Health Care Reform Implementation Considerations
Thanks to federal legislation, as of 2013 all employers and their workers must adhere to new requirements established by the Patient Protection and Affordable Care Act (PPACA). That means as of September 2012, HR and payroll should, at a very minimum, start the ball rolling on implementing required changes if they work at a business with 50 or more full-time employees.
Failing to meet criteria could result in serious fines. Because the program is set to begin in such a short amount of time, it's important that all integral players understand how the system works.
How Did This Happen?
The PPACA has been in talks for the last few years, first put before Congress in 2009. Delays in paperwork and political banter set its final passage back until the beginning of the following year, but approval in both houses didn't mean immediate enactment. In fact, the Reconciliation Act made some key revisions to the PPACA, which has resulted in its current format and explains why there's been no enforcement until now.
Even though some of the changes will begin with benefit enrollment during fall 2012, there will be certain landmarks in the process. Coverage will begin in 2013, while fees will start to roll out during that year and in 2014. Final steps in the compliance process won't be effective for another five years, but employers and HR professionals need to know about these guidelines now.
What Happens Now?
Because the bill has been passed and a deadline has been set, HR professionals need to make it their business to understand what companies must do to remain compliant. The fall is open enrollment season for many employers, and they need to start preparing for things such as the new health benefit summaries to be provided to employees and reporting the cost of the health care on 2012 W2 forms.
All companies with more than 50 people working full time at an establishment are required to provide health insurance or risk being fined a certain amount per individual. Coverage costs will be valued against current federal COBRA values to ensure compliance and quality, requiring employers to submit payroll and overall enrollment fee information.
Effective for months beginning after Dec. 31, 2013, an "applicable large employer" (an employer with an average of at least 50 full-time employees during the preceding calendar year) that does not offer coverage for all its full-time employees, offers minimum essential coverage that is unaffordable, or offers minimum essential coverage that consists of a plan under which the plan's share of the total allowed cost of benefits is less than 60 percent, is required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee.
For some, the price of insuring a full staff of employees may be more costly than simply paying the fine. There are programs where funds can be diverted to allow workers to select their own insurance with premium money set aside for that purpose by the business, but it could represent a savings boon to simply pay the penalty and seek alternate health care coverage.
Businesses have until Jan. 1, 2014, to get everyone enrolled in a private or state-run health care system. Prior to that, no fees will be assessed, but employers must make the decision by the end of 2012. They are still free to declare their numbers and join the program after that, but they will be liable for any applicable fees until they join one group or another.
For periods beginning after Dec. 31, 2013, there will be new reporting requirements for large employers subject to the employer responsibility rules and employers offering minimum essential coverage and paying part of the cost that require employees to contribute more than 8 percent of their wages to the premiums. These companies need to submit business information, including name, address, and federal tax identification number, or EIN. They also need to send in coverage documentation proving enrollment to an outside source or requesting federal membership. Each applicable full-time employee's personal data must be included, signifying the totality of the company's regular qualifying staff. The IRS is allowed to request any reasonable additional information it feels necessary to verify any part of this data or to gain a better understanding of the corporation's request.
While the current legislation allows for a monthly fee, there's also a nondeductible 40 percent excise tax that will be imposed on employers as of 2018 with excessively rich health benefit plans. The tax will be levied on the annual value of health plans for employees that exceed $10,200 for single coverage or $27,500 for family coverage. These amounts may shift in the future if the standard for health insurance costs changes nationally, but otherwise employers should be mindful of figures now in order to regulate expenses for the future. The IRS will regularly monitor personal income tax returns as well as corporate filings to ensure compliance.
The point of this legislation, according to the federal government, is to gain control of the health care insurance system that some feel is charging exorbitant rates unnecessarily. Whether these companies have a monopoly on the health care industry is not in question, but the hope is that these measures will loosen restrictions, provide insurance for more of the American people, and help regulate health care costs in the future.
Lori Loridon, CPP, is the director of Payroll and Tax Compliance for Sage Employer Solutions, which includes Sage HRMS. She manages teams of software engineers, quality assurance, user assistance, software requirements, and compliance analysts to ensure compliance in Sage HRMS's payroll and HR software deliveries. A Certified Payroll Professional, she has more than 25 years of payroll experience, in addition to her technology-based education and background. She has a bachelor's degree in Computer Science from Florida Metropolitan University and an associate degree in Computer Science from St. Petersburg College. Loridon also has held the Professional Human Resources (PHR) designation from SHRM and the Microsoft Certified Professional (MCP). Sage Employer Solutions is based in Irvine, Calif. Visit www.sagenorthamerica.com for information.
Posted by Lori Loridon on Aug 23, 2012