Rhodes-Warden Insurance Blog

All You Ever Wanted to Know About Insurance

Health Reform Changes for Employers: What's Changing and When

As the third year of the Affordable Care Act (ACA) gets underway, employers will see an impact on the health coverage they offer their employees.

Here is a brief summary of some of the taxes, fees and impending legal provisions that may impact employers.


Overview of Taxes and Fees Affecting Employers

  • Patient-Centered Outcomes Research Trust Fund Fee - Beginning with plan years that end after September 30, 2012, health insurers and sponsors of self-funded group health plans will be assessed an annual fee to fund the Patient-Centered Outcomes Research Institute. The fee helps to fund research on the comparative effectiveness of medical treatments. Rates will reflect the new fee.
  • Premium Tax - Starting in 2014, the health insurance industry will be subject to an annual excise tax, initially estimated at $8.0 billion in total and increasing annually thereafter. The amount that each health insurer owes will be determined annually based on its "net premiums written" (i.e. its market share) in the previous year. Rates will reflect the new tax.
  • Reinsurance Fee - The ACA will establish a transitional reinsurance program to be funded by health insurers and self-funded employers. The program is intended to help stabilize premiums in the Individual market during the first three years that health insurance exchanges are in effect (2014 - 2016). The tax will be assessed based on a company's insured commercial market share on a per-member basis, an approach similar to that used by state high-risk pools. Rates will reflect the new fee.

Key Provisions Effective in 2013

  • W2s - Beginning with the 2012 tax year, employers filing 250 or more Form W-2s must report the cost of employer-sponsored health coverage on W-2s issued in 2013. Both employer and employee contributions must be included in the amount reported.
  • FSAs - For plans beginning on or after January 1, 2013, employees' health flexible spending arrangements' (FSA) salary reductions will be limited to $2,500 per FSA plan year.
  • Medicare Tax — On wages earned on or after January 1, 2013, employees will be required to pay an additional Medicare tax of 0.9% on wages above $200,000 ($250,000 for married couples filing jointly). The employer's share of the Medicare tax will not change, but employers will need to update payroll systems to ensure that proper employee withholdings are made.
  • Exchange Notification — Employers are required to notify current employees (and new employees at the time of hire) about state health insurance exchanges and their insurance options. The notification is required by October 1, 2013.

Key Provisions Effective in 2014

  • Employer Mandate Employers with 50 or more full-time equivalent employees must offer full-time employees and their dependents "qualified health insurance coverage" that meets affordability and value requirements specified by the ACA or be subject to a penalty.
  • Employer Penalties — If an employer fails to provide health insurance to full-time employees, the employer will pay a penalty equal to $2,000 per full-time employee (with a credit for the first 30 employees). If the employer provides health insurance, but fails to meet affordability or value requirements established by the ACA, the employer will also be subject to a penalty equal to $3,000 for each employee that receives a premium tax credit.  Any penalties have been delayed until January 1, 2015.

What This Means to You - Recommended Steps for Employers

  1. Review group health plan provisions and regulatory guidance for employers to ensure that the health plan is in compliance with "qualified health insurance coverage" as defined by the ACA
  2. Prepare to report the cost of 2012 employer-sponsored health care coverage on 2013 W-2s
  3. Ensure that summaries of benefits and coverage and other required notifications are distributed to employees as required
  4. Plan for the financial impact of new taxes and fees Consider changes to payroll processing, particularly with respect to the increased employee Medicare tax withholdings
  5. Be on the lookout for upcoming regulatory guidance

Frequently Asked Questions

Q: Will the law make health insurance cheaper?

A: Insurers are required by law to provide richer benefits. That, along with new premium taxes, surcharges and underwriting reforms in the law, is likely to increase costs. However, the impact will vary by state and from one employer to the next based on employee demographics and plan benefits, plus any additional state taxes, fees and regulations.

Q: Are employers required to offer health insurance?

A: Though there is no requirement that small businesses offer health insurance, beginning in 2014, companies with more than 50 full time equivalent employees likely will have to pay a penalty if they do not offer affordable and effective coverage.


Key Definitions for Employers

Small/Large Employers: The federal definition of a large employer is an employer with 101 or more employees, whereas a small employer is defined as 2-100 employees. States can modify the definition of a large employer to 51 or more employees and small employer to 1-50 employees until January 1, 2016.

Full-time Employee: Defined as an employee who works an average 30 hours per week, per month or 130 hours of service per calendar month.


Key Upcoming Dates

October 1, 2014 - Employers required to notify current employees (and new employees at the time of hire) about state health insurance exchanges and their insurance options.

October 1, 2013 - Exchanges begin open enrollment period.

January 1, 2014 - Employers must generally be in compliance with coverage requirements. Coverage begins for plans purchased through exchanges.


This communication should not be considered legal advice. Questions regarding the application of the Affordable Care Act (ACA) to your plan should he addressed to your tax, legal and insurance advisors.


Discussion

There are no comments yet.


Leave a Comment

Required fields are marked with

Comment

Your name, comment, and URL will appear on this page after it has been reviewed and approved. Your email address will not be published.