The Affordable Care Act: What’s Next for Businesses?

After continually unfolding for the past three years, the Patient Protection and Affordable Care Act (ACA) took a couple steps back this year. In February, the Department of Labor stated that, solely for plan years beginning in 2014, a non-grandfathered group health plan that uses more than one service provider to administer benefits may apply the out-of-pocket maximum separately to each separately administered benefit. This could result in higher-than-expected costs for some employees in 2014.

In July, the Obama administration announced a one-year delay in the ACA’s employer mandate and related information reporting requirements, previously set to begin in 2014. Effective Jan. 1, 2015, the mandate will penalize an employer with 50 or more full-time employees if it does not offer health insurance or if its plan fails to meet affordability and minimum value thresholds.  

After these delays, you may wonder which ACA provisions are still on schedule and how they will affect your employees and your business. Unlike the employer mandate, the individual mandate has not been delayed. Beginning Jan. 1, 2014, most individuals will be penalized for failing to maintain “minimum essential coverage.” Certain individuals may qualify for an exception, including religious-conscience objectors and individuals whose premiums would exceed 8 percent of household income. “Minimum essential coverage” includes employer-sponsored health plans providing major medical coverage, coverage purchased through the new health-insurance exchanges—now being referred to as “marketplaces”—and governmental coverage, including Medicare Part A, Medicare Advantage, and most Medicaid coverage.

The opening of the marketplaces coincides with the individual mandate. The ACA set up the marketplaces to offer individuals a variety of health insurance products that will provide at least a minimum slate of competitively priced benefits. Individuals will also use the marketplaces to determine whether they qualify for a subsidy to offset the cost of coverage. Each state will have its own marketplace, although the federal government will operate marketplaces in the 34 states that declined to do so on their own, including Kansas and Missouri. Individuals will access the federally-run marketplaces through a Web site, currently HealthCare.gov. No details on participating insurers or products have yet been revealed for Kansas or Missouri, but open enrollment begins Oct. 1 for coverage beginning in 2014.  

Employers subject to the Fair Labor Standards Act minimum wage and overtime pay laws face an Oct. 1 deadline to notify employees in writing about the marketplaces’ existence. These notices must include contact information, a description of the marketplace services and other disclosures. For new employees hired after Oct. 1, such businesses will be required to provide the notice within 14 days after the employee’s start date.

Before 2015, most businesses will not feel the full impact of an employee’s choice to obtain insurance through the marketplace. If you offer a health plan, the marketplaces could result in reduced enrollment in 2014. But in 2015, an employee’s enrollment in marketplace coverage could subject a business with more than 50 full-time employees to a penalty. Even if such a business offers health coverage in 2015, it will be subject to a penalty if a full-time employee enrolls in marketplace coverage, pays the required premiums, and qualifies for a subsidy.

To avoid the penalty, that business must design and offer a health plan to full-time employees that meets both the ACA affordability and minimum-value requirements. Before 2015, businesses with more than 50 full-time employees will want to analyze whether it is better to pay the penalty or incur the cost to offer health coverage that will avoid it.

To help small employers, the marketplaces will include a Small Business Health Options Program, known as SHOP. Beginning Oct. 1, employers with fewer than 50 full-time equivalent employees (increasing to 100 FTEs beginning in 2016) will have access to the SHOP. As in the marketplace for individuals, an employer may choose a health plan from the SHOP and offer it to employees. 

The SHOP will handle employee eligibility determinations and enrollment. Its goal is to reduce costs by spreading insurance issuers’ administrative costs across multiple employers, while letting each employer select appropriate plan options and determine the amount it will contribute to plan premiums. How well it will succeed with that goal depends in part on whether the participating insurers offer sufficiently affordable products to entice small employers to provide health plan coverage through the SHOP.

Despite the recent postponement of two significant ACA requirements, most of ACA will continue to roll out in 2014. However, the one-year delay of the employer mandate offers unprepared employers a much-needed reprieve.

Employers who have not already set a course for navigating the employer mandate should take advantage of the delay by meeting with a qualified attorney and health insurance agent to create an appropriate plan for 2015.