ACA checkup can help keep firm healthy

(Corrected, April 8)
There’s another wave of health care reform mandates under the Affordable Care Act (ACA), commonly called “Obamacare,” that employers need to know about.
These “play-or-pay” mandates will require many companies to make changes in whether and how they provide health care benefits to their employees, and employers who fail to comply face significant penalties. Though not effective until January 1, 2014, employers are wise to start thinking about these issues now.
Below is a list of the top items to consider.
• Determine whether you are a “large employer” subject to the coverage mandate. All employers with an average of 50 full-time equivalent employees during 2013 will be required to offer health coverage. Full-time equivalence is determined by aggregating the number of “full-time employees” (those who average 30 hours, including paid time off, per week), and the full-time equivalent number of part-time employees. If businesses share at least 80 percent common ownership, or where certain service organizations have joint activity or control, those businesses are considered a single employer.
• If you are a large employer, you may need to redefine your policies governing eligibility for health insurance. The ACA requires that large employers offer coverage to at least 95 percent of their “full-time employees.” However, many employers currently consider “full-time employment” to be 32, 35 or 40 hours per week (instead of the 30 hours required by the ACA). Some employers’ policies even exclude entire categories of W-2 employees, such as temporary or seasonal employees, or per diems, all of whom may now need to be offered coverage. Large employers who fail to comply with these rules face an annual “sledgehammer” penalty equal to $2,000 times the number of all full-time employees. • Employers with fewer than 50 full-time equivalent employees are not required to provide coverage to their employees, but the ACA offers incentives and opportunities to do so. For example, employers with 50 or fewer employees will be eligible to purchase insurance through the new Rhode Island Health Benefits Exchange, and those with 25 or fewer employees may even be eligible for a federal tax credit to help pay the employer’s share of premiums.
• Determine whether you have any variable-hour or seasonal employees subject to special rules. If you have employees whose hours fluctuate, or if you employ seasonal workers, then you may have the option to average their hours over a period of six to 12 months. If an individual averages 30 hours per week during this “measurement period,” then they must be offered health coverage during a “stability period” that follows, which generally must be the same length as the measurement period.
• If you do offer health coverage, determine whether it satisfies the ACA standards for “minimum value” and “affordability.” The “minimum value” standard requires that the plan must pay on average at least 60 percent of the costs for covered benefits. The regulators are developing a minimum-value calculator, where employers will be able to input certain information about the plan, and get a determination as to whether the plan complies. The “affordability” standard requires that an employee’s share of the premium for single coverage cannot exceed 9.5 percent of the employee’s wages. If you discover that your current cost-sharing method makes coverage “unaffordable,” you will need to decide whether to adjust your employer subsidy to make it affordable for all employees, or whether to pay the penalty, equal to $3,000 times the number of your full-time employees who receive a federal government subsidy through an Affordable Health Insurance Exchange. • Revise your health-plan terms to comply with new mandates. The ACA requires that you must offer coverage to your employees’ biological, step, adopted and foster children. It also imposes a 90-day maximum on eligibility waiting periods, and caps the permitted out-of-pocket maximums.
• Use modeling tools to determine whether it is more affordable to “play” or to “pay.” Obamacare allows employers to pay a penalty and opt out of the coverage mandates. You should think about which option is better for your business.
• Consider changes to your business model. For example, some owners of multiple businesses are selling off shares in order to become “small employers” exempt from the coverage mandate.
• If you have a unionized workforce, negotiate with the unions representing your employees regarding changes that need to be made to your collective-bargaining agreements to ensure compliance. If your unionized employees participate in the union’s own health plan, you are not off the hook either, and you need to make sure that the union’s plan complies, or you as the employer will face the penalty. •


Kate Saracene is a labor and employment and employee-benefits lawyer with Nixon Peabody LLP. Stephen Zubiago is a health-services partner with the firm.

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