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Distilling Down the Details of the Affordable Care Act

Distilling Down the Details of the Affordable Care Act

By: Melanie Berkowitz, Esq.

The Affordable Care Act (ACA) dominated 2013 headlines -- whether because of deadline extensions, website malfunctions or threats of lost health care insurance coverage. 

While most of the ACA’s basic mandates and thresholds remain in place, they will not all become active as originally scheduled. That means planning around the health care act needs to be rethought.

Confused? That’s not surprising!

Here are some of the major changes and decisions small businesses need to consider now:

1.  Early Renewal of Current Insurance Plans
The Incentive:
After the ACA goes into effect, some small businesses can maintain lower insurance rates for a longer period of time by renewing current insurance policies early.

The Concern: Some small businesses with relatively healthy workforces fear that the ACA’s community rating requirement will lead to a major increase in policy rates once it comes time to renew.  

What this Means for Employers: Under the ACA, businesses that previously offered group health insurance do not have to ensure that their plans are ACA-compliant until the time that the plan is up for renewal.   

In order to maintain a beneficial insurance rate as long as possible, many small businesses have been quietly renewing their policies early, before the ACA’s January 1 effective date. This locks in their current (ideally lower) rate for a longer period of time.

Bonus: Now that the Obama administration has announced a year extension before any current insurance plan is cancelled, businesses may gain even more time to maintain current rates.

What Should Small Businesses Do?: Any small business owner that currently offers health insurance should explore the possibility of an early renewal, prior to whatever eventual deadline is set for ACA compliance. 

  • Talk to your current insurer about renewal.
  • Keep up to date on deadlines for compliance.
  • Research the online marketplace to see what rates may be under the ACA, given your particular workforce.

2. Get Your Recordkeeping in Place
The Incentive:
The extension of the employer mandate provision gives employers extra time in 2014 to track workers’ hours to determine whether they have more than 50 FTE employees. 

The Concern: Having more than 50 FTE employees, of course, means that an employer is subject to the employer mandate (also known as “pay or play”) and must provide health insurance or face a penalty.

If an employer who is subject to the employer mandate has an employee who chooses not to obtain insurance through his or her employer, the employer is subject to a different penalty under the health care reform bill.   

What this Means for Employers: Employers must determine if they have more than 50 FTE employees and, if so, who those employees are.  These steps will help you identify your FTE employees:

  • Identify a “controlled group” of employees whose hours you will begin tracking in 2014.
  • Review your recordkeeping procedures to ensure you capture all necessary information about your workforce.
  • Identify your FTE employees (workers who average more than 30 hours per week.)
  • If the variable schedules make it difficult to determine full time employees, prepare to use the ACA’s “measurement and stability period” method of calculation.  
  • Talk to an expert or visit IRS.gov or SHRM.org for guidance in determining the makeup of your workforce for ACA purposes.

3. Adapt to the Extension of the Employer Mandate
The Incentive:
Employers with more than 50 FTE employees now have an extra year (until January 1, 2015) to provide workers with ACA-compliant healthcare. 

The Concern: Employers on the threshold of 50 FTE employees are given more time to decide whether to cut hours, reduce hiring or accept the mandate and find health insurance. But having another year of not knowing how the law will ultimately affect them financially will potentially compliate decisions about growth and staffing beyond the Affordable Care Act.   

What this Means for All Employers: Regardless of size, there are certain things that all small businesses should do with the extra year:

  • Keep track of additional changes or extensions to the ACA by following the government’s websites including healthcare.gov, IRS.gov and DOL.gov. These sites will continue to provide guidance on how to measure the size of your workforce in relation to the ACA.
  • Take time to research insurance options to compare costs and benefits through the public exchanges as well as private insurers. While full information may not be available yet, it's best to familiarize yourself with this information now, rather than make an ill-informed decision down the road. 
  • Keep track of employee hours as it relates to FTE employees and your business needs. (see #2 above) 2014 is a good time to think about  how your business can function going forward with more part-time employees. It may make more sense to move to a mostly full-time workforce.

What Should Employers With More than 50 FTEs Do?
Employers who are certain about the size of their workforce should take this year to find the best possible insurance plan for their situation:

  • Talk to your current insurer about the type of ACA-compliant plans they can offer you.
  • Explore other public and private benefits options in the marketplace or via insurance exchanges.
  • Seek out an expert, if necessary, to help guide you through the process of buying and funding the best possible health care plan for your workforce.  
  • Continue to provide employees notice and information about ACA updates and their choices for insurance going forward.

What Should Employers on the 50 FTEs Threshold Do?
This group of employers is going to need to embrace some uncertainty. Here are steps to help:

  • Talk to an expert. This investment will be worth it.
  • Crunch the numbers -- how much will it cost to provide insurance? What will it cost to employ more part-time workers?
  • Consider your long-term goals. If you intend to grow beyond 50 FTEs in the future, does it make sense to offer insurance now or wait until the health care picture is more certain?

4. Understand SHOP
The Issue
: Beginning November 1, 2014, small businesses with fewer than 50 FTEs will be able to shop for and buy insurance through online public exchanges known as Small Business Health Options.  Currently, small businesses can use a broker or agent to complete a paper application for SHOP health insurance plans. In 2016, small businesses with fewer than 100 FTEs will be eligible to buy through SHOP.

What this means for employers: SHOP provides a way for employers who will not be subject to the employer mandate to choose to offer health insurance to their workforce. Certain small employers will even be eligible for a tax benefit if they buy insurance through SHOP.

What Should Employers Do?

  • Decide if you want to offer insurance even if not required to by law. Doing so can help attract top talent, stay competitive with bigger companies, improve employee morale and retain great workers. 
  • Talk to an insurance broker. Even though the online portion of SHOP is not yet active, small businesses can still purchase insurance the “old-fashioned” way. 
  • Explore whether your business is small enough to receive a tax incentive for buying insurance through SHOP.
  • Look ahead to 2016. For businesses on the threshold of the employer mandate, it may make sense to look at buying insurance through SHOP now for your workforce that is under 50 FTEs. In 2016, you will be able to add employees and expand up to 100 FTEs and still maintain your SHOP insurance plan.

Legal Disclaimer: None of the information provided herein constitutes legal advice on behalf of Monster.