After the Supreme Court Decision - What Should Employers Do Now? Part III of III
In June 2012, the U.S. Supreme Court upheld in general the Patient Protection and Affordable Care Act ("Act") in a landmark decision, National Federation of Independent Business, et al., vs. Sebelius (567 U.S. ____(2012)). This article is the third part of a three-part series answering the question for employers in what to do now that the Affordable Care Act was upheld. Part I of this series provided a list of action items required under the act in 2012. Part II of this series focused on items that go into effect in 2013 and this Part III addresses items that will go into effect in 2014.
Under the Act, an employer with more than 200 full-time employees must automatically enroll new full-time employees in the employer’s group health benefit plan and continue the enrollment of current employees in such health plan. Employees may opt out of any coverage in which he or she was automatically enrolled and the employer may impose a waiting period for the group health plan. It should be noted that the Internal Revenue Service ("IRS"), Department of Health and Human Services ("HHS") and Department of Labor ("DOL") announced that employers would not need to comply with the automatic enrollment requirement until regulations are issued. However, the Department of Labor website shows that the regulations are expected by 2014.
Limits on Waiting Periods and Pre-Existing Conditions
The Act provides that beginning as of January 1, 2014, a group health plan may not have a waiting period in excess of 90 days. This means that an employer cannot impose eligibility requirements for participation in the employer’s group health plan longer than 90 days. This section of the Act does not distinguish between full-time and part-time employees. It simply means that an employee may not be required to work longer than 90 days in order to become eligible to participate in the employer’s group health plan. In addition to the limitation on waiting periods, the Act provides that no group health plan may exclude coverage based on pre-existing conditions.
Employer Shared Responsibility
The Act provides what is called the "employer shared responsibility" provisions. These provisions state that a large employer that employs 50 or more full-time equivalent employees may be subject to a penalty if any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction payment. In general, an employer may be subject to this shared responsibility if the employer does not offer its full-time employees (and their dependants) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, or if the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible plan that is unaffordable relative to the employee’s household income (i.e., the costs to the employee exceed 9.5% of the employee’s annual household income). In general, the term full-time employee is an employee who works, at least, an average of 30 hours per week. Guidance is expected in the upcoming months to assist employers in determining whether employees are full-time employees and whether the coverage is affordable.
The Act provides an increase in the maximum reward allowed for participation in a wellness program offered through an employer. Currently, there is a 20% maximum allowed as an incentive for participation in a wellness program. Beginning in 2014, the incentive award for participation in wellness programs may be increased to 30% of the cost of employee-only coverage under the employer’s group health plan.
Limit of Cost Sharing
Deductible amounts will be limited in 2014 and later years to $2,000 for individual coverage and $4,000 for family coverage for fully-insured non-grandfathered small group plans. The out-of-pocket expenses for high-deductible health plans, which are used with health savings accounts, will be limited to a maximum of $6,250 for individual coverage and $12,500 for family coverage in 2013 for all non-grandfathered plans.
Small Employer Exchanges
Under the Act, small employers who have fewer than 50 employees will be able to purchase coverage through state-based health insurance exchanges. These state-based health insurance exchanges are expected to be operational in 2014 in states that are moving forward to establish them. The Federal government will run an exchange in states that opt not to establish one or that are otherwise late to do so. Enrollment in the exchanges is scheduled to begin October 1, 2013.
Beginning in 2014, employers must file an annual return with the IRS that certifies whether the full-time employees have the opportunity to enroll in minimal essential coverage.
This article is the third part of a three part series regarding what to do now after the Supreme Court’s landmark decision upheld the Affordable Care Act. This article is intended to only provide a brief summary of items that may affect employers or plan sponsors of group health plans. If you have any questions regarding the case or the Affordable Care Act, please don’t hesitate to call us.