It’s been three years since the Patient Protection and Affordable Care Act (PPACA, ACA) was signed into law, setting in motion some of the most sweeping changes in health coverage. It’s been called into question on constitutionality, challenged and defied by individual states. And though the future isn’t set in stone, as the current legislation stands, one thing’s for certain: It’s coming. And you need to be ready for it.
Though lots of parts of the issue are still up in the air, there are a few steps every business needs to take to get started, says Bob Graboyes, senior fellow for health and economics for the National Federation of Independent Business Research Foundation and advisor on healthcare policy.
1. Pay attention.
There’s no doubt the PPACA is enormous, with more than 1,000 pages of law and 13,000 pages of regulation so far. And legislators arguing over those stipulations as the law goes into effect is likely to make those numbers go up. It’s tough to keep on top of the changes, but ignoring it isn’t going to make it go away.
“The first thing I stress is this thing is huge,” says Graboyes. “It’s changing, it’s complex, it’s bigger than any one adviser. Employers are scared to death of it, but I don’t know if they’re aware yet of how scared they ought to be of it.”
Several of the provisions of the act are already in effect, including insurance coverage extended to dependents living with parents until age 26 and some preventive care coverage. But as more of those changes impact small business, it gets both tougher and more important to stay ahead of the game. Keep in touch with your accountant, your broker and your attorney regularly to make sure you’re in compliance with current rules, and get updates on changes to make the best decisions, especially as states determine response to the law and how the individual exchanges will work.
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ACA Resources SAF has developed a Health Care Resource Center that is free to members as a benefit. “It’s written in plain English, comprehensive, easy to understand and provides a Health Care Planning Tool for employers large and small to utilize to make informed choices about how they will comply with the ACA,” Corey Connors, senior director of government relations for SAF, says. The tool includes a worksheet to calculate business size. It then walks users through their options for both themselves and their employees. The Resource Center also provides a glossary, implementation timeline and other resources to assist with compliance. For non-SAF members, the Kaiser Family Foundation has done a good job of putting out non-partisan information about the ACA, Connors says (http://healthreform.kff.org). Other notifications and information about employer reporting requirements should be coming from state workforce agencies and state labor departments as time goes on, Connors says.In addition, attorneys and accountants should fairly well-versed on the requirements of the law. |
2. Keep records.
The size of the company determines where an employer falls with respect to the employer mandate, with the magic number landing right at 50 full-time equivalent (FTE) employees. As of 2014, an employer with 50 or more FTE employees is a “large” employer and must either offer minimum essential coverage to full-time employees and their dependents or pay a penalty. A full-time employee works on average 30 hours per week, or 130 hours per month.
Full-time equivalent and part-time employees muddy that water for many green industry employers, since each of those counts toward that 50-employee total.
For example, under the current ruling, an employer with 50 or more FTE employees working fewer than 120 days of the calendar year as seasonal employees slides in as a “small” business. Part-time employees are counted through a calculation of all hours worked by non-full-time employees and dividing the total by 120. The result is the number of additional FTE employees, and that could put an employer just over the mark.
Some employers are trying to figure out how to break up companies to avoid the number, but the IRS is increasingly clear that separating departments or finding workarounds with independent contractors or temps won’t work, says Graboyes. Employers will have the ability to determine that size through a still-undefined “lookback period” of the previous year. Some employers are just letting go of employees to get under that 50 FTE mark.
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Redefinition attempts The ACA definition of a full-time employee continues to be a focus of the Employers for Flexibility in Health Care (E-Flex) coalition, on which SAF serves as a steering committee member. Recently, E-Flex released a one-page document that outlines key areas that would ease compliance for employers prior to the effective date of January 1, 2014 (see bit.ly/123mYGW). At press time, SAF and its coalition partners were to begin canvassing Congress to gauge potential relief for employers, including amending the definition of a full-time employee, the definition of a large employer and other transition mechanisms. If bipartisan agreement can be reached on potential technical corrections, a major grassroots advocacy push would be needed to secure passage, SAF states. Source: SAF |
But regardless in which category the business falls, the IRS and the Department of Labor are going to want to know how those numbers were reached. Save employee paperwork and be ready to fill out more forms, even if the staff total dodges the mandate outright.
“Your annual penalties may be highly sensitive to how you structure your workforce,” says Graboyes. “You’re going to have to do paperwork, and that doesn’t go away even if you decide to drop coverage and take the penalties. And if you’re offering 100 percent coverage of the insurance, you’re not going to get hit with penalties. Your life is probably a little simpler in that respect, but there are still going to be issues.”
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Paying it forward How can a small business pass along the costs? Corey Connors, senior director of government relations for SAF, answers: “That’s a really good question. In one way or another, businesses across all industries will need to find a way to mitigate costs and limit potential tax liability. The ACA’s tax penalties are non-deductible and come straight out of profit margins — that’s important to note. That’s for large employers who do not offer coverage or offer coverage that is not considered affordable and of minimum value. Should employers choose to offer coverage, there’s certainly a cost for doing that. But will premium costs continue to rise, or will the law better contain premium increases? Does the existence of a SHOP exchange mean better access for small employers and more affordable options? “There may also be hidden costs for attracting and retaining employees, all of whom are responsible for obtaining coverage for themselves and dependents, regardless of business size. Will employees required to find coverage that is ACA-compliant leave a small employer to join a large employer that offers health benefits? What market pressures will be created by the individual mandate? What will the effect be on small employers? “How to pass along costs is a different matter. In an economic recovery with more fits than starts, will small businesses be put in a position of increasing downstream and consumer prices at a time when disposable income remains flat? Will large companies also have to increase product costs to make up for the cost of health coverage? By the same factor?” |
3. Start talking.
It’s not just important to keep open communication with the professionals outside the office. Keep employees informed of how the healthcare changes will affect the company. Steer clear of the politics, but remind employees that the adjustments aren’t the company’s decision.
“You’ll want to tell them, ‘I just want you to know, there are a lot of changes coming. You’ll like some of them and you’re not going to like some of them. But you need to understand it’s not my fault,’” says Graboyes.
On top of coverage changes, employees will need to know about plan changes that involve government subsidies, which can kick into effect for employees who make less than four times the federal poverty level. They’ll also need to hear about the state’s individual plans for insurance exchanges as those develop — it might be helpful to arrange presentations by your attorney or accountant on the legal issues that the company and the employees individually will face.
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The magic number Of all the coming changes resulting from the PPACA, the employer mandate levels some of the heaviest impacts at business. While some of the specifics of a full-time equivalent (FTE) employee are still being determined, the difference between a “small” and “large” business cuts off at 50 full-time employees, or full-time equivalent employees. Depending on where your business falls around that mark determines how the mandate applies, as well as what penalties might be on the way if employees aren’t properly covered. Here are the scenarios:
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