President Barack Obama’s re-election means health care reform is certain, and businesses need to plan to meet Patient Protection and Affordable Care Act (PPACA) mandates, most of which will be effective on Jan. 1, 2014.
There are ways companies can structure themselves to avoid any type of penalty and maintain their employees’ benefits, says Stefan Thomas, an associate with Kegler, Brown, Hill & Ritter.
“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.”
Smart Business spoke with Thomas about steps that companies should take in order to meet PPACA mandates.
What steps do companies need to take in order to be prepared for the PPACA requirements?
First,companies need to determine if the law will affect them. 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 workers.
There are other things to consider, such as whether the seasonal exception is applicable or whether full-time-equivalent workers (2-to-1) or seasonal employees, defined as those who work four or more months, have caused them to become large employers.
If a company is subject to PPACA mandates, what is their logical next step?
The next thing for a company to do is to figure out whether or not they’re providing any insurance and, if they are, whether it’s adequate. If it’s not adequate, it needs to be, meaning that they’re paying a certain percentage of the premium, which should be 60 percent.
If they’re large and have insurance that meets the 60 percent threshold, then they don’t have to worry about anything. But 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. On top of that, they have to determine whether an employee has opted into an exchange. However, if the employee hasn’t gone through the exchange, the company still might not be penalized.
Some businesses are trying to limit hours employees are working or they’re changing the way they are providing health insurance in order to avoid penalties.
Is there anything smaller companies need to know about the PPACA?
Small employers could be eligible for a tax credit if they have 25 or fewer employees, with salaries averaging $50,000 or less and they provide insurance. They also have to fill out tax form 990T to determine whether they qualify for credits.
Have all the regulations of the PPACA been determined now or are provisions still subject to change?
There is still quite a lot of ambiguity regarding the new law and that is just how it is going to be for the next few years. For example, it has recently been discovered that the Medicaid expansion is mandated.
If states fail to expand coverage to people up to 138 percent of poverty level, those states will not be able to receive full funding from the federal government. That is a big issue because Medicaid is one of the largest items in state budgets.
The health care reform law is evolving every day, so companies are advised to pay close attention to the regulations as they are rolled out. Consider dedicating staff to monitoring the act’s developments, otherwise your company could be missing tax credits or penalties that could be incurred because of lack of knowledge.
Stefan Thomas is an associate at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5484 or [email protected].
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