Our Proskauer Attorneys helped us better understand a few items in the Affordable Care Act. Here are the top 10:
- Costs will increase – An increase in costs will come from Direct Costs by way of taxes and penalties, Indirect Costs by way of administrative reporting and Unknowns that will have to do with compliance.
- Medical Loss Ratio – For those employees that received a rebate from the carriers, the rebate should have been used to benefit the member at the same ratio the member paid in for the premium. If the money has not been used in that capacity it would need to be placed in a trust fund. The rebate could not sit idle for more than 3 months. Now is the time to put those funds in order.
- W-2 Reporting – Employers with less than 250 employees are not subject to health care W-2 reporting. If an employer has more than one EIN number, the reporting is based on each separate EIN number. This is the only place in the law where this applies.
- Levels of coverage in the exchange – Bronze = 60%, Silver = 70%, Gold = 80%, and Platinum = 90%; Basically that means in a bronze level plan, the member would pay 40% of costs and the carrier would pay 60%. Catastrophic Care will be available for members under 30 years of age
- 90 Day Enrollment Requirement – Employers cannot wait until the first of the month following 90 days anymore. The eligibility period for an employee can be no more than 90 days regardless of whether it landed on the first day of the month.
- Pay or Play – Some employers have been talking about reducing hours for their employees to under 30 so they can avoid the participation and penalties. This will not work because all full time employees are factored in and reported as ‘full time equivalent’. Also, if you have 80% ownership in several companies (with different EIN numbers), you will be required to count all the companies as a “controlled group”. This way large companies will not be able to separate into small companies to try to avoid the mandate.
- For employers that have employees with variations in hours, the employer has 12 months to average the number of hours. If it is determined that the employee worked the minimum 30 hours, the employer has one month to begin offering benefits. The employer can go no longer than 13 months from the start of employment
- There is no difference in the law if you are a for profit or non-profit business – all rules apply.
- Employers will be required to offer a plan that is no more than 9.5% of the employees earnings. f an employee is on a group plan and adds his wife and child and at that point cannot afford the coverage, the employer is not penalized. The employer is only responsible for offering an affordable plan for the employee only. The spouse and child could then go to the exchange for coverage.
- It is recommended that every employer have a mandatory requirement for employees to sign a waiver if employee is waiving or declining coverage. If an employee waives and then goes to the exchange and receives a subsidy, the employer will not get penalized.
Compliance will be very important in the coming months. Employers will be required to provide monthly reporting to the government to show they are complying with the mandate.