For employers, the Affordable Care Act (ACA) has been a maze of confusing legislation filled with penalties if they don”™t adhere to the rules.
The Westchester County Association (WCA) hosted “Surviving Health Care Reform: What Every Business Needs to Know Now” Feb. 28 at Abigail Kirsch at Tappan Hill Mansion in Tarrytown. It featured three panelists discussing the ACA, which was signed into law in 2010.
The health care industry is Westchester”™s largest economic engine, generating $10 billion and 30,000 jobs, more than the public sector.
“Health care is a huge element of our society,” WCA President William Mooney said. The ACA is “a complex issue that”™s extraordinarily expensive.”
The 10,000 pages of legislation are constantly changing. David Rubenzahl, president of Maxon Administrators Inc., a third-party administrator of self-funded health plans and insured disability plans, explained the legislation and laid out the penalties for noncompliance.
The legislation applies to employers with more than 50 full-time employees who work more than 30 hours a week. Businesses owners face either the so-called sledgehammer penalty or tack hammer penalty depending on coverage offered, if at all.
The sledgehammer penalty applies if a business does not offer minimal essential coverage to 95 percent of its full-time employees, and at least one of the employees receives a premium tax credit from a state-run health care exchange. A penalty would result, using a complicated formula involving the number of full-time employees multiplied by $2,000.
Even offering employees coverage does not leave businesses immune to penalties. The tack hammer penalty applies if an employer offers coverage, but it is not affordable or does not provide minimum value and an employee receives a tax credit from the exchange. The employer is subject to a penalty involving the number of employees using the tax credit multiplied by $3,000.
“Employers have to decide whether to pay or play and determine what the penalties are if they don”™t offer coverage or offer minimal coverage,” Rubenzahl said.
If dollars are the only consideration, Rubenzahl said, go with whatever costs less, but that is rarely the case.
“The employers with which I am familiar rarely purchase the cheapest plan,” Rubenzahl said. “They purchase the best combination of cost and plan design. Consider that health insurance premiums are deductible and you can require contribution. Penalties are not deductible.”
James Schutzer, vice president of J.D. Moschitto & Associates, an employee benefits consulting firm, discussed the state-run health care exchanges that were put in place following the implementation of the ACA.
Under the ACA, states were required to set up their own exchanges by October 2012 or have the federal government run it for them. The exchange is designed to enhance the marketplace and make it easier to buy health care insurance, Schutzer said. Exchanges must be fully operational by Jan. 1, 2014.
New York became one of the first states to comply per an executive order from Gov. Andrew M. Cuomo. States such as Louisiana have refused to implement the exchange, while other states, like New Jersey, waited for the results of the election.
“The goal is to get more people insured,” Schutzer said. “But the more people enrolled and using insurance will cause costs to escalate.”
Last October, New York formally selected Oxford EPO as its essential health benefits benchmark plan and has received more than $300 million in federal grants to set up the exchange. The state expects to select its insurers by July 15.
“Will exchanges make health care more affordable?” Schutzer asked. “I don”™t think we will see a tremendous decrease. Time will tell.”
Robert M. Winton, a partner at Citrin Cooperman & Co. L.L.P., discussed the new taxes coming this year as a result of the ACA.
The employee portion of Medicare tax will increase by 0.9 percent, currently at 1.45 percent, while there will be additional tax on combined wages/self-employment income in excess of $250,000 for joint filers.
Winton also discussed the small business tax credit that was available beginning in 2010 to incentivize businesses to provide health insurance. Businesses are eligible if they have fewer than 25 full-time employees and their salaries average less than $50,000.
Currently, the maximum credit is 35 percent of premiums paid and employers must contribute at least 50 percent of the premium cost. In 2014, employers will get two years of credits, but only health insurance purchased via the exchange is eligible. The credit will increase to 50 percent of premiums paid.
I am delighted to read that there was a a forum on this. While I wasn’t there, the write up misses many important points.
The tack hammer will come into play very easily. I believe the law is designed to only use affordability, as a percentage of household income for the employee only portion of the benefits (9.5%). If the employee signs up for a family plan, there is no limit. Either way, employers are going to be asking employees what their spouses earn.
These exchanges are not going to be like shopping at the mall. We are mandating coverage that the government, not the individual, wants. So a couple where one or both partners are sterile, by choice or not, are going to be paying for a plan with a host of new mandates for contraception, fertility, maternity, etc. To a certain extent, some of that exists now in NYS because it’s a community rated state.
The bigger issue with the state exchanges is that it will increase Medicaid recipients. That’s awesome news for the NYS taxpayer (sarcasm). That will hurt all of us eventually because someone has to pay for that.
But the issue no one is talking about is the relationship of healthcare, retirement, Medicare, and Social Security. That is going to harm a lot of people, whether the ACA continues to exist or gets repealed or defunded. That may be dangerous to employer and employee. This is the area where I consult.