What the healthcare bill means for small businesses
— Christa Rapoport is the chief compliance officer for independent benefits consulting and brokerage firm Corporate Synergies Group, Inc. The views expressed are her own. —
The House of Representatives last night passed the Senate’s Patient Protection and Affordable Care Act (H.R. 3590), as well as the Health Care & Education Affordability Reconciliation Act of 2010 (H.R. 4872).
While the final details are being ironed out, now the big question is: what does that mean for small businesses?
The biggest change is that employers with more than 50 full-time equivalents (FTE’s) will be considered large employers. Therefore, the most essential compliance step is for you to identify how many full time employees (about 40 hours) or FTE’s you have working for you. Employers near the magic number of 50 FTE’s will have to make sure you accurately count your employees. Keep records for each non-exempt worker, and certain identifying information about the employee and data about the hours worked and the wages earned.
Once you understand your employee count, you can determine your options or penalty calculations. You may want to analyze your employee count on a quarterly or monthly schedule based on how close you are to the federal goal post of 50 FTE’s.
Employer coverage mandate (“pay or play”)
Large employers will have to make available to all employees a minimum level of coverage or pay a per-employee penalty (fee). Employers will not be required to provide coverage for part-time employees, but these employees may be counted as partial employees for purposes of determining whether an employer has 50 employees. The bill is still unclear as to how employees will be counted and what formula will be used, but it looks like the real “number” to be counted will be a baseline of total hours worked by all employees. For that reason, keep accurate time records as described above. If the employer offers coverage but employees are forced to purchase insurance through the state-based exchanges because the employer’s coverage is not affordable, the employer must pay separate fees. This “Pay or Play” provision goes live in 2014 upon the creation of the state-based exchanges. Once the exchange is established, it can:
– Assess employers with more than 50 FTE’s that do not offer coverage and have at least one full-time employee who receives a premium tax credit a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. For example, an employer with 50 employees will pay a penalty of $40,000 (20 times $2,000) for not offering coverage.
– Employers with more than 50 FTE’s that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $750 for each full-time employee. (Effective January 1, 2014)
– Exempt employers with 50 or fewer FTE’s from any of the above penalties.
– Require employers that offer coverage to their employees to provide a free choice voucher to employees with incomes less than 400 percent federal poverty level whose share of the premium exceeds 8 percent but is less than 9.8 percent of their income and who choose to enroll in a plan in the Exchange. The voucher amount is equal to what the employer would have paid to provide coverage to the employee under the employer’s plan, and will be used to offset the premium costs for the plan in which the employee is enrolled. Employers providing free choice vouchers will not be subject to penalties for employees that receive premium credits in the Exchange. (Effective January 1, 2014)
Creation of state healthcare exchanges
Small businesses and individuals would have the choice of buying health insurance through state-based exchanges. The exchanges are expected to offer easy-to-understand competitive benefits at affordable prices. Some small businesses and individuals may be eligible to receive credits toward the purchase of insurance through the exchanges. The exchanges will begin in 2014.
Limitation on employee contributions to healthcare flexible spending account
Employees would be limited to an annual contribution of $2,500 to health care flexible spending accounts. One downside is that employers would no longer be permitted to reimburse employees for over-the-counter medication under flexible spending arrangements. For example, over-the-counter cough and allergy medicine that can now be paid under flexible spending arrangements will now be paid out of pocket by employees with post-tax dollars. This provision is effective at the beginning of 2011 in the Senate bill, but the House bill would delay the effective date to 2013.
Elimination of preexisting condition exclusions and lifetime limits
Group health plans and insurers will no longer be permitted to exclude coverage for preexisting conditions or place lifetime limits on coverage. Lifetime limits are prohibited effective six months after enactment of the legislation. Preexisting conditions exclusions must be eliminated for dependent children within six months of enactment and must be completely eliminated by 2014.