The Patient Protection and Affordable Care Act (PPACA) has several requirements that become effective in 2014 and could force some changes to your health insurance plan. Starting in 2014, employers with 50 or more full-time or full-time equivalent employees must offer affordable coverage that provides at least a defined minimum level of benefits to full time employees. Full time employees are defined as an employee working an average of 30 or more hours per week. Failure to comply can result in fines to the employer. This has been called the “Pay of Play” provision of PPACA.
If you have volunteers that are working an average of 30+ hours per week, you may be required to provide access to coverage and make it “affordable.” The minimum level of benefits means the benefit plan must be expected to cover at least 60% of total costs based on an actuarial evaluation. The plan is considered affordable if the employee does not have to contribute more than 9.5% of their annual wages to be on the plan.
Fines can be levied if:
- If the coverage is NOT offered AND any of the full-time employees receive a federal subsidy for health insurance, the employer will pay a penalty. The penalty is $2,000 per year for each full-time employee over 30 full-time employees.
- If the coverage IS offered to full-time employees but a full-time employee receives a federal subsidy for health insurance, the penalty is the lesser of $3,000 for each person receiving the subsidy, or $2,000 per year for each full-time employee over 30 full-time employees.
- The federal subsidies for health insurance are available if household income is less than 400% of the federal poverty level ($46,100 for an individual and $92,200 for a family of four).
- Penalties will be adjusted in future years. Employers can meet the requirement to offer coverage to “substantially all” of its full-time employees if they offer coverage to 95% of full-time employees and dependents, however this is likely intended to accommodate miscalculations – not to avoid providing benefits to otherwise eligible full-time employees.
Do you have 50+ full-time or full-time equivalent employees? All regular full-time employees are counted. Part-time or volunteers count as a portion of an employee based on the hours worked. For example, 2 half-time employees count as one full-time employee. So if you have 45 full-time employees and 20 volunteers that work “half-time,” your total would be 55 full time equivalents and you would be subject to the new requirements in 2014 for health insurance.
The access and affordable requirements would apply to volunteers working an average of 30 hours or more and are considered a full time employee. Since the number of hours worked by volunteers can vary throughout the year, there is a process to determine who averages more than 30 hours per week and you have some flexibility in when you measure the employees’ average hours worked.
The measurement is to be done in 2013 to determine 2014 status. The Safe Harbor Measurement allows for the average hours to be calculated over the Standard Measurement Period which is a period of 3 to 12 consecutive months chosen by you. If an employee or volunteer is determined to be full time (30+ hours per week average during the Standard Measurement Period) they must have access to affordable health insurance for at least six months and that period must be greater than or equal to the Standard Measurement Period. This period of coverage is called the Stability Period. The guidance provided is temporary until 2015 so the rules could change in the future.
Regular full-time employees in the fire service typically meet the requirements for access and affordability as defined by the law. Some volunteers may now be classified as a full-time employee but not receiving benefits and should to be added to your health insurance plan. Some analysis and planning now can help you avoid potential fines in 2014.
What should you do? In summary, if you have more than 50 fulltime equivalent employees you have to provide access to affordable health insurance to full time employees in 2014 or potentially pay a fine. To determine your status you should:
- Determine if you have 50 or more full time equivalents. If less, the employer mandate does not apply to your group.
- Calculate which employees are considered full time based on an appropriate time period.
- If some full-time employees are not receiving access to coverage currently, you can include them on your plan in 2014 or face possible fines.
- Check with your insurance carrier to confirm they will offer eligibility for any new employees you want to add.
A few other things to keep in mind about the new law:
- Employers are required to notify all employees of the new Health Insurance Exchange marketplace. Notices should be distributed in the fall of 2013 (not available yet).
- Additional fees and assessments will be added into the cost of your group health insurance plan for 2014 and future years (i.e. PCORI/CERF fees, the Health Insurance Industry Fee and the Reinsurance Assessment).
- If you have a separate Health Reimbursement Arrangement (HRA) there is a $1 per member fee due on July 1, 2013. The fee will be increased in future years.
- Employers with more than 200 full-time employees will be required to auto-enroll all new employees into their health insurance plan and also provide adequate notice for an opt-out. The requirement is to be implemented when additional regulations are issued – expected sometime in 2014.
- A “Cadillac” tax will be imposed on employer-sponsored health plans that offer generous coverage. Premium amounts above the thresholds will be taxed at 40%. The threshold amounts for high risk jobs such as fire fighters are $11,850 for an individual and $30,950 for a family. The threshold amounts include health insurance premiums along with other benefits such as HRA’s, HSA’s and FSA’s. The tax begins on 2018 so you should consider the impacts of the tax now, as you negotiate multi-year bargaining agreements that stretch into and past 2018.
New guidance on the laws is coming out on a regular basis. This summary is based on a current review and understanding of the laws, requirements and guidance. Your options and direction could change as new guidance is released. Feel free to contact our health insurance broker, Russ Bong (email@example.com) if you have questions or would like more details.