Employers and the PPACA

In a Nutshell:  A Very Quick Look

Grandfathered plans:

A plan in effect as of March 23 of this year – “grandfathered” and will not be required to meet the new employer mandates until 2014.  Union-bargained plans remain grandfathered until the date on which the latest expiring collective bargaining agreement.

 However, such a plan (as of the first day of the plan year beginning on or after September 23, 2010, must provide coverage for children up to age 26, can’t rescind coverage, must eliminate lifetime dollar value limits on essential benefits, and must eliminate pre-existing condition exclusions for children < age 19.

Your plan can lose grandfathered status if you change insurance carriers, you eliminate benefits, or the employee cost-sharing percentage is increased.

If your plan is grandfathered, you should include a declaration in your plan materials, including the summary plan description, that the plan “believes it is a grandfathered plan.”

In effect now:

·         Small (up to 25 employees, average annual wage < $50,000) business tax credit for purchasing health insurance for employees – and employer covers at least 50% of the premium cost. For 2010-2013, tax credit is up to 35% of employer’s contribution, scale sliding higher the smaller the employer.  In 2014, credit will increase to 50% of employer contribution

·         Employers with > 200 FT employees must automatically enroll new FT employees.

·         Reasonable break time for nursing mothers (amends Fair Labor Standards Act – but inapplicable to employer under 50 employees if break would impose significant difficulty).

·         Another amendment to the FLSA protects employees from discrimination on the basis of protected activity related to health care reform, including whistle-blowing

All other plans, effective September 2010:

·         Subject to §105(h) discrimination rules, i.e., 70% of employees must be eligible for coverage

·         Highly compensated will be taxed on “benefits” of plan (plan pays $90,000 for care, insured employee pays tax on $90,000)

Minimum standardized benefits requirement: 

·         Coverage for all dependents to age 26

·         All emergency care must be covered as in “network”

·         No lifetime limits

·         Insurer must cover pre-existing conditions on minors under 19

·         No cost sharing on preventative services

Beginning 2014: State insurance exchanges as alternatives to private indemnity insurers

·         Guaranteed issue of insurance contract with no dollar limit on pre-existing

·         Premiums become community rated

·         Only variables for underwriting: age and tobacco

2014 Employer mandate

·         Applies to all employers with over 50 Full-Time Equivalents (at least 30 hrs per week)

·         Must offer “affordable” coverage – no mandate for dependent coverage

·         “Affordable” coverage must meet actuarial guidelines

·         Employee contribution must meet percentage of income test (generally 8-10% of   household income)

·         $2,000 penalty per employee for failure to cover

·         Small Business Tax Credit:  >10 FTE with average wage of $25,000; credit = 35% of premiums paid

2014 Individual mandate

            All U.S. citizens and legal residents must have qualifying coverage or pay penalty

            Penalty:  sliding scale of 1% of household income, 2% in 2015, 2.5% in 2016

            Exemptions for financial hardship, religious objection, or of lowest cost plan is greater than 8% of household income