As an employer, you now know that he Supreme Court ruled 5-4 that the Affordable Care Act (ACA) is largely constitutional. And that the ruling came about due to Chief Justice John Roberts’ determination that the individual mandate portion of the ACA constitutes a lawful tax precipitating his surprise alignment with the more liberal justices.
But, what does this outcome mean for you as an employer? For the time being at least, much of the uncertainty has been removed despite Republican vows to continue to fight to repeal the law. While repeal efforts may ultimately succeed, particularly if Mitt Romney is elected President, for now you really need to look at the following areas to ensure your legal compliance:
1. Summary of Benefits and Coverage (SBC.) Employers sponsoring group health plans should ensure compliance with the SBC provisions. These require distribution of a Summary of Benefits and Coverage regarding your health plan during upcoming open enrollment periods. The summaries must be distributed no later than the first day of the first open enrollment period beginning on or after September 23, 2012.
2. Form W-2 Health Care Reporting. Forms W-2 for calendar year 2012 (generally provided in January, 2013) and beyond must include the annual cost of group health coverage in Box 12 using code DD. The amount is reported for informational purposes and is not taxable. Important Note: Employers that issued fewer than 250 W-2s have been given transition relief from this provision for 2012 (and perhaps beyond) pending further guidance from the IRS.
3. Health Plan Components. Employer group health plans will be prohibited from imposing lifetime or annual maximums on benefit amounts and pre-existing condition limitations by 2014. The law already mandates that plans provide coverage for subscribers’ children up to age 26 and that specific preventative care benefits have first dollar coverage (unless grandfathered.)
4. Health Flexible Spending Account (FSA) Limits. For plan years beginning in 2013, annual contributions will be limited to $2,500. If you offer an FSA with a higher limit, you’ll need to adjust the plan document, communicate the change to employees and provide updated summary plan descriptions.
5.Medicare Payroll Tax. Beginning with the 2013 tax year, there will be a 0.9% Medicare payroll tax increase on high income individuals (those earning $200,000 plus.)
6. Play or Pay. Beginning in 2014, employers with 50 or more full-time employees will have to either (a) provide at least a specified minimum level of health coverage that its employees can afford or (b) pay a shared responsibility payment. This payment amounts to a penalty of $2,000 per full-time employee (not including the first 30.) While that’s a lot less than the cost of health insurance, think carefully about all the implications (such as recruiting and retention) before deciding to drop health insurance for your employees.
7. Small Employers. Employers with fewer than 25 employees (whose average salary does not exceed $50,000) that pay at least 50% of an individual health premium are eligible to receive a tax credit. For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers. On January 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.
8. Automatic Enrollment. Beginning in 2014, employers with more than 200 full-time employees are required to automatically enroll new full-time employees in group health plans.
9. Waiting Period Limitation. Beginning in 2014, any waiting period for employee eligibility for health benefits is limited to 90 days.
10. Future Cadillac Tax. As you plan for future health insurance for your employees, keep in mind the provision that takes effect in 2018 that imposes upon insurers an excise tax of 40% on the amount of health insurance premiums that exceed $10,200 for individual coverage and $27,500 for family coverage. Although insurers pay the tax, there is a concern that the cost will be passed on to consumers.
11. Union Contracts. If you are unionized, consider the effects of current health care reform requirements and those that will roll out during the next few years when negotiating contracts.