January 27, 2013:
Here are some of the new regulations and guidelines facing employers under the Affordable Care Act:
— Penalties: Employers with 50 or more full-time workers who do not provide adequate and affordable health benefits could face financial penalties beginning in 2014. If at least one employee receives a tax credit when buying insurance on his or her own in a health insurance exchange, the company will be assessed a penalty. Those eligible for tax credits have an income of up to 400 percent of the poverty level ($44,680 for an individual and $92,200 for a family of four in 2012). The penalty is $2,000 multiplied by the number of employees, not counting the first 30, with the amount increasing over time.
An employee can also obtain coverage in an exchange and be eligible for a tax credit if his or her employer provides benefits but does not pay at least 60 percent of covered services or if the premium exceeds 9.5 percent of a worker’s income. The company will be assessed a penalty of $3,000 for each full-time employee receiving coverage through an exchange; however, it will not exceed the amount applicable if it offered no coverage at all.
— Small businesses: Employers with fewer than 25 full-time workers are eligible to earn a tax credit if the average annual wage is less than $50,000 and if they pay at least half the cost toward employee health insurance. For tax years 2010 to 2013, eligible small-business employers can earn a maximum credit of up to 35 percent (or up to 25 percent for small, tax-exempt businesses like charities) of their contribution toward employee health care premiums. In 2014, the rate will increase to 50 percent for small businesses that purchase coverage through an exchange and 35 percent for tax-exempt businesses. Employers are eligible to take the tax credit for two years.
Employers with fewer than 100 full-time workers will be able to purchase coverage through an exchange beginning in 2014. States will have the option in 2017 to allow businesses with more than 100 employees to purchase through the exchange.
— Taxes: When employees receive their W-2 forms this year, the amount their employers pay toward their health insurance will be shown. Employees will not be taxed on this amount. It is for informational purposes only.
Insurers and self-insured employers could be levied a new excise tax on high cost “Cadillac” health plans beginning in 2018 if their value exceeds $10,200 for individual coverage or $27,500 for family policies. The tax rate imposed will be 40 percent of the plan’s premium amount exceeding those thresholds. For example, if the premium is $11,000 for an individual, the rate would be 40 percent of $800. If health care costs rise more than expected before implementation, the threshold amounts may be increased. Retirees 55 and older who are not eligible for Medicare, employees in high-risk professions, and companies that may have higher health care costs because of the age or gender of their workers may also see their threshold amounts adjusted upward.
— Employer health plans: Plans in place on March 23, 2010, are considered “grandfathered plans” subject to some new rules but exempt from others. Such plans have already had to eliminate lifetime limits on coverage and restrict annual limits on coverage, eliminate pre-existing condition exclusions for children and extend dependent coverage up to age 26. Beginning in 2014, grandfathered employer plans will be required to eliminate any annual limits on coverage, eliminate pre-existing condition exclusions for adults and limit waiting periods for coverage to no more than 90 days.
Grandfathered plans will not have to meet the new minimum benefit standards, limit enrollee cost-sharing or provide coverage for preventive services with no cost-sharing. To maintain its grandfathered status, a plan cannot reduce or eliminate benefits to treat particular conditions, increase employee cost-sharing (including deductibles, co-insurance and co-payments) above certain thresholds, reduce the employer share of the premium cost or change insurers. Once a plan loses its grandfathered status, it will have to comply with all the new rules.
— Self-funded funds: Self-funded plans (financed by an employer rather than through a health insurance company) will be subject to many of the same provisions that apply to full insured plans; however, they are generally exempt from state insurance regulations, so costs will be lower. Self-funded plans won’t likely have to meet the minimum essential health benefit requirements, such as limits on deductibles, but they will be required to extend dependent coverage until age 26, eliminate cost-sharing for preventive services, limit waiting periods for coverage to no more than 90 days and eliminate lifetime or annual limits on coverage.