The PPACA and what employers need to know

Health Care and the Health Care and the Patient Protection and Patient Protection and

Affordable Care ActAffordable Care ActFundamentals of Employment Law

Dr. Greg Chartier, The Office of GJ Chartier914-548-1689, [email protected]

IntroductionIntroduction

Greg Chartier◦[email protected]◦914-548-1689◦www.linkedin.com/gregchartier

05/03/23Fundamentals of Employment Law 2

mailto:[email protected]

What is the Affordable Care Act?What is the Affordable Care Act?

On March 23, 2010, President Obama signed the health care reform bill into law.

On June 28, 2012, the Supreme Court rendered a final decision upholding the PPACA.

October 1, 2013, individuals and small business will be able to enroll in NYS “Marketplace.”

January 1, 2014, major provisions of the law take effect.


What is the Affordable Care Act?What is the Affordable Care Act?

◦Employers with 50 or more employees will now be required to provide affordable health care or pay a penalty.

◦Employees who have health care offered to them by their employers must take the health care or pay a penalty.

◦Children will be allowed to stay on their parents’ policies until they turn 26.

◦Lifetime limits on health coverage will be eliminated.

◦Insurance companies will no longer be able to deny coverage to anyone with pre-existing conditions.


Coming in 2014Coming in 2014

The biggest changes take effect 1/1/14.◦Most Americans will be required to have health

insurance, if they can afford it.◦Insurers cannot deny coverage to anyone and

they cannot charge you more, even if you cost more.

◦Each state is required to have an “exchange” to purchase health care online. Low income individuals and families may qualify

for a discount or other subsidies.



Small Business Tax Credits◦Fewer than 25 full time equivalent employees◦Average annual wages less than $50,000◦Employers pay at least 50% of the premium

cost◦Non-profits also eligible (credit against

employment taxes)◦Consult your tax advisor



Health Insurer Fee◦$8 billion in 2014, $14.3 billion in 2018

Transitional Reinsurance Contribution Program◦Aggregate fee of $25 billion over a 3 year

period, 2014-2016Patient-Centered Outcomes Research Fee

◦$1 per life in 2014, $2 per life in 2015High Value Plan Tax (Cadillac Tax)

◦40% excise tax on amounts over $10,200 for single and $27,500 for family


Employer Shared ResponsibilityEmployer Shared Responsibility

Effective 1/1/15Employer must count all full-time

employees and part-time employees on a full time basis in determining if they have 50 or more employees.◦Full time=30 or more hours per week, per month

or 130 hours of service per calendar month ◦Certain seasonal workers are not counted◦Penalties assessed for “no coverage” or

coverage that is “not affordable” or does not provide “minimum value.”



For each calendar month of the preceding year, employers must:◦Count the number of FT employees who work

an average of 30 hours per week per month.◦Aggregate the number of hours worked by non-

FT workers and divide by 120.◦Add the number of FT workers and the number

or FT equivalents.◦Add the monthly totals and divide by 12. If the

average exceeds 50 FT equivalents, determine if the seasonal worker exception applies.


Employer Shared Responsibility:Employer Shared Responsibility:The Penalties: Sledge HammerThe Penalties: Sledge Hammer

If a large employer does not currently provide coverage to 95% of FT employees and their dependents and at least 1 FT employee receives a tax credit:◦The penalty is $2,000 x the total number of FT

after subtracting the first 30.◦Example (70 FT employees and 1 employee

receives a tax credit, penalty is $2,000 x 40 (70-30) = $80,000 (not deductible).


Employer Shared Responsibility:Employer Shared Responsibility:The Penalties: Tack HammerThe Penalties: Tack Hammer

If a large employer offers coverage to their FT employees and their dependents but the coverage is “not affordable” or it does not provide “minimum value.”◦The penalty is the lesser of $3,000 x the number

of FT employees receiving a premium tax credit or $2,000 x the total number of FT employees

◦Example: 70 FT employees and 10 FT employees get a tax credit, penalty = $3,000 x 10 $30,000



“Not Affordable”◦General rule: employee share of the self-only

premium for the employer’s lowest cost plan that provides minimum value cannot exceed 9.5% of household income. Safe Harbor:

◦W-2 safe harbor. Employee premium share does not exceed 9.5% of the amount reported in Box 1 o W-2.

◦Rate of pay safe harbor. Employee premium share does not exceed 9.5% of an employee’s monthly wages determined by the employee’s hourly rate time 130 hours.

◦Federal Poverty Level safe harbor. Employee premium share does not exceed 9.5% of Federal Poverty Level for one person.



“Minimum Value”◦A plan fails to provide minimum value (MV) if

the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs (percentage of medical expenses-deductibles coinsurance, copays, etc.) Minimum Value Calculator:

cms.gov/resources/files/mv-calculator-find-2-20-2013.xlsm

Safe Harbor Checklist Actuarial Certification



Transition relief for tax penalty◦Transition relief for large employers that

maintain a non-calendar year plan as of 12/27/12.

◦Employer is not subject to the penalty if they offer affordable, minimum value, coverage on the first day of 2014 if: The plan was offered to at least 1/3 of all

employees (FT and PT) prior to 12/27/12 or The plan covered ¼ of all employees (FT and PT)

as of 12/27/12.


Individual MandateIndividual Mandate

On 1/1/14, the individual mandate requires most individuals to have minimum essential coverage or pay a penalty which is called the “shared responsibility payment.” ◦An employer group health plan◦An individual health insurance policy◦A government plan like Medicare or Tricare◦Student health coverage◦A Medicare Advantage Plan◦A state high risk pool coverage plan



Penalties will be assessed when individuals file their 2014 taxes in 2015.◦2014: Greater of $95 per adult and $47.50 per

child under age 18 (maximum of $285) or 1% of income over the tax filing theshold.

◦2015: Greater of $325 per adult and $162.50 per child under age 18 (maximum of $975) or 2% of income over the threshold.

◦2016:Greater of $695 per adult and $347.50 per child under 18 (maximum of $2085) or 2.5% of income over the threshold.



Individuals may not be liable for the penalty if they do not have minimum essential coverage.◦Those who cannot afford coverage (more than

8% of household income)◦Those below the tax filing threshold◦Individuals who qualify for a hardship

exemption; personal or financial harships.◦Those with a gap of less than 3 consecutive

months in a calendar year◦Non-US citizens, individuals in prison


Marketplaces (Exchanges)Marketplaces (Exchanges)

Requires creation of American Health Benefit Exchanges (AHBE) for individuals and Small Business Health Options Program (SHOP) for small business up to 50 lives.

Insurance coverage can be purchased beginning October 1, 2013 and is effective January 1, 2014.◦In 2016, SHOP Marketplaces must increase to

small groups of 100 or less◦States can choose to expand their SHOP

exchanges to serve larger groups in 2017.


Exchange BasicsExchange Basics

An exchanges is an organized marketplace designed to help people shop for and enroll in health insurance plans.

Individual, families and small business will be able to use the Exchange to compare options, calculate costs and select coverage online, in person or over the phone.

The Exchange will be able to tell what type of financial assistance is available to applicants to help them afford health insurance.


Exchange BasicsExchange Basics

Exchanges are not optional.If a state doesn’t create one, the federal

government will step in and operate the exchange for the state.

18 states, including New York, have been approved to operate their own Exchange, 3 are partnering with HHS and the rest will be run by HHS.


Exchange Subsidy BasicsExchange Subsidy Basics

Subsidized coverage will be available to those purchasing individual coverage through the Exchange.

Low income individuals who are part of a SHOP Exchange are not eligible for a personal premium tax subsidy.

Only subsidies that will be distributed through the SHOP Exchange are the small business tax credits.

Those with “credible” and “affordable” coverage through their employer may not leave and buy subsidized coverage.


Employer ResponsibilitiesEmployer Responsibilities

Employers must provide a notice to current employees and new hires about Exchange and subsidies:◦model notice is available at HHS

Employers will have to help verify coverage◦HHS will use date from insurance exchange to

determine if individuals have coverage through their employers.


Form W-2 Cost of Coverage Form W-2 Cost of Coverage ReportingReporting

Employers must report the cost of employer provided health care coverage on Form W-2, beginning 1/1/12.◦Under 250 W-2 forms in 2012◦HRAs◦Self insured plans not subject to COBRA


Automatic EnrollmentAutomatic Enrollment

Large employers (more than 200) must automatically enroll employees in health care plans staring 2014.

www.dol.gov/ebsa/healthreform


http://www.dol.gov/ebsa/healthreform

CostsCosts

So far, everything that has been done and all of the requirements of the law, have increased health care costs.

Is there some point at which costs will come down?◦New models of care. How your receive care will

change.◦Experimentation and research◦Health care costs on reimbursements on

Medicaid and Medicare are now below the cost of care.


Access Access

One of the keys to the law is the intention to provide everyone with health care.

Will health care be universal?◦Medicaid expansion not provided by your state◦Is health care “affordable”◦Are there enough primary doctors?


Patients, consumersPatients, consumers

Patients will have to change their behavior and accept that they will need to be healthier and that the health care system will not be as responsive as it currently is.


Questions/Comments? Questions/Comments? 05/03/23

Fundamentals of Employment Law 28

The PPACA and what employers need to know

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