BHCG Monitor: Focus on Health Care Benefits

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BHCG Monitor: Health Care Reform


Health Care Reform — Notable News

Health care reform with all its nuances and implications is an issue that remains front and center on our employer members’ radar screens. As such, look for this column about all things pertaining to the Patient Protection and Affordable Care Act (ACA) to be a regular feature of the BHCG Monitor. We will be keeping you up to date on ACA developments relevant to employers and also providing information that we hope will be helpful you to you as you continue to develop your health care reform compliance strategies.

Exchange Notices Delayed

At least for now, HR and benefits professionals will have one less thing to do this quarter. The ACA originally called for employers to notify their employees concerning the state-wide health insurance exchanges by March 1, 2013. As expected – since many of the details and administrative rules are pending – the Department of Labor (DOL) has postponed that notification deadline. The DOL anticipates a new deadline to be in the late summer or fall of this year, allowing employers to coordinate the notice with typical year-end open enrollment periods. However, the exchanges are still scheduled to be open for business on January 1, 2014.

The law calls for employers of all sizes to notify their employees of the existence of the exchanges and provide a description of the state exchange, what services it provides and how to contact the exchange (website and customer service number). In addition, employers will need to inform employees about their health plan value and their eligibility for a premium tax credit if they purchase a plan on the state exchange and also explain the favorable tax treatment of remaining in the employer’s health plan.

The DOL has indicated it may issue a model notice for employers to use to satisfy the notice requirement. In addition, the DOL may consider another approach to satisfy the requirements through an “employer coverage template” that will be available for download at each exchange and be an alternative to the model notice.

Affordability Test Only Applies to Employee

The IRS recently released final regulations regarding the 2014 requirement (“play or pay”) that large employers (defined as businesses with 50 or more full-time-equivalent employees) must offer affordable health insurance or pay a penalty (affordability test). The law stipulates that large employers must provide insurance that does not cost more than 9.5 percent of the worker’s household income* for employee-only coverage.

As it stands now, the IRS has ruled that only the portion of an employee’s health insurance contribution that pertains to employee coverage is to be considered for purposes of determining what is affordable – not the entire contribution an employee with a family pays for family coverage. A requirement that large employers offer coverage to employees’ dependents will start phasing in next year (to be fully implemented in 2015), but that coverage will not be subject to the affordability test.

In the example of an employee who earns $35,000 a year, the IRS rules that if that employee is paying less than $3,325 (9.5 percent of their earnings) a year towards their coverage, they must stay with their employer’s health plan and would not be eligible for a federal subsidy on the exchange. However, in a 2012 Kaiser Family Foundation survey, the average employee contribution for family coverage is $4,316 a year – a number well over 9.5 percent of earnings for an employee earning $35,000.

Critics say the IRS ruling may make family coverage unaffordable for many Americans who are offered family coverage by their employers, and yet they would not qualify for subsidies provided by the law. Conversely, others maintain that employers who offer health coverage do so primarily on behalf of their employees and that although many employers do provide family coverage to full-time employees, many do not. Expect to hear more on this front as the government, in trying to increase access to coverage, attempts to strike a balance between increasing costs to the federal government and increasing costs for many employers.

*The IRS provided a safe harbor under which an employer could determine affordability based on either the employee’s Form W-2 wages or a salaried employee’s monthly salary, and, for an hourly employee, the hourly rate of pay times 130 hours per month.

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BHCG Monitor: Focus on Health Care Benefits - April 2012