What you should know about health insurance in 2015

Complexity will define health insurance coverage for businesses in 2015. There are myriad considerations companies must make to provide affordable coverage for employees and avoid penalties.

“The move to consumerism is very challenging for the users of health benefits, which are employees,” says William F. Hutter, CEO of Sequent. “In anticipation of this, companies should be figuring out how to fill an advocacy role for employees to help them with health benefit issues.”

Smart Business spoke with Hutter about health insurance considerations for 2015.

Are companies with fewer than 50 employees affected by new health care laws?

The regulatory reporting and penalty environment created by the Affordable Care Act (ACA) does not impact companies with fewer than 50 full-time employees. They will, however, be impacted by the changes insurance carriers are required to make by the ACA. Insurance carriers and their distribution systems will be impacted by cost increases. We won’t really understand the full impact this will have until the additional tax to carriers that’s being subsidized by the government to offset carriers’ costs expires.

Why might a company with very few employees pay different rates?

Under the ACA, small groups now fall into a community rated pool. Geographic area, self-only or family, age (not more than 3:1) and tobacco use are the only factors allowed now. Community rating, then, can be good for smaller groups.

How will the 9.5 percent affordability calculation affect companies with more than 50 employees?

Employees who are charged more than 9.5 percent of their monthly income for health insurance benefits are eligible for a subsidy for coverage in the health insurance marketplace. That also means the company has not provided employees with a plan that meets the affordability definition and will pay a $2,000 penalty for each instance.

Employers may want to establish a policy that sets the cost of health care coverage at 8 percent of income to make sure they stay under the threshold, especially during the measurement period for affordability.

Companies with more than 50 full-time employees need to account for age rating scenarios because age is one of the determining rate factors. That can be a very complicated transaction that must be closely considered to avoid the after-tax penalties.

What is a measurement period?

Companies with more than 50 employees in a variable hour workforce must establish a measurement period to take averages and determine benefit eligibility on a look-back basis. Eligibility changes from year to year and is based on the actual hours worked in a given measurement period. The administrative burden of establishing a look-back period is going to be challenging.

There are important limits on the length of an administrative period and important exceptions regarding the permitted length of the stability period.

How will companies that are geographically separated but have one owner be treated under the ACA?

Under the ACA, two companies are considered one when they’re under common control. This prevents owners from subdividing their companies to receive more beneficial treatment. If one company has 26 employees and the other has 25, the ACA treats that as one entity with 51 employees, requiring the entity to comply with the law.

Companies in this situation should consider their network coverage issues in the context of both geographies. Establish comparable coverage in which everyone is treated the same from a financial perspective.

How can employers ensure they comply with the new regulations?

Tracking data is very important. Companies need strong reporting and data management to provide the required reports to the federal government to show their plan affordability and to stay within the safe harbor rules.

Companies must also have that data formatted properly, which can be challenging for those without a good HR information system. There are seminars that offer training on reporting to help HR staffs keep up with the requirements.

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