With only 6 months remaining before new healthcare reform mandates go into effect, HR professionals should be tracking employees’ hours and wages, and evaluating whether their healthcare plans comply with the new requirements, says Rob Wilson.
Update: In July 2013, the Obama Administration delayed the ACA 'play or pay' provision until 2015.
Wilson, president of human resources outsourcing company Employco USA, Inc. (www.employco.com), says employers’ top concerns for 2014 related to the Affordable Care Act (ACA) include recordkeeping, compliance, and healthcare costs.
Effective January 1, 2014, the ACA’s “play or play” provision kicks in. Employers that employ at least 50 full-time workers must offer affordable, minimum level insurance to at least 95 percent of their full-time workers, Wilson says. Full-time workers are defined as those working a minimum of 30 hours per week.
Employers that do not offer coverage will face a $2,000 penalty per employee per year (after the first 30 employees) and an even higher penalty—$3,000 per employee annually—if they do not offer affordable or minimal level coverage.
Wilson says employers should be tracking employees’ hours to determine how many full-time employees they have. In 2014, wages also will need to be tracked to make sure eligible employees are offered “affordable” healthcare coverage (i.e., coverage in which the employee contribution does not exceed 9.5 percent of the employee’s wages), he explains. Wilson recommends that employers start tracking wages now to assess whether they are in compliance.
Generally, the requirement to offer affordable coverage will have the most impact on employers that pay low wages and do not subsidize employee coverage, he says. For example, if an employee makes $20,000 per year ($10 per hour x 2,000 hours) and pays $400 per month for insurance, that plan is not considered to be “affordable” because it exceeds 9.5 percent of the employee’s income, Wilson says. The employer would have to pay about $2,900 of the employee’s premium or face a $3,000 penalty if the employee gets coverage through a state insurance exchange and receives a subsidy due to his or her income level.
Some employers have decided to limit part-time workers to less than 30 hours per week to avoid the penalties, he says. And while some employers initially considered dropping their coverage and having employees rely on state insurance exchanges, Wilson advises against doing so. That’s because such employers would face a $2,000 per employee, nondeductible penalty per year—regardless of whether the employee works the entire year. So, if an eligible employee works only 5 months and is replaced by another eligible employee, the employer could be assessed a $2,000 penalty for each of them, he says.
Wilson recommends that employers review their healthcare plans to determine whether they are in compliance with the 2014 mandates and, if not, what changes are necessary. For example, “annual dollar limits on essential health benefits and pre-existing condition exclusions for all plans, including grandfathered plans, will be eliminated”; deductibles will be limited to $2,000 per individual and $4,000 per family; all plans must provide coverage for employees’ children up to the age of 26; and waiting periods will be limited to 90 days, he says.
The new mandates are expected to drive healthcare premiums even higher, thanks to a change in the way medical underwriting will be done, Wilson says.
Premiums tend to be lower for men in their 20s and 30s than for women in the same age group because of pregnancy coverage, he says. Similarly, coverage for women in their 50s and 60s is generally less expensive than for their male counterparts, because men in that age group tend to have more health problems than women, he explains. However, next year only geography, tobacco use, and age can be considered during medical underwriting—not gender, which Wilson says will result in higher premiums.
BLR has created a new infographic to help employers determine whether they must provide coverage to their employees and whether they are subject to ACA penalties. To download the infographic, visit ow.ly/l0LYG.