Businesses shouldn’t wait to deal with health care reform
Supporters of health care reform cheer the Supreme Court decision to uphold the law last summer. LEFT: A chart by the Congressional Research Service explains whether employers will pay a penalty for not health insurance.
As implementation of the Patient Protection and Affordable Care Act on Jan. 1, 2014, continues to draw near, employers are faced with grasping what the law means for their business, both in terms of their ability to comply and the possibility of additional health insurance costs on their bottom line. The 2012 Alaska State of Reform Health Policy Conference held on Sept. 27 at the Dena’ina Civic & Convention Center in Anchorage, confronted these issues directly.
Stephen Cilley, CEO and founder of Ataraxis, an outsourcing firm for employee benefit services based in Boise, Idaho, spoke at the conference and warned business owners against ignoring the impending regulation changes.
“A lot of people are unfortunately taking the approach that I don’t have to do anything until next year,” Cilley said. “You really need to design now what you’re going to do, because it does take effect for employers in 2014.”
While urging against procrastination, Cilley said small businesses that currently provide health benefits will not see a major shift in the operation of their benefit plans.
“Nothing’s changed for a small employer. They still wanted to have a benefit program before it really comes down to the cost. If the cost is going to go up significantly, that’s something they have to analyze.” Cilley said.
Cilley also noted that while it has been publicized that small businesses, those with less than 50 full-time employees, will not be required to offer employee health benefits, the law does not allow for such cut-and-dried determinations.
“Full-time hours for healthcare reform is 30 hours,” Cilley said.
A 2010 summary of PPACA by the Congressional Research Service describes a small employer as an entity that employs 50 or fewer full-time equivalent employees during a given year.
Part-time employees, those averaging less than a 30-hour week, will still figure into the equation, however. All hours worked by part-time employees will be added together and divided by 120 working hours per month. The resulting number from the equation will be the number of full-time equivalents, or FTEs, an employer must add to its truly full-time positions.
For the many seasonal businesses in Alaska, a new layer is added to the equation. Seasonal employees, full- or part-time will not be counted as long as they work 120 days or less per year for small employers. Large employers will have to report full-time seasonal employees if the business employs over 50 FTEs.
Lynn Klassert, director of sales for Swan Employer Services in Anchorage, recommends employers meet with their coverage providers now to determine what, if any, coverage they will need to be compliant.
“It all depends on what kind of business you have as to how you need to calculate your FTEs,” Klassert said. “You’re going to have to sit down with your provider and start doing some modeling. You know, what’s going to be the impact on my business?”
For businesses that do not comply with PPACA guidelines, the Congressional Research Service details the equations that will be used to calculate the two major foreseen penalties for large employers, those with more than 50 FTEs in its Summary of Potential Employer Penalties Under PPACA (see chart).
The CRS calculations are based on employees making at least 300 percent of the federal poverty guideline. The Department of Health and Human Services 2012 poverty guideline is $11,170 for a single individual with no dependants.
In the event a large employer does not offer qualifying coverage, employees will qualify for exchange credits from their respective state-run exchange or the federal government to cover incurred costs exceeding those set forth by PPACA regulations. Currently, Alaska has chosen not to set up a premium credit exchange.
Opposite from possible penalties incurred as a result of not providing a qualifying coverage plan, is an excise tax on employers providing plans with exceptional coverage and cost, such as those for high-earning or high-risk individuals, which has come to be know as the Cadillac tax.
Employers offering health plans with a total cost greater than $10,200 for an individual and $27,500 for a four-member family plan will be required to pay a 40 percent tax on those plans. To help calculate these figures, health benefit plan costs will be added to W-2 income tax forms beginning in 2013, with the Cadillac tax taking effect beginning in 2018.
Even though the tax is several years away, Jennifer Bundy-Cobb, vice president of the Wilson Agency, based in Anchorage, said some employers, especially those providing health plans negotiated through collectively bargained agreements, need to take heed now.
“You could easily be bargaining in the next 24 months for a contract that will carry you through 2018,” Bundy-Cobb said. “If these discussions aren’t contemplated you can get to 2018 and be real sorry, to put it mildly.”
To best combat any nerves regarding the nuances of such a complex law, Bundy-Cobb encouraged business owners to step back at take a deep breath.
“It’s difficult for an employer to comprehend these things,” Bundy-Cobb said. “The bullets are coming fast. The first thing we’re encouraging employers to do is to just sit down and think about it.”
Elwood Brehmer can be reached at firstname.lastname@example.org.