Health Care Reform Update:
By Steve Fallon, Insurance Buyers Council, Inc.
MINIMUM BENEFIT LEVELS AND
One of the key provisions of the Patient Protection and Affordable Care Act (ACA) is the employer "pay-or-play" mandate. The ACA requires "large employers" - those with at least 50 full-time (equivalent) employees - to offer those employees "minimum essential (health care) coverage" which provides "minimum value" and is "affordable" as defined by the ACA. This mandate will be generally effective January 1, 2014, with "special transition rules" applicable to employers, like some counties, which have fiscal year plans. Subject to certain conditions, these rules effectively extend the compliance date for those counties until July 1, 2014.
What exactly constitutes "minimum essential benefits" has yet to be announced by the Department of Health and Human Services (HHS), but it is clear the overwhelming majority of county groups are already offering coverage which far exceeds what will be required of employers under the ACA.
As for employee contributions, while many county plans have some level of employee contribution, the "affordability" definition under the ACA is tied to a single (enrollment) plan only (you can require 100% premium contribution for dependent coverage), such that a plan is "affordable" if the employee's share of the cost of "self-only" coverage does not exceed 9.5% of their household income. Under the so-called "W-2 safe harbor", employers can use the employee's W-2 wages in assessing the "affordability" of its plans. For a full-time employee earning $25,000, the maximum monthly contribution allowed would be $197.92 for single coverage. This translates to an employee contribution of 30-40% of premium of a typical medical/Rx employee-only premium.
The employer mandate under the ACA does not apply to "small employers" which, by definition, have less than 50 full-time (equivalent) employees.
Determining if you are a "Large Employer"
In determining if you are a "large employer" with 50 or more full-time employees, you must also count "full-time equivalents" (FTEs) by determining total hours for the month for all non-full-time employees (including seasonal employees) and dividing by 120 (30 hours per week x 4). The result is the number of FTEs which must be added to your total employee count in determining if you are a "large employer" under the ACA.
Defining Full Time Employees
If you are a "large employer" as defined by the ACA, you must offer the required ACA-compliant "minimum essential coverage" (which has "minimum value" and is "affordable") to all full-time employees by no later than January 1, 2014 (July 1, 2014 for counties on a fiscal year plan). A "full-time" employee is one who works an average of 30 hours per week. In general, short-term, part-time and seasonal employees are not considered "full-time" under the ACA.
Identifying employees working "full-time" (30 hours a week) should be simple enough for the vast majority of your workforce. The complicating factor is calculating employees on the cusp of 30 hours-including employees with peaks and valleys in hours, "variable hour employees" (VHEs), and seasonal employees.
The methods used for determining the VHEs are complicated, utilizing a number of "measurement periods." The CCAP Health Alliance, through its partnership with the Delaware Valley Health Insurance Trust (DVHIT), is assessing the recently released regulations and will be providing additional guidance - well in advance of the January 1, 2014 implementation date. In the meantime, the following are a few action items to consider:
- If your county or entity is close to 50 full time employees/equivalents, strategize on future hiring plans.
- Clearly define/manage employees close to the 30 hour weekly threshold to make sure you don't have hour-creep. One extra average hour can result in additional health insurance premium of $5,000-$8,000 (per single employee).
- If your threshold for measuring full-time/benefit eligible employees is currently more than 30 hours, calculate the number of new eligible employees and the impact on your budget.
- Strategize on ways to offset any increased costs caused by newly eligible employees.
If you have any questions about this update or how the regulations will impact your county or entity, contact Julia Jackson, CCAP Employee Benefits Program Manager at (800) 895-9039 x 3305.
Steve Fallon, Insurance Buyers Council, Inc. is consultant to the Delaware Valley Health Insurance Trust (DVHIT), administrator of the new CCAP Health Alliance.