The Supreme Court ruled in King v. Burwell that subsidies used to purchase health insurance in the 36 states on the federally facilitated marketplace are legal, thus avoiding the death spiral so often referred to by Congress. What does this ruling mean for employers? Business as usual the governments Healthcare Marketplace is the new normal and the legal path has been cleared for employers to focus on compliance initiatives, including:
1. Employer shared responsibility If large employers want to avoid an Internal Revenue Code §4980H(a) penalty for failure to offer health insurance to employees, they must make sure that they offer coverage to at least 70% of their full-time employees (FTEs) (working an average of 30 or more hours per week) in 2015 and 95% of FTEs in 2016 and beyond. In addition, employers must ensure that such coverage is affordable and meets the minimum value criteria for each FTE to avoid lesser penalties under Internal Revenue Code §4980H(b).
2. Employer ACA reporting Beginning in 2015, employers are required to report to individuals and to the IRS on the health care coverage offered to their full-time employees and other individuals covered under the plan. The forms are due in early 2016 when W-2 forms are due, but employers must act now to gather data for completing the forms. Employers must be prepared to document they offer affordable coverage to FTEs in order to be able to defend against notices for demand and payment from the IRS.
3. Cadillac Tax - How will employers prepare for the 40% nondeductible excise tax on high cost health plans? Will employers gravitate towards high deductible health plans? Will they decide to not offer health flexible savings accounts, pre-tax and employer contributions to health savings accounts and on-site clinics - all of which count towards calculating the tax? How will plan designs evolve through wellness and prevention to address the overall cost of claims?
4. Decisions on how to design their active health plans now that the Healthcare Marketplace is here to stay - Should employers continue to offer coverage to spouses which is not required under the ACA, but which adds additional costs to the employers bottom line (e.g. reinsurance and PCORI fees)? How will employers manage their employees work force hours (i.e. ensuring employees who are not offered health care work less than 30 hours per week)?
5. Decisions on how to design their retiree health plans now that the Healthcare Marketplace is here to stay - For employer that offer medical coverage to retirees, will those employers continue to provide pre-65 retiree health coverage or send those retirees to the Marketplace, where the retirees may even qualify for a government subsidy, and which subsidy will not trigger a penalty to the employer.
6. Documentation of plan design decisions - Employers will need to be able to demonstrate on audit that their benefit plans comply with not only the market reforms already in effect under the ACA, such as the elimination of pre-existing condition exclusions and coverage of children up to the age of 26, but eligibility language that complies with the employer shared responsibility requirements. This may include amending plan documents and summary plan descriptions to reflect such compliance.
This article previously appeared in Employee Benefit News, a SourceMedia publication.
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