In July 2013, the Obama Administration delayed a major provision of health care reform legislation applicable to employers with 50 or more full-time or full-time equivalent employees. But many provisions of the Affordable Care Act (ACA) are going forward as scheduled. And any reprieve may be short-lived, since unless additional guidance is issued, January 1, 2014 will start the clock on determining employers’ size for purposes of the employer mandate, and also for determining which employees will be full- and part-time for purposes of offering health care coverage.
Under the ACA's employer mandate, an employer with 50 or more full-time (including full-time equivalent) employees generally must offer minimum essential health coverage that provides minimum value and is affordable to substantially all of its full-time employees (at least 95 percent), or it will be assessed a penalty if one or more full-time employees obtains coverage from a state-or federally-run health insurance exchange and is eligible for a subsidy or cost-sharing reduction. Under the ACA, a
“full-time” employee is an employee who works 30 hours or more per week or 130 hours or more per month. There are special rules, which require all employees within an employer’s controlled group to be counted for purposes of determining whether the employer is a large or small employer. These rules are complicated, but generally a controlled group includes a parent-subsidiary group with at least 80-percent overlapping interest or a brother-sister group owned by five or fewer individuals who have at least 80-percent combined total interest, and more than 50-percent shared interest. In addition, there are special rules for franchises.
Employers that fail to offer minimum essential coverage that provides minimum value and is affordable to its full-time employees under the ACA's employer mandate in 2014 will not be subject to a penalty.
The Affordable Care Act in 2014
Despite the delay, many provisions of the ACA are moving forward as scheduled, such as certain plan design requirements regarding the type of coverage that must be provided (such as women's preventive care and the elimination of pre-existing condition exclusions), implementing a 90-day waiting period, reporting the cost of health care coverage provided on employees’ Form W-2, and distributing certain notices, such as a Summary of Benefits and Coverage (start of open enrollment).
In addition, starting October 1, 2013, all employers subject to the Fair Labor Standards Act must distribute a Notice of Coverage Options to all employees regardless of whether the employees are eligible for employer-sponsored health care or not. In addition, employers must distribute the Notices to all new employees within 14 days of hire if hired after October 1, 2013. There are model notices from the DOL available, however, these notices generally provide disclosures not required by the Notice of Coverage Option rules, and generally should be tailored to match your business model.
Also, starting January 1, 2014, individuals must obtain coverage under the ACA’s individual mandate, or pay a penalty. There are several pending efforts at the time of writing that would delay the individual mandate for a year or more if successful.
For small employers (generally, those under 50 employees), full implementation of the Small Business Health Insurance Exchanges, a featured provision of the state-or federally-run health exchanges has also been delayed until 2015. Small businesses should be able to participate in a limited operation of SHOP in 2014, with open enrollment expected to start on October 1, 2013, but participating employers will generally not have access to multiple different health insurance options until 2015. Instead, participating employers will be offered one plan on the SHOP from which their employees may choose. Participating employers that employ fewer than 25 employees may still qualify for a tax credit for providing health care in 2014.
Finally, the ACA’s fees are here to stay. The ACA imposes several fees, such as the PCORI fee, Transactional Reinsurance Fees, and eventually, the Cadillac Tax. In addition, employers are still required to distribute Medical Loss Ratio rebates, if any, to participants shortly after they are received from insurance companies.
2015 Planning Opportunities Start Today
Notice of Coverage Options: The most immediate action item is to distribute Notices of Coverage Options to employees by October 1, 2013, and to all new employees within 14 days of hire if hired after October 1, 2013. Notices may generally be distributed by hand, by first class mail, or by electronic delivery if the employer meets the DOL’s regulations for electronic delivery. Employers are encouraged to t