Obamacare: The Next Steps to Prepare Your Company for Health Care Reform
The Magazine - a publication from the Ohio SHRM State Council October 1, 2013
It’s a topic of most discussions and HR professionals are in the midst of wrapping their minds around it. The Patient Protection and Affordable Care Act (PPACA), more commonly known as Obamacare, has been at the top of companies’ and professionals’ minds alike since President Barack Obama’s re-election in November 2012.
Most PPACA mandates were effective on the first of January this year, yet HR professionals are still struggling to structure their companies to avoid any type of penalty and maintain their employees’ benefits.
“Because of the ambiguity of the law, it’s a difficult subject matter for companies to understand. Some are opting in or opting out of insurance plans, some are self-insured and some are privately insured. It’s really specific and handled on a case-by-case basis,” said Stefan Thomas, associate at Kegler Brown Hill + Ritter.
Professionals first need to determine if the law affects their employees. Depending on the size of the company, it might not. They would have to be an applicable large employer, which means having 50 or more employees, including full time, full-time equivalent and seasonal. Considering things such as whether the seasonal exception applies or whether FTEs (2 to 1) or seasonal employees (working > 4 or more months) have caused them to become large employers.
“If the company is subject to PPACA mandates they must figure out whether or not they’re providing any insurance,” said Tony Fiore, of counsel at Kegler Brown Hill + Ritter. “And if they are, whether it’s adequate.”
For a company to be considered not adequate, it means they’re paying a certain percentage of the premium, which should be 60 percent.
If they’re a large company and have insurance that meets the 60 percent threshold, they do not need to worry about meeting the mandate. However, if they fail to provide the adequate amount, they have to pay a tax penalty, which is based on a ratio and can be $2,000 or $3,000 per employee.
“Employers cannot simply make this a numbers game,” said Fiore. “Many believe that canceling coverage and paying the penalty will cost the company less, but in reality it could end up costing much more.
“On top of that, they have to determine whether an employee has opted into an exchange,” said Thomas. “However, if the employee hasn’t gone through the exchange, the company still might not be penalized.”
Some companies are trying to limit the hours their employees are working or change the way they provide health insurance in order to avoid penalties.
“Smaller companies are eligible for a tax credit if they have 25 or fewer employees,” said Fiore. “Their salaries must average $50k or less and they provide insurance. They also have to fill out tax form 990T to determine whether they qualify for credits. “
HR professionals must understand there is a lot of ambiguity with the PPACA and that’s how it’s going to be for the next few years. It was discovered earlier this year that the Medicaid expansion is mandated and if states don’t expand coverage to people up to 138 percent of poverty level, they will not be able to receive full funding from the federal government.
“That’s a big issue because Medicaid is one of the largest items in state budgets,” said Fiore.
Companies and HR professionals should pay close attention to the regulations as they unveil since health care reform is continuously evolving.
“HR professionals should be dedicated to monitoring developments,” said Thomas. “Otherwise tax credits could be missed or penalties could be incurred because of lack of knowledge.”
The PPACA is an ongoing matter and it’s crucial for HR professionals to make a conscious effort to educate themselves and their employees to ensure a successful transition.