The Affordable Care Act has begun implementation, which will have a profound effect on Kentucky businesses and their role in providing health insurance to employees. Many businesses will be under an “employer mandate” to provide such coverage or pay a penalty, and applicable employers will have to provide each employee with a notice of coverage options. Luckily, many of the provisions won’t take effect just yet, and there are options available through Kentucky’s exchange system to make these processes simple and effective.
“The Department of Labor recently lifted the requirement for employers to notify employees in October 2013 about their options for employer-offered health coverage or obtaining coverage in Kentucky’s Health Benefit Exchange [KHBE]. Even though notice is no longer required, this requirement will come back next year [in 2014], and frankly, we think employers should consider discussing these options with employees this year anyway,” said Doug McSwain, an attorney with Wyatt Tarrant & Combs LLP.
While the employer mandate is delayed until January of 2015, the individual mandate takes effect in January of 2014, so employees need as much information as possible to make an informed choice. The KHBE has sample employer notices available at its website (http://healthbenefitexchange.ky.gov) for businesses ready to start those conversations.
“Employees need to understand how their entitlement to tax-subsidized insurance coverage purchased in the KHBE could be affected by what their employer offers in the way of affordable and adequate coverage through their work. Employees could make inappropriate decisions in their employers’ next open enrollment period due to insufficient or incorrect information,” said McSwain.
“There is an option for individuals with lower income to purchase a Qualified Health Plan [QHP] through the exchange in the individual market, if the employer plan is unaffordable,” said Andrea Welker, a certified application counselor to assist Kentuckians in enrollment through kynect, Kentucky’s health benefit exchange online marketplace (http://kynect.ky.gov), and program coordinator and attorney for Child Advocacy Today. Child Advocacy Today is a medical-legal partnership that assists families in obtaining health-insurance benefits. “While some employers may opt to pay all or most of an employee’s premiums, they are only required to pay a minimum of 50 percent of the premiums. So, if the employee’s cost of the lowest plan’s annual premium is greater than 9.5 percent of their annual household income, it is considered unaffordable.”
“Because the employer mandate is delayed for a year, employers have extra time to measure and take proactive planning steps as to how to comply with it,” said McSwain.
Employees who work an average of 30 hours or more a week during a specified multi-month measurement period during 2014 will be considered full-time employees for purposes of the employer mandate. Employers must report this information to the IRS for purposes of compliance with the law.
“Human resource executives of larger companies will likely need to establish new measuring and tracking systems for each employee under the new Internal Revenue reporting requirements concerning health coverage,” said McSwain.
For smaller employers not covered by “pay-or-play” provisions of the ACA, employer exchanges are available as well.
“SHOP [Small Business Health Options Program] exchanges are a special health insurance marketplace that is geared to the needs of small employers. Small employers simply need to visit the website for that state’s SHOP exchange and sign up for insurance. Available tax credits for businesses with 25 employees [or less] should be automatically applied,” said Nicole Huberfeld, H. Wendell Cherry Professor of Law at the University of Kentucky College of Law.
“While small employers are not subject to the employer mandate, they may find it advantageous to check out these tax credits. To date, small employers have underutilized these credits [which have existed since 2010],” said McSwain.
In Kentucky, the SHOP exchange is administered through kynect. According to an Oct. 9 statement from Gov. Steve Beshear’s office, 240 small businesses had already started applying for insurance within the first nine days of the program.
The Affordable Care Act also, in effect, provides employers with an opportunity to opt out of providing health insurance.
“I think some employers will try to figure out whether it makes more sense for them to continue to provide health insurance as an employment benefit or whether they should pay the tax penalty and allow their employees to migrate to individual insurance in the exchanges. Most large employers [over 200 employees] provide health insurance as an employment benefit and are unlikely to change that practice soon,” Huberfeld said.
McSwain agreed that employers might be looking at the ACA from a strategic perspective.
“With apologies to Shakespeare, many employers are still asking: ‘To comply or not to comply? That is the question.’ ... Whether ‘tis smarter ... to wait until next year to see if Congress changes the employer mandate before taking steps to comply,” he said.
A helpful chart for employers to understand their choices under the Affordable Care Act is available online at: http://kff.org/infographic/employer-responsibility-under-the-affordable-care-act.