Sweeping changes in health care laws affect nearly all taxpayers, employers, and many elements of the health care industry. The Health Care and Education Reconciliation Act of 2010 represents a massive overhaul of the U.S. health care system with the enactment of the Patient Protection and Affordable Care Act (PPACA).
In July 2013, the government decided to give employers another year to meet several of the employer mandate provisions under the PPACA; additional guidance associated with these provisions is forthcoming. However, organizations that have not addressed changes required by the PPACA should not wait another year to get ready for compliance.
Here are five frequently asked questions regarding health care reform and the potential impact on your organization.
1. Do I need to offer coverage?
Employers with less than 50 employees are not, and will not be, mandated to provide health insurance to employees. Only a large employer may be subject to penalties regarding employer-sponsored coverage. In order to determine eligibility, both full-time and part-time employees are included in the calculation. Full-time employees are defined as those working an average of 30 or more hours per week. The hours worked by part-time employees (defined as less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis, by the total number of monthly hours worked divided by 120.
2. What does “Pay or Play” mean to my organization?
On January 1, 2015, the Employer Mandate will change the landscape of U.S. healthcare by requiring large employers to offer health coverage to full-time employees and their children up to age 26, or risk paying a penalty. The decision to “Pay or Play” and the way that decision is made could have a significant impact on your organization. Large employers will be forced to make a choice: to either "play" by offering affordable health coverage that provides minimum value or "pay" by potentially owing a penalty to the Internal Revenue Service if they fail to offer such coverage. This scheme, called "shared responsibility" in the statute, has become known as the Employer Mandate.
3. What are the penalties if we are not compliant?
Beginning in 2015, if minimum healthcare coverage is not offered to full-time employees, and at least one employee obtains subsidized coverage through an exchange, a $2,000 penalty will be assessed for each employee (after the first 30). If minimum coverage is offered to full-time employees but is not affordable, and that employee obtains subsidized coverage through an exchange, a $3,000 penalty will be assessed for each employee getting subsidized coverage.
4. What is a Health Benefit Exchange?
A cornerstone of the PPACA is the establishment of health insurance exchanges. Pennsylvania is one of 26 states that chose not to operate a state-run exchange. For those states that opted out, there is a federally operated online health insurance marketplace called an exchange that is scheduled to open for business in October 2013. Employers will be required to give employees notice of these exchanges by that date. The exchange will allow individuals to shop online for an assortment of government-approved health insurance plans. The exchange will also match people with tax credits to make the coverage affordable. It will be open to all individuals, regardless of whether they have access to coverage at work. Small businesses will also be able to shop for coverage on the exchange, allowing them to enjoy savings previously available only to large companies.
5. What benefits need to be included?
Section 1302 of the PPACA states that essential health benefits are intended to mirror those provided under a typical employer-sponsored health plan and, at a minimum, cover the following general categories:
- Ambulatory patient services, such as doctor's visits and outpatient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
While the PPACA requires coverage for each of these categories, the law does not define the specific services that must be covered, or the amount, duration, and scope of services. The Health and Human Services Secretary will define the specific benefits within each of these categories and will be able to update the definition over time to address gaps or respond to changing medical practices in the future.
These answers are just the tip of the iceberg. As evidenced by the delay implementing the Employer Mandate, healthcare reform is very complex. The PPACA covers more than 2,000 pages and is being implemented over a ten-year period from 2010 to 2020. The evolving rules and regulations are extensive. For more information on how the PPACA impacts your organization and how to proceed, please contact your healthcare provider or broker.
Maxine G. Romano can be reached at Email or 215.441.4600.