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Navigating health reform
Health Reform: FAQs From Employers
Update 7/8/2013: In July 2013, the Obama administration announced the employer mandate provision of the ACA would be delayed one year and not take effect until January 1, 2015.
The following are common questions we heard during and after our health reform webinar for employers.
If you have locations in several states, which health insurance exchange do you follow?
Eligible employees will receive subsidies and purchase insurance through their state of residence.
What determines the state plan rules to be used if you conduct work throughout the nation? State of incorporation?
The Patient Protection and Affordable Care Act (PPACA) is a federal law which will be followed in all states. The state insurance exchanges will be available to employees that reside within that state. The federal exchange will be available for residents of those states opting not to establish a state-based exchange.
Is there any mechanism concerning the amount of penalty — for example, how much it might go up in the future?
There is no indication of what, if any, the increase in penalty there will be in the future. As the penalty fee is established in law, any change to the specific amounts would require Congressional action.
Have you seen a trend with organizations leaning one way or another about whether to keep their health care plans or throw in the towel and pay the penalty?
Surveys show that the majority of employers plan to maintain their group health plan. Our anecdotal experience in running our health insurance penalty calculator for our clients is that most of them want to continue offering health coverage to their employees.
So, to clarify, if we have fewer than 200 full-time employees, we do not have to do the W-2 reporting?
The reporting for employers with fewer than 250 W-2s in 2011 has been delayed until further regulations are issued.
For an employee who has two jobs, does the 9.5 percent apply to combined earnings?
For the purposes of determining whether or not an employer penalty applies, affordability of coverage for an employee (9.5 percent or less of their income) is determined by comparing the employee’s W-2 earnings for the employer to the employee’s premium cost to purchase self-only health care coverage through the employer.
Is the small employer designation (50 or fewer employees) based on the current year or prior year?
Our employee count varies year to year. The count will be based on the full-time employees determined during the “measurement period.” See IRS Notice 2012-58 for further information on determining the number of full-time employees and information about the measurement period, which will begin in 2013 for 2014.
Have any documents been put together to help explain this plan to employees?
The DOL has issued guidance on the Summary of Benefits and Coverage, which provides employees with information on their plan. To date, no information materials have been developed to explain health insurance exchanges and premium tax credits to individuals. However, the insurance exchanges are supposed to have “navigators” available to assist people with this process, and it is likely more public information will be available in the coming months as the details of the exchanges are finalized by the federal government and the states.
Where can we find information regarding the nondiscrimination testing?
Is the pay-or-play penalty deductible by the employer?
No, the penalty is nondeductible.
If an employee is covered under their spouse's insurance, is the employee's employer penalized or is this employee included in the employer's FTE count?
The employer is only penalized for its full-time employees who receive a subsidy and purchase insurance through the state insurance exchange. Therefore, if their employee is enrolled in coverage through their spouse’s employer, they are not eligible for exchange subsidies, and no penalty accrues to their employer. The FTE count — all full-time employees plus full-time equivalents (all part-time hours worked during a month divided by 120) — is only used to determine whether an employer is a large employer (50 or more FTEs) and, therefore, potentially subject to the shared responsibility penalties.
If employees are enrolled but decide to cancel and go with an exchange, is the employer penalized?
The employer is only penalized if the employee receives a subsidy and purchases insurance through the state exchange. Employees can still enroll in a plan offered through an exchange. However, they are only eligible for subsidies if their employer-sponsored health plan premiums are unaffordable for them and their income is 100 – 400 percent of the federal poverty level.
We utilize temporary employees from a staffing agency. Would we have to include them as employees?
Employees with W-2 wages are included as employees for purposes of the PPACA.
Does the state only have the leeway to change the “large employer” definition if they are running their own exchange (i.e., not federal)?
States cannot define “large employer” differently than PPACA as it relates to which employers would have to pay penalties. States that establish their own exchange will initially be able to define “small employer” as either 50 or fewer employees or 100 or fewer employees for the purposes of determining which employers are eligible to offer health plan coverage to their employees as a defined contribution through the exchange.
What happens if in 2013 you average 60 FTE (including seasonal workers) per month but in 2014 you always have less than 49 employees per month including seasonal workers? Are you still a large employer covered by the PPACA even if you don’t have 50 employees in 2014?
If an employer is under the 50 full-time equivalents (full-time workers working an average 30 hours a week + [hours for part time workers divided by 120 per month]), the penalties should not apply. Please also note that seasonal workers are not included in the count of FTEs, if they work fewer than 120 days per year. If an employer has 50 or fewer employees in 2014, it will also have the option of offering health insurance to its employees via the insurance exchanges on a defined contribution basis in 2014.
Anita Baker, Employee Benefit Plans Managing Partner
firstname.lastname@example.org or 480-615-2410
Nicole Fallon, Health Care Manager Consultant
email@example.com or 612-376-4843