HR the human resource, June-July 2010, Vol. 3, Issue 3
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Attorney At Law Magazine, Premier Edition, May 2011
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By Jaron Blandford and Ben Fiechter
After much congressional deliberation and debate, President Barack Obama signed the Patient Protection and Affordable Care Act of 2010 on March 23, 2010 ("PPACA"). Several provisions of PPACA will have an impact upon employers in all industries, not just those in the healthcare field. Now that healthcare reform is a reality, employers should be well aware of the provisions that impact them.
Insurance Plan Requirements After PPACA
Employers must be aware of several new insurance plan requirements and restrictions. After September 23, 2010, grandfathered plans (those group or individual plans that were in existence on the date of enactment) may not contain lifetime benefit limits or pre-existing condition exclusions for enrollees under the age of 19, may not be revoked except for fraudulent conduct, may not contain restrictions on annual limits for "essential health benefits," and must contain provisions for coverage of dependent children up to the age of 26. Non-grandfathered plans are subject to the same requirements, with two additions. These plans must cover preventive health services and immunizations without cost and may not discriminate in favor of higher-wage employees.
An Employer's Responsibility To Provide Insurance
One of the overriding goals of PPACA is to get as many people into insurance pools as possible, and employers will be required to pick up some of the slack. PPACA establishes state-based health insurance exchanges to accomplish this goal. Starting in 2014, these exchanges will include programs to assist small businesses in the enrollment of employees. Under PAPCA, businesses with fewer than 25 full-time employees that earn an average annual wage of less than $50,000 will be offered a tax credit to offset up to 35 percent of employee health insurance costs. Beginning in 2014, employers with over 200 full-time employees are required to automatically enroll employees into the lowest-cost premium plan the employer offers if the employee does not sign up or does not opt out of coverage. Finally, but 2014, employers offering insurance coverage must provide vouchers to employees with incomes below 400 percent of the federal poverty line if their share of the premium cost is between 8 and 9.8 percent of income to enable them to enroll in an exchange. Employees who offer free choice vouchers will not be subject to penalties.
Though PPACA does not require employers to provide health insurance, it does place penalties on employers whose employees purchase health insurance through an exchange and receive federal subsidies. Beginning in 2014, employers that have more than 50 employees and do not offer insurance coverage will be assessed a penalty of $2,000 per full-time employee, excluding the first 30 employers that have more than 50 employees and do offer coverage but have at least one employee who receives a premium credit through an insurance exchange will be subject to a penalty of $3,000 for each employee who receives a premium credit of $2,000 for each full-time employee, whichever is smaller. An employer's decision to offer coverage versus paying the penalties may be drive by cost, as the penalty may be less than the cost of insurance. Finally, so-called Cadillac plans — those with total premiums of $10,200 for individuals and $427,500 for families — will be subject to a 40 percent excise tax beginning in 2014.
Temporary Insurance Programs
Employers should also be aware of potential penalties and savings associated with two temporary insurance programs that go into effect on June 21, 2010. The temporary high-risk insurance program protects individuals with a pre-existing condition who have not had group health coverage for the previous six months. The Secretary of HHS is required to establish guidelines for determining whether employer-based health plans have dumped enrollees into this pool and may require employers to reimburse the pool. Although states may opt out of the high-risk pool, Kentucky will remain in the program. The temporary reinsurance program for early retirees provides reimbursement to employer-based plans for 80 percent of the cost in excess of $15,000 and below $90,000 of providing coverage to retirees between the ages of 55 and 64 and their families.
One aspect of health care reform that received broad bipartisan support was an emphasis on wellness and prevention. PPACA contains several incentives for employers to create wellness programs. Employers with fewer than 100 employees who work 25 hours or more per week are eligible to receive grant money to establish wellness programs. Eligible wellness programs must include awareness assessments, efforts to include employee participation, initiatives to change unhealthy behaviors and lifestyle choices, and a supportive environment. The federal government will provide technical assistance and consultation services to help employers develop wellness program. Further, PPACA places no limits on participation-based wellness programs that are a part of a group health plan and gives regulators the authority to allow incentives of up to 50 percent of the cost of coverage. Finally, PPACA lifts the limit on total financial incentives found in HIPPAA from 20 percent to 30 percent for positive lifestyle practices or participation in a workplace wellness program.
PPACA contains new disclosure requirements for employers. Employers must report the aggregate cost of health coverage received by each employee under the employer's health plan on the employee's annual W-2 form. Beginning in 2011, employer contributions to flexible spending accounts are limited to $2,500 annually. Finally, the federal government wants to ensure compliance with PPACA, and through anti-retaliation provisions it protects employees who report violations of PPACA, testify or assist authorities with investigations, or refuse to participate in activities that violate PPACA.
Jaron Blandford is a Member with McBrayer law. Mr. Blandford concentrates his practice in employment law and litigation and is located in the firm's Lexington office. Mr. Blandford can be reached at email@example.com or at 859-231-8780, ext. 1252.
This article is intended as a summary of newly enacted federal law and does not constitute legal advice.