Affordable Care Act: A New Body of Law With Lots of Moving Parts

Practical Guidance on Administering ObamaCare and Other Health Plans

The acronym “ACA” has now joined the acronym “ADA” in the panoply of regulations with which companies must comply. As with any new and unfamiliar system, some companies may be uncertain as to what exactly is required of them. To that end, on April 22, 2014, LexisNexis held a webinar, Cutting Through the Noise: Practical Guidance on Administering ObamaCare and Other Health Plans (with CLE credit where applicable) designed to cut through the confusion. Over the course of an hour, panelists Cynthia Marcotte Stamer (a 25-year veteran of issues relating to employee benefits, health care and human resources matters) and Jaan Sidorov M.D. MHSA (general internist with over 20 years of experience in primary care, disease management and “population-based care coordination”) gave practical advice to assist companies navigating through implementation of ACA-compliant insurance plans for their employees.

What is the ACA designed to accomplish?

The panelists began by noting that the overall purpose of the ACA is to ensure that all Americans have affordable access to essential health benefits, whether through an employer sponsored plan or through alternative marketplaces called “exchanges.” The ACA has three main component parts supporting this goal: (1) ensuring adequate coverage through a minimum mandated benefit list; (2) ensuring individual “shared responsibility” by requiring everyone to enroll in a plan or pay a penalty; and (3) ensuring large employer “shared responsibility” by requiring companies to offer coverage to their employees or pay a penalty.

Which employers are affected?

The panel noted that employer mandates in the ACA apply only to those employing more than 50 employees. This mandate is phased in – for those employing over 100 employees, the penalties, if applicable, begin in 2015. For those employing 50-100 employees, the “pay or play” provision does not become applicable until 2016. Employers with fewer than 50 employees are not affected.

How should employees be counted?

Given the foregoing, the panelists emphasized the importance of accurately assessing the number of full time employees in one’s workforce. For purposes of the ACA, the applicable definition of “employee” is the common law one. The definition of “full-time” is an employee who works on average 30 hours or more per week each month, or its equivalent. The employee count is based on the previous year’s numbers, so the panel recommended that companies make an immediate effort to ensure payroll records are accurate, since 2014 numbers will be used for next year’s assessment.

Which time period is applicable?

The ACA identifies two applicable periods – the “Measurement Period” during which the number of hours and the number of employees are counted and the “Stability Period”, which follows thereafter. The ACA allows for an optional “Administrative Period” of up to 90 days to transition between the two periods. The Measurement Period and Stability Period must be the same length. According to the panelists, if an employee qualifies as a full-time worker during the Measurement Period, and subsequently goes on leave, he or she is still considered full time for the balance of the Measurement Period. The panel therefore suggested that should there be some time variance in the workforce (the cited example was a school district with a teacher going on maternity leave) the employer may wish to use a shorter measuring period than 12 months.

What are the plan requirements?

All plans offered must (i) include the minimum mandated benefits; and (ii) meet the minimum affordability test (premium must not exceed 9.5% of an employee’s adjusted household income.) The panelists noted that some employers are offering what are being referred to as “skinny plans” or “prevention only plans.” They recommended that employers exercise caution and get advice from counsel as to whether such plans are ACA compliant.

Enforcement of Employer Shared Responsibility

Penalties may be assessed against employers who do not comply with the ACA. These are triggered if at least one full time employee enrolls through the exchange and receives a premium credit or if the employer does not offer an affordable plan that provides minimum essential coverage to at least 95% of its employees and dependents (up to age 26.) If an individual qualifies for a subsidy, but has been offered an affordable plan by his or her employer which provides minimum essential coverage, he or she becomes ineligible for the subsidy. In such a scenario, the employer penalty is not triggered.

Enforcement of Individual Shared Responsibility

Like employers, individuals are subject to penalties for failure to enroll in coverage. Currently the penalty is set at 1% of adjusted gross income, or $95. This penalty will increase – in 2015 it will be 2% of adjusted gross income, or $325. Since the ACA is designed to ensure that coverage is affordable for all Americans, a subsidy becomes available if the adjusted family income is less than 400% of the poverty level. Low-income individuals may qualify for subsidies that could potentially be as high as 100% of the cost of enrollment.

Options for Small Businesses

Included in the ACA is the Small Business Health Options Program (“SHOP”.) This program is designed to provide “preferential purchasing power” for employers with fewer than 50 employees. However, the panel indicated that it is not yet on-line and is accessible by “paper” only. The panel indicated that the number of businesses utilizing this program may increase once the website becomes operational.

Additional Changes To Be Aware Of

> Flexible Spending Accounts. Previously, money in an employee’s account that was not spent by the end of the year was “left on the table.” Now, a FSA can either allow for a $500 carryover, or a two and a half month grace period. The employer must provide sufficient notice to the employee as to which option is being exercised.

> Mental Health Parity and Addiction Act. The ACA expanded this by requiring small group and individual plans to comply with it.

> Insurance premiums can no longer be based on health status.

> Financial incentives can be used for wellness promotion. However, the Panel cautioned that all wellness programs must comply with all regulations including HIPAA, GINA and the ADA.

A final word

The ACA is significant new body of law with lots of moving parts. There are many requirements that overlap with other regulations, including, for example, HIPAA, COBRA, ERISA, IRS reporting etc. Given these potential pitfalls, the panel suggested that where doubt exists, it would be prudent for an employer to seek expert advice.

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