Congress passed the Patient Protection and Affordable Care Act (PPACA) in March 2010, fundamentally altering the way companies manage health insurance programs for their employees. ABA's focus is to continue to work on favorable implementation of the health care law, while at the same time work to amend the PPACA through commonsense changes to employer requirements, taxation, and other burdens created under the law.
Beginning in 2014, employers with more than 50 employees will be required to offer coverage or pay a $2,000 fine per employee if just one employee receives a subsidy to purchase insurance through newly created state health insurance exchanges. A firm's first 30 employees will be subtracted from this penalty payment calculation.
Businesses with more than 50 employees that do offer health benefits will face a $3,000 fine for each full-time employee who opts out and receives a subsidy to purchase coverage through an exchange. Part-time employees are taken into account as full-time equivalents, defined as working 30 hours per week. The total employer penalty is capped at the maximum penalty amount it would face if it did not offer any coverage at all. An employer plan must cover a specific set of services to be determined by the government and meet actuarial standards laid out in the law.
Beginning in 2014, the pay or play rules will apply to employers with 50 or more "full-time equivalent" employees.
To understand the impact of the employer mandate, it is necessary to first review one aspect of the ACA that is not directly applicable to employers—the insurance exchanges that will be operational in 2014. These exchanges will permit individuals and small businesses to choose from various levels of coverage (known as "bronze," "silver," "gold," and "platinum"). Individuals who are at or below 400% of the federal poverty level will be entitled to premium tax credits toward the cost of coverage in the exchanges.
Despite the availability of individual coverage through state or regional exchanges, the ACA is built on the premise that the majority of Americans will continue to receive their care through employer-sponsored coverage. Thus, the ACA introduced the pay or play concept aimed at employers and modeled after health care reform in Massachusetts. Under the mandate, an employer will either elect to play, by providing "minimum essential" health benefit coverage to their full-time employees, or to pay a penalty. Employers who fail to offer the required coverage will pay a penalty equal to $2,000 for each full-time employee in excess of 30 employees. Those who offer coverage, but who fail to provide at least 60% of the actuarial value or who have any full-time employees for whom the coverage costs more than 9.5% of their compensation, will pay the lesser of the first penalty or $3,000 for each full-time employee receiving a premium tax credit to purchase coverage through the exchange.
This is an excerpt from a Littler ASAP Report from June 2012. To view the entire ASAP report, click here.
The Cost of Healthcare Regulations on Your Company – Presentation given at the ABA HR Committee 2012 Winter Meeting discussing the specific financial impacts of PPACA on the baking industry – By Lockton Companies
Healthcare Implementation Timeline – A timeline of what to expect from PPACA over the next few years – By the U.S. Chamber of Commerce
This issue falls under the ABA Human Resources Committee.
ABA Issue Expert: Cory Martin