Karen Vines, vice president of IMA Inc., tapped into her 27 years of experience in the employee benefits arena to lay out a road map for employers to follow to ensure they are in compliance with the Patient Protection and Affordable Care Act. On Oct. 1, the day the online health care marketplaces opened, she gave Best of Success attendees an overview of the law’s requirements, penalties, taxes and fees in a session titled “Health Care Reform: What Employers Need to Know.”
“What I’m trying to do for you this morning is walk you through some of the really critical things that are on the horizon,” she said. “It’s important as an employer to know what’s still coming.” She urged attendees to examine some key questions, including: What are your employees’ expectations? As an employer, what are you required to do? And what should you do?
Employers who have 50 or more full-time employees can be subject to annual penalties if they do not offer group medical coverage or if they offer coverage that does not meet required minimum thresholds of the law, noted Vines. Determining the number of full-time employees can be tricky, as part-time workers must be taken into account. There is a specific formula spelled out in the regulations for calculating the number of employees that are “full-time equivalents” or FTEs.
“Health care reform uses 30 hours as a full-time definition,” she said. “All the employees that don’t work that threshold on an average are part-time employees, and you have to create some equivalencies for those part-time employees. So you look at each calendar month of the year, add up all the total hours for the people who are part time, and then you divide it out to come up with a full-time equivalent. So it’s that number, plus the number of full-time employees, that determines whether you meet 50 or don’t meet 50. So it’s a really important delineation. If any of you tend to float around 50, you have to understand how that works.”
Affiliated or “sister” companies must combine their employee counts if they have common ownership to determine whether or not they are a large employer, Vines noted. For companies with 1099 relationships, Vines recommends using existing IRS practices to determine if the person could be considered a common-law employee. “If they meet the definition of a common-law employee, they must be considered your employee for the purposes of health care reform. So if you have any of those circumstances, you might want to seek some guidance.”
For employers with 50 or more FTEs, there are two layers of penalties for lack of compliance, noted Vines: the “Pay” or “Sledgehammer” penalty, and the “Play” or “Tackhammer” penalty. To avoid the Pay penalty, employers must offer minimum essential coverage to at least 95 percent of all full-time employees, offer dependent enrollment and have an open enrollment. To eliminate the Play penalty, employers must do all of those things plus offer minimum value coverage and coverage that meets the affordability requirement.
Minimum value is based on an HHS calculator that takes into account plan components and determines that the plan would pay at least 60 percent of total claims, noted Vines. Affordability is based on what the employee is asked to pay for coverage. “A really important concept with affordability is it’s not about what the person enrolls in — it’s about what you offer. That’s a critically important nuance as you’re creating your strategies around health care reform. It’s what’s available, not what they pick, because affordability is centered on the lowest-priced single plan that you offer.”
Vines urged employers to help educate their employees so they can make informed decisions about their health care plans. Employees who go to the health care marketplace to buy coverage will undoubtedly have questions, and most will turn to their employers for answers. “They are going to call you,”Vines said. “So the more you can educate employees on the front end, the better off you’ll be as an employer.”