Affordable Care Act is the Law

The United States Supreme Court confirmed today that the Affordable Care Act (“ACA”) is the law and is here to stay. In deciding King v. Burwell, the Court for the second time upheld the health care law that was passed by Congress in 2010.

What does King v. Burwell mean for employers? Not much. As an employer, you just have to keep soldiering on to make the ACA work in your business, just as you have been doing for the last several years.

Of course, how big an issue the ACA is to you as an employer depends on the size of your workplace. To apply the ACA, you as the employer have to count your employees and determine how many “full-time equivalents” that you employ. Under the ACA, a full-time employee is one who is employed an average of at least 30 hours per week.

The Affordable Care Act’s mandate, requiring employers to provide health insurance to employees or face a penalty, does not apply to employers with less than the equivalent of 50 full-time employees. This is the small business exemption to the mandate and means that small businesses can choose whether to provide health insurance at all.

If you have between 50 and 99 full-time equivalent employees, you have been getting ready for the Affordable Care Act this year, since 2016 is the year that you are required to provide your full-time employees with affordable health insurance coverage or pay a potentially substantial penalty.  You are probably still working out the kinks in your system of counting hours, determining who is full-time, setting measurement periods. Next year you will be getting employees signed up and answering endless questions from your employees about their coverage.

If you have 100 or more full-time equivalent employees, then 2015 is the first year you have been required to  provide health insurance to your employees or pay a penalty. The penalty is imposed if at least one of your full-time employees receives a subsidy to purchase coverage in the individual Marketplace. So the subsidies that the Supreme Court upheld in King v. Burwell today will determine if you as an employer get penalized.

But at least you have a little margin for error this year if you employ 100 or more people. In 2015, you only have to offer coverage to at least 70 percent of full-time employees, rather than 95 percent which will begin in 2016.

There are other changes on the horizon for you as an employer in dealing with the ACA. The next big issue will be the “Cadillac tax”, which takes affect in 2018.  That provision imposes a astonishingly high 40% excise tax on the amount above the threshold of what the ACA believes is the max that premiums should cost.

While the insurance company is responsible for paying the Cadillac tax (unless your company self-insures), you as the employer will be responsible for the calculation, and, of course, will see the consequences of that tax in the form of an increase in your plan premiums or decrease in your coverage.

So employer-sponsored health plans with aggregate expenses (your contribution to the premiums and the employee’s contributions to the premiums combined) that exceed certain thresholds (currently $10,200 for individual coverage and $27,500 for family coverage) will get hit with this excise tax.

That sounds like a lot of money, particularly since the nonpartisan Kaiser Family Foundation says the typical family plan cost $16,834 in 2014 and the average individual plan cost $6,025.

But one-third of employers will be hit by the tax in 2018 if they do nothing to change their plans, according to a March survey by Mercer, a benefits consulting firm. They are also predicting that 60 percent of employers will be affected by this tax by 2022, which suddenly doesn’t seem that far away.

That means that you as an employer need to be working with your insurance company now to find and offer your employees at least one plan that doesn’t hit these thresholds. That will probably mean higher deductibles and more out-of-pocket costs for the employee at the time of treatment.

 

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