The Patient Protection and Affordable Care Act will play a significant role in employer responsibilities, regardless of whether a health plan is offered through your business. If you are an employer, one thing is certain: You will have a great deal of decision-making in the coming months.
IF YOU OFFER HEALTH COVERAGE:
If you are an employer with 50 or more full-time or full-time equivalent employees and you currently provide health coverage, to avoid the shared responsibility penalty, your plan must provide “minimum essential coverage” and must be “affordable” and provide “minimum value” to your employees.
You will want to guarantee that your plan is in compliance with PPACA. At this time, employer sponsored plans must meet the following government requirements:
• May not have a lifetime dollar maximum on any “essential health benefit”
• May not have an annual dollar limit on an “essential health benefit” that is over a certain amount
• May not exclude pre-existing condition limitations for children under age 19
• May not retroactively rescind coverage, except for fraud or material misrepresentation or for nonpayment of premium by certain terminated employees
• May not reimburse over-the-counter drugs under a health FSA, an HRA or an HSA unless the drug is prescribed by a doctor
• Must cover the employee’s dependent children until the dependent reaches age 26, even if the child is married or employed
• Must provide first-dollar coverage for specific preventive services (does not apply to grandfathered plans)
• Must cover emergency services at in-network levels regardless of the provider (does not apply to grandfathered plans)
• If a primary care physician must be chosen, allow each person to choose their own PCP and allow a pediatrician to be the designated PCP (does not apply to grandfathered plans)
• Must allow women to see an OB-GYN without a referral (does not apply to grandfathered plans)
• Must have a specific and comprehensive process for handling claims appeals (does not apply to grandfathered plans)
Employers are also expected to make the following changes between now and January 1, 2014, if they have a health plan in place:
• Expand the definition of first-dollar preventive care to include a number of women’s services, including contraceptives
• Distribute medical loss ratio rebates, if any were received from the insurer
• Begin issuing summaries of benefits and coverage to all enrollees
• Reduce the maximum employee contribution to $2,500, if the employer sponsors a health flexible spending account
• Withhold an extra 0.9 percent FICA to those earning more than $200,000
• Provide information on the cost of coverage on each employee’s W-2, if the employer issued more than 250 W-2s in 2011
• Provide a notice about the upcoming exchanges to all eligible employees
• Calculate and pay the Patient Centered Outcomes Fee if the plan is self-funded (insurers are responsible for calculating and paying the fee for insured plans, but will likely pass the cost on).
Assuming that coverage is offered, but it does not meet government requirements, you, as an employer, must pay a $3,000-per-year fee (calculated monthly) for each employee who is eligible for a premium credit and who purchases coverage through an exchange. If you offer even one plan option that provides the required 60 percent minimum value and costs less than 9.5 percent of the employee’s W-2 income, no penalty will apply, even if an employee purchases coverage through an exchange.
IF YOU DO NOT OFFER HEALTH COVERAGE:
If you are an employer with 50 or more full-time or full-time equivalent employees and you do not offer minimum essential coverage and any of your full-time employees receive a premium or cost sharing credit through an exchange, you must pay a fine of $2,000 per year for each full-time employee, excluding the first 30 employees. The fee is calculated on a monthly basis. Keep in mind that these penalties are not tax deductible, where contributions to a health plan are tax deductible. They also do not count toward a contribution into the exchange. As an employer, it would be wise to evaluate not only the monetary incentive to offer coverage, but also the value that would be gained through this investment.
Consider the reasons companies across the nation have historically offered coverage to their employees, even before they were mandated to do so. Employers know that competition in business is fierce, and benefit packages help to attract and retain quality employees. Employee morale and productivity is proven to increase because you are showing your employees that they are important and you value them. Also, offering benefits will keep you compliant and save you from the hassle that comes with these fees, fines, and taxes.
If your bottom line is most important, the best way to determine whether to offer coverage is simply to compare the costs of offering coverage verses paying the penalties. Contact a local insurance agent who specializes in employee benefits packages. After collecting a few details from you, your company will be presented with pricing options that meet your companies needs, and are compliant with PPACA. To estimate the potential tax penalty for not offering coverage, you will need to multiply the fine of $2,000 per year by the number of FTEs, minus 30. The penalties for not offering a health plan will most likely be less than the cost of offering coverage.
However, the intangible benefits of offering a group health plan can far exceed this difference.
Yes, this law is complicated, and each employer will need to base his decisions on his particular situation. It is wise to seek the counsel of an insurance adviser who is well prepared to assist you with your decision making.
Jimmy S. Mallia is president of the Employee Benefits Division at Dwight Andrus Insurance and has been with the agency for the past 18 years. In addition to individual health policies, his division specializes in self-funded and employer group plans.