No issue in last five years has been as polarizing as health care reform. Baring a repeal of the law, however, ACA will forever change the way Americans obtain health insurance coverage, access health care services and view the health care system.
For businesses, understanding and complying with ACA will soon become a reality of everyday life. The many upcoming changes include:
- October 2013: State run health insurance exchanges, including Nevada’s Silver State exchange, began offering enrollment for health insurance coverage to individuals and small business. This includes subsidized coverage for certain businesses and individuals.
- January 2014: All legal residents of the United States, with limited exceptions, will be required to maintain minimum essential coverage or pay tax penalties.
- January 2015: Large employers (with at least 50 “full-time equivalents”) must offer affordable coverage of a minimum value to employees and dependents or face tax penalties.
In preparing for ACA, businesses should start their compliance efforts by taking the following steps:
- Assess whether you are a “large” or “small” employer under ACA – Assessing your classification under ACA will provide a baseline from which many decisions will follow. This is done by calculating the number of “full-time equivalents,” essentially the number of full-time employees plus the equivalent number of hours worked by part-time employees. Employers with 50 or more full time equivalents must provide affordable benefits of at least a minimum value to full-time employees or pay tax penalties starting in 2015. Employers with less than 50 full-time equivalents have no obligation to provide coverage to employees and employers with less than 25 full-time equivalents may be eligible for subsidies to purchase coverage.
- Review how your business is currently staffed – While part-time employee hours count towards the calculation of full-time equivalents, large employers will be subject to a tax penalty only if any full-time employee (not a full-time equivalent) receives a subsidy for a policy purchased from an exchange. To receive a tax credit, an employee’s household must earn 400 percent or less of the federal poverty level and not have the opportunity to obtain affordable coverage from their employer. “Affordable” coverage exists where the employee contribution for the employee’s own coverage is less than 9.5 percent of the employee’s household income. In reviewing how your business is staffed, you should, therefore, consider: full-time versus part-time employees, use of independent contractors or staffing agencies, whether employees may be eligible for subsidized coverage and what dollar amount would constitute “affordable” coverage for your employees under ACA.
- Explore the different options for purchasing coverage – Employers and employees will have various options for the purchase of coverage under ACA. For example, employers with less than 50 full time employees may purchase coverage through the exchange in 2014. In 2016, the availability to purchase coverage from the exchange will expand to employers with less than 100 full-time employees. Other options include participating in private exchanges and providing self-insured coverage (rather than purchasing commercial insurance). In many situations, employers may be best served by dealing with an insurance carrier with which they have a longstanding relationship.
- Evaluate factors unrelated to ACA – Providing insurance coverage is not just about complying with the law. If your business provides coverage now (when not legally required) it is important to consider the reasons why coverage is provided. These can include attracting and maintaining quality employees, promoting employee health and the tax benefits associated with employee benefit plans. Likewise, when considering whether to reduce worker hours, your business should assess the cost of hiring and training new part-time employees, whether long standing employees may seek other employment and the risks that may be associated with hiring additional employees (e.g. employment claims, liability exposure, customer service concerns, etc…)
Engaging in these steps will help your business evaluate the need for coverage, identify the potential benefits and penalties and provide a framework for making difficult health insurance coverage decisions now and in the future.
Holland & Hart, www.hollandhart.com