2013 was a whirlwind year for the Affordable Care Act (ACA). Much of the news related to delays or breakdowns in implementation of one or the other section of the law. What still matters for employers in 2014?
First off: the ACA is still the law. It has not been repealed.
Below are the highlights for the coming year.
PLAY OR PAY
The ACA requires certain employers to either play—offer acceptable health coverage to their full-time employees or else pay—a shared responsibility payment of either $2,000 or $3,000 per affected employee per year, depending on the nature of the noncompliance. On July 9, 2013, the government delayed this requirement until 2015. As of this writing, Applicable Large Employers - more on this term below - do not have to offer health coverage in 2014 in order to avoid penalties, but they will need to comply in 2015.
Are you an Applicable Large Employer (ALE)? To find out, you must count your employees based on their full-time work schedule for this year. Full-time means, for example, 30 hours on average per week. You will count each full-time employee once, and combine non full-time employees to determine how many full-time equivalents you have on payroll. If you total 50 full-time employees or full-time equivalents in a measuring period—this calendar year, for example - then you are an ALE. A potential ALE will count employees during the year before the year in which you might have to offer coverage. Therefore, the time to determine whether or not you must comply with the law on January 1, 2015, is now.
If you are not an ALE, then you do not need to offer health coverage under the ACA. If you know that you are an ALE, then you must decide whether you want to pay or play beginning in 2015.
If you might be an ALE—for example, you are close to 50 full-time employees or full-time equivalents and you are planning on hiring this year, or you are modifying work schedules for some employees - then you have research to complete in the coming months, tracking employees and their work hours, to determine your status.
The Affordable Care Act imposes several fees in 2014. Generally, insurance carriers are liable for these fees. However, carriers are passing these fees on to employers:
The PCORI fee imposed under the ACA is equal to $2 per the average number of lives covered under a health insurance policy. The purpose of this fee is to fund the Patient-Centered Outcomes Trust Fund. The PCORI fee is set to terminate for policy years ending after September 30, 2019.
Annual Fee on Health Insurance Providers
This fee is calculated under a formula applicable to a carrier's net premiums written. The purpose of this annual fee is to help pay for premium subsidies and tax credits that will be made available to qualifying individuals who are purchasing health insurance coverage on the Marketplaces beginning in 2014. There is no termination date for this fee.
Note that this fee does not apply to a self-insured employer.
Transitional Reinsurance Contribution
The amount of this contribution is based on the percentage of revenue of the carrier or, for a self-insured plan, on the cost of providing benefits to enrollees. The purpose of the reinsurance contribution is to fund a state's non-profit reinsurance entities for the purpose of establishing a high-risk pool for the individual market. This contribution is imposed for three years, beginning in 2014.
Employers will now have access to the coverage cost for individual employees. This is different from the past practice of only receiving a composite bill for the entire workforce. For example, the employer will see that the cost for coverage for an older employee will be higher than a younger employee's cost, and that a smoker's coverage will cost more than a nonsmoker's coverage. Employers will need to decide whether to pass those higher costs on to affected individuals (charging some employees more than others), or continue charging the composite cost to all employees, regardless of their individual characteristics. If an employer maintains the status quo, then the employer will also need to determine how to allocate any cost increase between the employer and the employees.
The Small Business Health Options (SHOP) Marketplace is intended to offer compliant plans for purchase by small businesses. SHOP would be available to businesses with 50 or fewer employees; these businesses would qualify for tax credits. Enrollment was intended to be open this past fall, but the SHOP program is now delayed until November 2014.
-Employers required to file 250 or more W-2s must report health coverage costs for informational purposes on the W-2s, BUT small employers still enjoy an exception from this requirement, until the IRS issues further guidance.
-FSA/cafeteria plan documents must be amended to affirmatively limit annual contributions to $2,500 per participant. EVEN IF you already impose this limit, the plan must be amended to state this by December 31, 2014, for calendar year plans.
-Insured plans must not discriminate in favor of highly compensated employees, or else pay hefty penalties. BUT this provision of the ACA is not yet in effect. PRACTICE TIP—do not commit to providing more favorable terms for health coverage for select employees unless you also state that the terms are subject to modification if the law changes.
Please contact any member of Devine Millimet's Labor, Employment and Employee Benefits Practice Group with any questions you have about the ACA.
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