover dependent children to age 26 even if the child has access to his/her own employer-provided coverage.
12. New wellness program requirements if incentives are health-contingent vs. participatory.
13. For small insured plans, whether in or outside the exchange/marketplace, coverage must include the essential health benefits, with a deductible of not more than $2,000 for individual and $4,000 for family. PPACA identifies coverage levels as “metal categories”:
a. Bronze = 60 percent of the actuarial value
b. Silver =70 percent of actuarial value
c. Gold = 80 percent of actuarial value
d. Platinum = 90 percent of actuarial value
14. For small insured plans, whether in or outside the exchange/marketplace, modified community rating (rating classes are limited to age, tobacco use, family size and geographic area), guaranteed issue and guaranteed renewal (with some limitations) will apply.
15. Timely distribution of any MLR rebates the plan may receive.
The government stated in the delay announcements that the exchanges are still expected to begin open enrollment on Oct. 1. It is unclear at this point how the delay of the “play or pay” requirement will affect determination of employee eligibility for subsidies. Presumably the official guidance that Treasury has promised to provide over the next few weeks will address this issue, as well as other potential issues.
While we are awaiting future guidance, employers who plan to continue offering coverage in 2015 should use the delay to better understand the regulations and to make decisions about their reporting systems.
Violetta DiClemente is the manager of benefits operations at Brown & Brown of NY, Inc. She is responsible for the day to day consulting and management of employee benefit clients, including analyzing carrier proposals, implementing new benefits and problem solving for companies in the Rochester area. Violetta is a member of the National Human Resource Association, The Women’s Council through the Rochester Business Alliance, and is a board member of the American Heart Association, Rochester Founders Affiliate, and a co-chair of their Community Action Committee. This article is brought to you by the Rochester affiliate of the National HR Association, a local professional HR organization focused on advancing the career development, planning and leadership of HR professionals. Visit www.humanresources.org for more information.