Navigating the Affordable Care Act: What You Need to Know
The 2,900-page Patient Protection and Affordable Care Act (PPACA), aka Obamacare, contains regulations and timetables that business leaders must understand and be prepared to meet. However, delays and uncertainties seem to be as much a part of the story as new policies.
Until recently, Jan. 1, 2014, was the effective date for the employer mandate that requires businesses with 50 or more employees to offer health insurance. Citing the need for “time to adapt health coverage and reporting systems,” the U.S. Treasury Department in July postponed the employer mandate until Jan. 1, 2015. As of this writing, there is also debate on Capitol Hill about possibly delaying the individual mandate that requires employees to purchase health insurance.
“Midsize businesses are where all the action is regarding health care reform, and I think their world could change quite dramatically,” says Kevin Kuhlman, manager of legislative affairs at the National Federation of Independent Businesses (NFIB). “Even though the employer mandate is delayed, all insurance market reforms will kick in on Jan. 1, 2014.”
Employers with fewer than 50 full-time employees must comply with the Essential Health Benefits (EHB) package, a list of 10 benefit categories that all insurance plans must offer. EHB requires providers to offer not only traditional coverage, but also pediatric dental and vision and “habilitative” services, which Kuhlman says have yet to be defined. Deductibles will be limited to $2,000 for individuals and $4,000 for families. Beyond this, Kuhlman says it’s largely a “waiting game” as companies anticipate the employer mandate and face compliance requirements that show, for example, that their insurance plans don’t favor executives with more generous or free coverage.
As of Oct. 1, 2013, all employers were required to have distributed the U.S. Department of Labor’s Notice of Coverage Options to all full- and part-time employees, whether or not they are eligible for benefits. State and federal health care exchanges, where employees without coverage can shop for policies, opened Oct. 1 although online enrollment was difficult because of glitches with the Affordable Care Act website. The government’s Small Business Health Options Program (SHOP) exchange that provides insurance for companies with 50 or fewer full-time employees also began open enrollment Oct. 1. Coverage under SHOP begins Jan. 1, 2014, but in another recent change, the government announced that businesses can only offer a single plan under the program until Jan. 1, 2015.
Because requirements and penalties are based on the size and type of the workforce, Kuhlman says executives must take stock of their full- and part-time employee numbers. If a company, whatever its size, offers health insurance, it must determine whether that coverage is affordable. Affordable coverage means the employee contributes less than 9.5 percent of income toward premiums, and restricts employees’ access to the individual exchanges. However, if a company has at least 50 full-time employees — those working at least 30 hours per week, or 130 hours per month — or full-time equivalent employees and does not provide insurance, it must offer coverage beginning in January 2015 or pay fines beginning at $2,000 per full-time employee.
Employers are not required to offer coverage to part-timers who work less than 30 hours per week. The size of a workforce is determined by adding the number of full-time employees and part-time workers converted into full-time equivalent employees. (For example, if six employees each work five hours per week, that counts as if the firm had one additional full-timer.)
To stay under the 50-employee threshold, some companies may be tempted to redefine their workers as independent contractors, but Kuhlman cautions against this tactic.
“There are many legal and IRS requirements for using independent contractors,” Kuhlman says. “You give up a lot of control over an employee if they become an independent contractor. You can’t just switch all your W-2s to 1099s and then comply with the law.”
Kuhlman says business owners should be prepared for employees to come to them with questions.
“We encourage folks to get answers from their trade associations, attorneys, or the NFIB… you don’t have to be a member,” he says. “The further you get out in front of this thing, the more prepared you’ll be and the better both employers and employees will be able to understand and adapt.”