In spite of the suspension of employer penalties under health care reform, the government strongly encourages employers to: (1) maintain or expand coverage; and (2) report on minimum affordable coverage under Section 6055 and/or 6056 rules. It’s important for employers to get experience gathering data and setting up systems for that reporting, Rachel Levy, an attorney with the U.S. Department of Treasury, said on Sept. 17.
Levy was joined by three benefits law attorneys from the DOL Employee Benefits Security Administation, at a compliance assistance webcast describing the finer points of employer responsibility payments. Health reform’s employer mandate takes full force on Jan. 1, 2015. Remembering these rules now will help employers avoid unintended consequences.
An “aggregation rule,” under which certain affiliated employers with coownership or that are part of controlled group must aggregate their lives, thereby avoiding efforts to split up into 49-employee large companies none of which has large employer status.
Under the aggregation rule you could have an employer — owned by a much larger firm — that technically has fewer than 50 full-time employees working and still be subject to employer responsibility payments because of compliance problems with its health coverage.
A “seasonal worker exception” that says if a workforce is pushed above 50 full-time equivalents solely due to seasonal workers, the employer is exempted from the pay-or-play provisions, but employers will have to be careful about how they define seasonal workers, Levy said.
Ninety-day waiting periods, as provided in proposed regulations. Coverage must be offered coverage to newly hired employees within 90 days of the date it is determined they are indeed full time. Employers can get slightly up to one year to figure out whether hourly paid employees worked enough hours to be considered full-timers. Levy described several methods of doing so.
Determining whether group health coverage provides “minimum value” is key to avoiding penalties under health care reform. To understand whether plans meet minimum value, HHS developed a calculator employers can use to input their plan details and determine if they meet the 60-percent value threshold.
Levy said that “almost every employer-sponsored insurance plan out there currently passes the 60-percent test.”
The affordability test is based on self-only coverage. The other side of the affordability equation (employee’s income) can be gleaned either from the employee’s W-2 earnings entry, (under a safe harbor from the law’s requirement that it be compared to household income).
Therefore if the cost of self-only coverage is not more than 9.5 percent of his or her wages as reported in box one of the employees form W-2, the employer is deemed to have offered affordable coverage.
“This is an attractive safe harbor because it looks that information that the employer absolutely must know,” Levy said.
“And the second thing to note is that the affordability looks to the cost of self-only coverage. So it could be as an employer you offer a plethora of plans, some of which are self only and some of which has family coverage, some of which has single plus one,” she added.
“The cost you are looking at for purposes of determining affordability is the lowest cost plan that meets minimum value and in that plan, the cost of self-only coverage. Even if an individual employee decides to elect coverage and a more robust plan that is more expensive coverage for his entire family; that does not matter for purposes of determining whether or not an employer has met the affordability test,” Levy said.