Health Care Reform: Next Steps for Employers
As the countdown to January 1st continues, employers must continue to prepare for the changes that must be made to comply with the Health Care Reform.
Analyze Full-Time Vs Part-Time Staff
Employers who are subject to the employer responsibility are those who employ 50 or more full time employees working 30+ hours per week. Included in this count would be “full time equivalents” (part time employees whose hours are added together to equal a full time employee status). Employers who are under Common Ownership must comply if the complete number of employees in the Control Group exceeds 50 employees, even if each employer in the group has less than 50 employees individually.
Special rules also apply to how seasonal employees are to be counted to determine the “over 50 employees”. An employer will not be considered to employ more than 50 full time employees if the seasonal employees work 120 days or fewer in a calendar year, and if the employees in excess of 50 employed during the 120 day period were seasonal workers.
There are also calculations that apply for counting variable hour employees. You should seek the advice of your counsel or plan service providers, such as your insurance advisor or TPA, to assist you in properly tracking these hours.
The mandate states that the premium for employer-provided coverage, which must meet at least the Minimum Essential Benefits as defined by the law, must be “affordable”. To satisfy this affordability, the coverage provided can cost the employee no more than 9.5% of their household income for their portion of the single (employee-only) coverage. If the employer offers multiple health plans, the test for affordability will apply to the lowest-cost option available to the employee.
The big question here is: How would an employer know their employee’s “household income”?
Answer: The IRS has created a safe harbor that the employers can create to avoid a penalty:
- The employee’s cost share does not exceed 9.5% of the wages the employer pays the employee that year, as reported in Box 1 of Form W-2
- The monthly premium paid by the employee toward the cost of single coverage is equal to/lower than 9.5% of the employee’s wages for that month (based upon 130 hours X the rate of pay)
- The employee’s cost for the single coverage does not exceed 9.5% of the federal poverty line for a single individual
Employers will also be allowed to apply a discount for wellness, or impose a surcharge of up to 30% of the cost of the medical coverage; or up to 50% with respect to tobacco cessation programs.
Setting up any wellness initiative programs can be quite complex, as each employer’s plan must be a fit to work alongside existing reward or incentive strategies for their workforce. Before setting up or restructuring any plan design, employers are encouraged to meet with their legal counsel and insurance advisor to ensure they remain in compliance.
Update Existing Medical Coverage
Beginning in 2014 certain plans must meet annual deductible limits of $2,000 single/$4,000 family. This mandate does not apply to self-insured plans or fully insured large group plans (generally with more than 100 employees).
Single out of pocket limits will include all eligible expenses, such as medical, prescription, and mental health benefits. Non-grandfathered plans must meet these single out of pocket limits at their 1st renewal in 2014. If there are multiple TPAs or carriers providing coverage, they will have until 2015 to comply.
Define Information Sources
The main source of information and education for most Americans will come from their employers. There are some mandatory communication pieces for employers to provide.
Summary of Benefits and Coverage (SBC): The standard benefit summary that employers provide to employees at time of hire, during Open Enrollment, and any time that benefit changes are made.
Model Notice of Exchange: The Department of Labor has released the Model Notice of Exchange for employers to distribute to their employees. This form must be provided to the employees no later than October 1, 2013.
Talk With Your Advisor
If your car needs repair, you take it to a trained mechanic. If your plumbing is leaking, you call a licensed plumber. It’s just a prudent practice to seek advice and services from professionals in their field.
Given the complexity of this law, the mandates, and the amount of information that is updated on a weekly basis, it is best to seek the advice and guidance from your professional insurance advisor and legal partner. With the potential for such a significant impact on your business, it is important to stay on top of the most current and relevant information available to help avoid getting into a penalty situation.
As always, use caution when reading any information on Health Care Reform compliance to make certain they are using the most current information available and are a reputable source.