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Fall 2012
IN THIS ISSUE
d&G Lawyer News
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The Practical Effect Of the Supreme Court's Upholding the Constitutionality Of The Affordable Health Care Act On Businesses
By: Eric D. Nowak
The political and legal implications of the United States Supreme Court’s upholding the constitutionality of the individual mandate of the Patient Protection and Affordable Care Act (the “ACA”) are wide-reaching. However, the practical effect of the ruling on businesses is being lost in the flurry of news coverage. Because the Supreme Court upheld some of the significant aspects of the ACA, businesses must continue to comply with certain provisions of the ACA already in effect and must prepare to comply with other provisions that are set to become effective over the next couple of years.
The ACA’s requirements for businesses vary depending on the size of a business. If the business has less than 50 full-time equivalent employees, then the ACA does subject those employers to penalties for not making health insurance accessible for their employees.1 However, if these small businesses do provide health insurance coverage to their employees, there are certain requirements that their group plan must meet. Among other things, group plans must limit waiting periods to 90 days,2 must not limit lifetime or annual benefits3, must provide coverage to adult children up to age 26,4 and cannot exclude pre-existing conditions starting in 2014 (as of September 23, 2010 group plans cannot exclude pre-existing conditions for children 19 years or younger).5
Larger employers, those with more than 50 full time equivalent employees,6 must provide health care coverage for all of their full-time employees (defined as an employee that averages 30 hours a week in a given month7 ) or they will be assessed a penalty.8 The penalty is mostly limited to $2,000 annually for each full-time employee in excess of 30 full-time employees.9 Interestingly, the amount of the penalty is based on actual, full-time employees and not on full-time equivalent employees. This means that even though a business may have 50 full-time equivalent employees, they may not be subject to a penalty for not providing health care benefits. This is because the annual penalty is $2,000 an employee starting at your 31st actual full-time employee, not your 31st full-time equivalent employee. A business with 25 full-time employees and 25 full-time equivalent employees would be required to provide a qualified health care plan, but would have a $0 fine for failing to do so.10
Employers with 200 or more full-time equivalent employees must automatically enroll their employees in a qualified health plan.11 Also, there are new reporting requirements for employers providing health benefits, which include, but are not limited to, disclosing the value of health insurance coverage on each employee’s annual W-2 and providing a statement to employees on: the length of waiting periods for coverage; the employer’s share of the total allowed costs of benefits under the plan; and information on the monthly premium for the lowest cost option in each of the enrollment categories under the employer’s group health plan.12
All businesses required to provide their employees coverage must also ensure that their policy is affordable and provides minimum essential coverage.13 A policy is not affordable under the ACA if the premium for the individual employee exceeds 9.5% of the employee’s household income.14 Also in order to provide minimum essential coverage, the plan must cover 60% of the value of the cost of the essential benefits.15 A failure to provide affordable and minimum essential coverage may also subject a business to penalties if its employees opt to purchase subsidized coverage via the individual state insurance exchanges. 16
The requirements outlined in this article are just a small portion of the new requirements imposed the ACA. de la Parte and Gilbert, P.A. is a full service law firm and can assist you if you have any questions about how the ACA will affect your business. Please contact Pat McNamara, Dan McBreen or Eric Nowak for more information, at (813) 229-2775, or by email at pmcnamara@dgfirm.com, dmcbreen@dgfirm.com and enowak@dgfirm.com.
1ACA does give businesses with less than 25 employees a tax credit if that business provides their employees with health insurance.
26 U.S.C. §45r(b). This credit gets lower and is phased out as the size of the business increases and as the average salary of the employees increase. 26 U.S.C. §45R(d)(1)(A)(B) and 26 U.S.C. §45R(d)(3)(B).
242 U.S.C. §300gg-7
342 U.S.C. §300gg-11(a)(1) (Annual/lifetime limit prohibition)
442 U.S.C. §300gg-14 (Adult Children extension)
542 U.S.C. §300gg-3 (Pre-existing condition exclusion); 45 C.F.R. §147.108(b) (effective dates).
626 U.S.C. §4980h(c)(2)(E), the number of full-time equivalent employees that an employer has is determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120.
726 U.S.C. §4980h(b)(4).
826 U.S.C. §4980h(a).
926 U.S.C. §4980h(a), (b)(2), and (c)(2)(D). The penalty is increased to an annual penalty of $3,000 for each employee that enrolls in health insurance coverage from the state created insurance exchange. 26 U.S.C. §4980h(b)(1).
10Emily Maltby, What the Health Care Decision Means for your Small Business, Wall Street Journal, June 28, 2012.
1129 U.S.C. §218a.
1226 U.S.C. §6051(14) and 26 U.S.C. §6056(b).
1329 U.S.C. §4980H(a) and 26 U.S.C. §36b(c)(2)(C).
1426 U.S.C. §36b(c)(2)(C)(i)(II).
1526 U.S.C. §36b(c)(2)(C)(ii).
1626 U.S.C. §4980H(b).
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