10 Health Care Reform Questions Every Employer Needs to Know

10 Health Care Reform Questions Every Employer Needs to Know Q: What is a “Health Benefit Exchange”?

Each state can establish, as a governmental agency or nonprofit entity, an American Health Benefit Exchange. These Exchanges have two functions:

  1. To facilitate the purchase of qualified health plans
  2. To provide for the establishment of a Small Business Health Options Program (referred to as a “SHOP Exchange”). A SHOP Exchange will assist employers in enrolling employees in small group qualified health benefits plans. States may establish a single Exchange that performs both functions, or create separate Exchanges.

Grants will be made available to states by the Department of Health and Human Services (HHS) for planning and establishing an Exchange.  However, by 2015, Exchanges must be self-sustaining and may generate revenue through assessments or fees.  The HHS will also provide technical assistance to states on facilitating participation of small employers in SHOP exchanges.

Q: What are “Employer Vouchers? How are they used?

A:  An employer who offers minimum essential coverage and pays any portion of the premium must provide free choice vouchers to each qualified employee. A qualified employee is defined as an employee:

  • Whose required contribution to the employer plan, for self-only coverage, is greater than 8% and less than 9.8% of the employee’s household income for the taxable year
  • whose household income is not greater than 400% of the FPL for the relevant family size
  • who does not participate in the plan offered by the employer.

The voucher will be equal to the monthly amount that the employer would have contributed toward the plan for which the employer pays the largest portion of plan costs, for either the employee or, if elected by the employee, family coverage.

An Exchange will credit the amount of a voucher to the monthly premium of an exchange plan in which the qualified employee is enrolled, and the employer will pay the exchange the credited amount.

If the amount of the voucher exceeds the premium, the excess will be paid to the employee.

An individual receiving a free choice voucher will not be eligible for the exchange premium credits or cost-sharing subsidies. No penalty will be imposed on an employer with respect to any employee who is provided with a voucher.

Q: What are the penalties for employers who do not offer coverage?

A: Beginning in 2014, an employer with more than 50 employees that does not offer coverage will be subject to a penalty. The monthly penalty per employee will be equal to the number of full-time employees minus 30 multiplied by one-twelfth of $2,000 ($166.66) for any applicable month.

For example, an employer with 80 employees will be subject to a penalty of $8333 per month (80-30 = 50 X $166.66). After 2014, the penalty payment amount would be indexed by the premium adjustment percentage for the calendar year.

Q: What is being suggested for employers that do not have health care plans in place to do at this time to prepare for the upcoming changes?

A:  Each employer should begin collecting the necessary information to determine if they have 50 or more full time equivalent (FTE) employees. If an employer has fewer than 50 full time employees, the law does not require the employer to offer coverage. If the employer has 50 or more FTE’s than there are several parts of PPACA that need to be evaluated to determine the impact to the employer. It is recommended to consult with a professional familiar with the law and its implications to the business.

Q: What is the meaning of \”affordable insurance” with respect to an employer’s obligation to provide “affordable health insurance”?

A: Affordable coverage means the plan has an actuarial value of at least 60% of required health care covered expenses and the employee cost is less than 9.5% of household income.

Q: What is a “Cadillac Health Plan”?

A: The PPACA imposes a 40 percent excise tax on “Cadillac” health insurance plans. This new tax will apply to health plans valued in excess of $10,200 for individuals and $27,500 for families. Those thresholds will grow annually by inflation plus 1 percent. The tax takes effect in 2018 and is projected to raise $32 billion by 2019.

Q: Not only does the cost of a health plan need to be affordable … don’t maximum deductibles and out of pockets apply too?

A: Yes, PPACA requires small group plans limit deductibles to $2,000 per individual and $4,000 per family. These amounts will be indexed to health care premium inflation.

Q: If Governor Romney is elected, what are the chances of repeal being successful?

A:  If states opt out of the Medicaid expansion they will not receive the federal funds available to pay for the expansion. Funding will be a significant impact to any state budget and economy. Romney will need the Senate to support any repeal effort.

Q: How does Healthcare Reform affect COBRA elections and cost to the employee?

A: This is not clear at this time. COBRA may no longer be need if individual have access to coverage through the state exchanges. However, if the state exchanges are higher cost the employee may elect COBRA.

Q: What happens to a person that is unemployed and cannot afford the penalty/coverage?

A: The individual would likely be eligible for premium subsides or the expanded eligibility for Medicaid.