The disastrous health care exchange website has gotten the media attention. However, the game-changing provisions of the Affordable Care Act that should be in the spotlight are the IRS’s employer shared responsibility regulations.
As employment attorneys, we understand the complexity and impact of these regulations. When the employer shared responsibility mandate was delayed until Jan. 1, 2015, we understood employers needed an additional year to properly prepare for ACA implementation.
While the final employer mandate regulations issued on Feb. 10 contained an additional delay, it was only for certain employers. Employers with 50 to 99 employees may now delay implementation until 2016, if they certify to the federal government that they are not cutting workers for the purpose of falling below this threshold.
This delay also provides large employers (100 or more full-time employees) with transition relief for 2015. Previously, proposed regulations required employers to offer coverage to at least 95 percent of their full-time employees and dependents to avoid the substantial employer mandate penalty. This has been scaled back to 70 percent in 2015, but it is short-term relief, since the 95 percent threshold will be effective Jan. 1, 2016.
Most notable about these regulations is that the rules are now final, so the hope that the law’s employer mandate would somehow change or go away is not viable. Most employers must immediately prepare for implementation of the shared responsibility provisions by Jan. 1, 2015.
The shared responsibility regulations are vastly different from how health care is offered by employers today; most employers have no idea where to begin the implementation process. The following is a summary of initial steps employers must take to ensure compliance.
Small employers (under 50 employees)
Small employers must decide whether they will provide coverage or leave their employees at the mercy of the health insurance exchanges. Many small employers have resisted forcing employees onto the exchanges because of the computer glitches, high health plan costs and security issues. Since the cost of providing health insurance is too great for many small employers, an assessment of the exchange plans versus possible employer-sponsored plans should be analyzed in 2014.
Large employers (50 or more employees)
Employers should begin the implementation process with a complete understanding of whether and how they have offered health insurance to employees before the Affordable Care Act. Employers should make a list of all benefits provided to employees that touch upon health.
Learn the basics of the mandate; all business leaders should understand the basics. Knowledge of the law is critical in light of the steep penalties, taxes and costs related to the mandate.
If they haven’t done so already, large employers will need to decide either to provide affordable health insurance to all full-time employees or to pay a penalty. The insurance must meet all of the federal standards for minimum value and minimum essential coverage.
Employers must calculate the play-or-pay penalty. If a large employer does not offer the minimum essential coverage to 95 percent of its full-time employees (or at least 70 percent in 2015) and their dependents, it will be subject to a penalty of $2,000 for each full-time employee in excess of 30 employees per year. Therefore, large employers must determine who is a full-time employee by reviewing their employment during 2013 and 2014 and must analyze the benefits and drawbacks of different measurement periods, known as the look-back and stability periods.
A large employer that does offer minimum essential coverage to 95 percent of its full-time employees and their dependents might still face a penalty if the coverage offered was not “affordable” or failed to meet a “minimum value” threshold. Generally, a plan is not affordable if the employee’s premium contribution for single-only coverage exceeds 9.5 percent of his or her household income.
Implementation of the Affordable Care Act creates numerous other action items for employers, such as considering single versus family cost, reviewing record systems for their tracking ability, determining how hours of work will be calculated for non-hourly employees, evaluating policies on paid time off, and reviewing handbooks and collective bargaining agreements for compliance and flexibility in light of the steep penalties under the act.
Karlee S. Bolanos and Joshua D. Steele lead the Affordable Care Act team in the labor and employment law practice group of Harris Beach PLLC.
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