In yesterday’s Advisor, We covered Michael Aitken’s suggestions for the employee side of the Patient Protection and Affordable Care Act (PPACA). Today, employer responsibilities under the act, plus an introduction to a unique product aimed specifically at the smaller HR department.
Aitken’s comments came during the Society for Human Resource Management’s (SHRM) recent annual Conference and Exposition in San Diego. Aitken is SHRM’s director, Government Affairs.
[Go here to read the first half of this article]
Employer Responsibilities
Employers have additional requirements placed on them by PPACA. Aitken points out the following factors for employers:
- Penalties are assessed if the employer does not offer health coverage at all, if the employee is offered coverage that is “unaffordable,” or the plan has an actuarial value of less than 60 percent (briefly, pays less than 60 percent of costs).
- Employers with 50 or more employees not offering coverage to FTEs are subject to “free rider” penalty equal to $2,000 multiplied by total number of FTEs if even one FTE receives a subsidy to purchase health insurance in the exchange. The first 30 employees are excluded from the above calculations.
- If coverage offered is unaffordable or has actuarial value less than 60 percent, penalty would be $3,000 per year (pro-rated) for each FTE receiving a federal subsidy, up to a maximum of $2,000 times the total number of FTEs.
- Beginning in 2011, employers will be required to report the value of employees’ health benefits on W-2s.
- By March 2012, employers must provide a four-page, uniform summary of benefits for all plans (The Department of Health and Human Services is to provide a model summary).
- Beginning in 2014, there can be no waiting periods over 90 days.
- Employers with more than 200 employees must automatically enroll new full-time employees in health care coverage, allowing for employee opt-out, likely effective in 2014.
Employer-Provided Free Choice Vouchers
PACAA requires employers that offer coverage and make a plan contribution to provide “free choice vouchers” to qualified employees for the purchase of qualified health plans through the exchanges that the states are required to set up.
If the employee’s required contribution under the employer’s plan is between 8% and 9.8% of income and the employee’s income is at or below 400% of federal poverty level, an employee qualifies for the voucher. This provision is effective in 2014.
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Will the Employer Pay A Penalty Beginning in 2014?
Aitken offers the following decision tree for employers:
Are you a large employer?
You are if you had at least 50 full-time equivalent workers including full time (30+ hours per week) and part-time workers (prorated) and excluding season workers (up to 120 days per year).
–If no, there is no penalty.
–If yes:
Are any of your full-time employees in an exchange plan and receiving a premium credit?
–If no, there is no penalty.
–If yes:
Do you have more than 30 full-time employees?
–If no, there is no penalty.
–If yes:
Do you provide health insurance?
— If no, pay a monthly penalty of 1/12 x $2,000 x (Number of full-time employees — 30)
— If yes, pay monthly penalty, the lesser of: 1/12 x $2,000 x (Number of full-time employees — 30) or 1/12 x $3,000 x (Number of full-time employees who receive credits for exchange coverage)
Source: Congressional Research Service analysis of P.L. 111-148 & P.L. 111-152
HR Suggested Actions
Aitken recommends that HR managers consider the following:
- Brief senior leadership on the new law and potential impact on organizations’ health plan(s).
- Determine whether all plan designs satisfy the “minimum essential coverage” requirements.
- Review definition of coverage eligibility in health care plan.
- Adjust waiting period definition if more than 90 days.
- Estimate number of potential subsidy and voucher eligible employees.
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