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When, on New Year’s Eve, the Waterford Crystal ball makes its Times Square descent into 2015, the employer mandate of the Patient Protection and Affordable Care Act (PPACA) will apply. Employers shouldn’t expect a delay this year, according to Steven Friedman, an attorney with Littler in New York.
In the run-up to the employer mandate due date, more guidance has been provided to clarify which plans don’t meet the law’s minimum value threshold.
Employers are asking questions about part-time employees, variable employees and seasonal employees, Friedman noted, and also about steps they can take between now and the new year to address whether these workers must be treated like full-time employees.
No Hospitalization Coverage
The Departments of Health and Human Services (HHS) and the Treasury clarified in Notice 2014-69 on Nov. 4, 2014, that large employer medical plans without hospitalization coverage do not meet the law’s minimum value threshold.
These kinds of plans are odd birds since they just cover minimum health coverage such as check-ups and vaccinations, and are stripped of costs associated with catastrophic health care, noted Kurt Anderson, an attorney with Ballard Spahr in Philadelphia. They are like car insurance that would cover only oil changes, he observed.
The marketing of no-hospitalization coverage as satisfying the minimum value requirement has been “a recent phenomenon, as some insurers figured out they could get such a plan to satisfy the minimum value threshold using HHS’s calculator,” said Edward Fensholt, an attorney with Lockton Companies in Kansas City, Mo.
Plans without hospital coverage are given a one-year reprieve if rolled out before Nov. 4, 2014, and if the plan year begins no later than March 1, 2015.
Paul Hamburger, an attorney with Proskauer in Washington, D.C., and Stacy Barrow, a Proskauer attorney in Boston, said they “would not expect these plans to disappear entirely once final rules are released—for example, they may adapt and provide ‘substantial’ coverage for hospital services and physician services. Future guidance will define the level of coverage necessary to be ‘substantial.’ In general, these plans seem to be most popular with employers in industries such as manufacturing, retail sales, food service and hospitality, and human capital (staffing industry).”
By not being considered to be minimum value plans for premium subsidy purposes, “even if individuals are offered this coverage, they could go to a marketplace and get a premium tax credit or subsidy. In turn, that could subject an employer to a pay-or-play penalty (the $3,000 annual ‘unaffordable’ coverage penalty applicable to plans that are either not affordable or fail to provide minimum value), as the plan will not provide minimum value.
“Employers presumably could still avoid the larger ‘no-coverage’ penalty—$2,000 annual penalty multiplied by all full-time employees minus 30 after 2015 (or minus 80 for 2015)—for failing to offer coverage to at least 95 percent of full-time employees after 2015 (70 percent in 2015),” they said.
PPACA Compliance Steps
One step some employers are taking to comply with the PPACA’s employer mandate is making sure the premium for single health coverage does not exceed 9.5 percent of each of their employees’ salaries, Friedman remarked.
This kind of “staggered premium schedule” is more complex and “creates a lot of administrative headaches,” he said. But it fits within the safe harbor created for determining if the premium for single coverage exceeds 9.5 percent of family income.
Strangely, the law has no limit on the amount that can be charged for spouse or dependent coverage.
Another step employers can take at this point is determining all of their full-time employees, and using the so-called measurement period to determine if a variable-hours employee must be treated as a full-time employee, Friedman noted. If part-time, seasonal or variable employees reach 130 hours a month, they should be offered coverage, he said.
Employers are “in the middle of open enrollment. Most employers are lined up with the plans they’re using and going full steam ahead for 2015,” Friedman said, but these other steps can be taken between now and the singing of “Auld Lang Syne.”
Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.
Employer Plans Lacking Hospitalization Barred, SHRM Online Benefits, November 2014
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