PPACA: Three HR compliance challenges for 2013 and beyond
With the Supreme Court decision to uphold the Patient Protection and Affordable Care Act (PPACA) now nearly a year behind us, employers have moved full-speed ahead, spending this year proactively strategizing and preparing to ensure that their health care plans and benefits administration are in full PPACA compliance heading into 2014.
Given the complexity and HR compliance challenges facing employers this year, there are many key PPACA issues employers need to keep in mind. Below are three important compliance-related considerations for company leaders.
1. Will you “Play or Pay”?
“Play or Pay,” otherwise known as “Employer Shared Responsibility,” requires all employers with 50 or more full-time employees to offer full-time workers (individuals who average more than 30 hours per week) health care coverage that is both “affordable” and of “minimum value.”
“Affordable” means that the employee’s share of the health insurance premium, for self-only coverage, does not exceed 9.5% of the employee’s W-2 wages. “Minimum value” means that the employer-sponsored health plan’s share of the total allowed costs of health benefits is at least 60 percent. Failure to meet both of these requirements could result in stiff penalties.
O’Connell says, “It’s fair to say that the Employer Shared Responsibility mandate is potentially the single most disruptive employee benefits rule ever enacted. ‘Play or Pay’ will require employers not only to meet the twin-test for offering compliant health plans, but it also requires employers to administer complex ‘measurement’ and ‘stability’ periods to calculate whether newly hired and ongoing employees work full-time or part-time schedules.”
To determine whether employers are subject to these requirements, the IRS will be using a rolling 12-month period for its audits. This means it will be looking at 2013 data for 2014 enforcement.
Employers should take the time now to determine their number of full-time equivalent employees and firm up their workforce management strategy heading in to 2014. Risk mitigation through proper planning, tracking and monitoring of employee data will be essential so that organizations can successfully identify and offer coverage for all eligible employees.
2. Notification of public health insurance exchanges
Originally required by March 1, 2013, the Department of Labor says employers now have until late summer or fall 2013 to notify employees of the future availability of health insurance exchanges in their state. This notice must include:
- Written notification informing employees about the state’s exchange
- Notification to employees if the plan offered by the employer is not of “minimum value.” If it is not, employees may be eligible for a tax credit if they purchase a qualified health plan through an exchange
- Notification to employees that if they purchase a health plan through an exchange, they may lose the employer’s contribution to health benefits offered by the employer
“It’s no surprise that the Department of Labor opted to postpone this employee notice requirement. The reality is that the state exchanges are not ready for prime time,” says O’Connell. “Nevertheless, employers must keep a close eye on exchange developments. Timing aside, these exchanges will represent the heart of health care reform. In the not-too-distant future, 20 million or more people, including some employees who now receive employer-sponsored coverage, may ultimately get their health insurance through a state or federal health insurance exchange.”
3. 90-day waiting period limit regulations
Another important PPACA compliance provision relates to the maximum 90-day waiting period limit applied to group health coverage. For plan years starting on or after January 1, 2014, group health plans may not apply a waiting period to employees or eligible dependents that exceeds 90 days.
According to regulations, all calendar days must be counted in the waiting period, including weekends and holidays. In the case where an employer imposes a 90-day waiting period and the 91st day is a weekend or holiday, the employer could apply coverage prior to the 91st day for administrative convenience. Coverage, however, cannot start later than the 91st day.
O’Connell says, “This will be a tricky requirement for plans that begin coverage on the first day of the month. For example, a new employee with a start date of January 15 would need to become eligible for health coverage on April 1, since to wait until May 1 would exceed the 90-day maximum waiting period.”
While these three PPACA compliance provisions touch on some of the major challenges employers face this year and in the coming years, there are a number of complex provisions that require employers’ attention. Taking the time now to ensure that your organization is prepared for all PPACA provisions is the best defense against possible compliance penalties.
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