Since its passage in 2010, the Affordable Care Act, or ACA, has changed the health care landscape for insurers, individuals, and, especially, employers. President Obama signed the Patient Protection and Affordable Care Act (H.R. 3590) into law Tuesday, March 23, 2010, and he signed the Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872) on Tuesday, March 30, 2010. Together, these laws make up the Affordable Care Act.
Beginning in 2014, the Affordable Care Act requires nearly every American to obtain health insurance or face penalties. ACA generally requires insurance companies to provide health insurance to all individuals who apply for enrollment in their plans. ACA also requires large employers (generally those with 50 or more full-time employees) to offer certain minimum levels of health care coverage or face penalties. A phase-in of the “employer mandate” provisions began Jan. 1, 2015.
Shortly after the law was enacted, the Alabama Retail Association provided members with a detailed summary of the laws’ provisions. Open enrollment for the health insurance exchanges — the centerpiece of the ACA — began Oct. 1, 2013, and many of ACA’s most important provisions took effect in the 2014 calendar year or shortly thereafter. For that reason, Alabama Retail and Lehr Middlebrooks and Vreeland P.C. have updated the information that follows to inform you of relevant changes. This information is not to be construed as legal advice and is intended as general background information. Please work with your legal counsel, accountants and insurers to determine the exact effect on your business.
RETAIL RELEVANT PROVISIONS BY EFFECTIVE YEARS
Small Business Tax Credit: Beginning with the 2014 tax year, small businesses are eligible for up to a 50 percent tax credit (a phase-in of this credit began in 2010) to reduce the employer’s costs of providing health insurance coverage for employees. The credits are only available to employers with fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 (as adjusted annually for inflation beginning in 2014). Only smaller employers (10 employees or fewer) with even lower average annual wages can claim the full credit. The credit is available for a maximum of five years, with a two-year maximum beginning in 2014. More information on the small business health care tax credit.
Space, Breaks for Nursing Mothers: Since March 23, 2010, employers must provide reasonable breaks (unpaid, unless the employer compensates other employees for their breaks) for nursing mothers to express milk while at work. Employers must provide a suitable place, other than a restroom, for a nursing mother, who is a nonexempt employee, to express milk for up to a year after the birth of a child. Employers with 50 or fewer employees are exempt if the requirements would cause the employer significant difficulty or expense.
Excise Tax on Indoor Tanning Services: Since July 1, 2010, businesses must collect and remit a 10 percent excise tax on any indoor tanning services. The provider must pay the excise tax to the government, quarterly, using the IRS Form 720, Quarterly Federal Excise Tax Return.
W-2 Reporting Responsibilities: Employers who generate 250 or more W-2s must disclose the value of group health benefits on their employees’ W-2 forms. No taxes will be assessed on the value of the health coverage. Chart listing many types of health care coverage that may be required to be reported on the W-2. Covered employers generally do not have to report “excepted benefits” on the W-2.
Simple Cafeteria Plan Available for Some Small Employers: Small employers meeting certain requirements may establish a simple cafeteria plan to provide tax-free benefits to their employees. Small employers in this instance are defined as those who have employed on average 100 or fewer employees during either of the two preceding years. By definition, 125 Cafeteria Plans and other benefits/plans may not favor highly compensated and/or key employees with regard to eligibility or benefits. Using a simple cafeteria plan creates a safe harbor for both the 125 nondiscrimination rules and certain benefits offered under the simple cafeteria plan, including group life insurance, coverage under a self-insured group health plan and benefits under a dependent care assistance program.
Summary of Benefits and Coverage: Employers sponsoring a group health plan and insurance issuers offering group health insurance coverage are required to provide a written summary of benefits and coverage for each benefit package without charge to participants and beneficiaries of the group health plan. The summary of benefits and coverage, or SBC, must be provided as part of any written application materials for enrollment distributed by the plan, as well as at renewal and within seven days of any request for a summary of benefits and coverage. Go to the Department of Labor website for a template and samples. Look under “Templates, Instructions and Related Materials.” If an employer makes a mid-year change in the plan provisions that would change the terms of the summary of benefits and coverage, the plan must provide a “Notice of Material Modification” at least 60 days before the change takes effect.
Limits on Employee Contributions to Health Flexible Spending Accounts: For plan years beginning on or after Jan. 1, 2013, annual salary reduction contributions from employees to their health flexible spending accounts offered under cafeteria plans are limited to $2,550 (as of 2015), indexed for inflation. In addition, reimbursement of over-the-counter medicines or drugs (other than insulin) without a doctor’s prescription is no longer allowed.
Medicare Part D Deduction No Longer Allowed: Employers who provide prescription drug coverage for Medicare Part D-eligible retirees will no longer receive a deduction.
Health Insurance Exchange Notice: Employers are required to provide annual notice to all current employees (regardless of full-time status or plan participation) of the availability of coverage through an exchange or marketplace. Employers also must provide the notice to all new employees at the time of hire (or within 14 days after).The DOL has clarified that there is no penalty for failing to provide the notice, but still encourages employers to comply even if they missed the original Oct. 1, 2013, deadline. The model notices below can be found on the Affordable Care Act page on the DOL website.
Open Enrollment in Health Insurance Exchange/Marketplace: Open enrollment for coverage through the federal health insurance exchange/marketplace began Oct. 1, 2013. Annual open enrollment is anticipated to begin Oct. 1 of each year. The health insurance exchange/marketplace operates as a virtual marketplace where individuals and small employers have access to health care coverage. Depending on income and other factors, individuals may be eligible for subsidies to help make exchange coverage more affordable. Individuals can enroll annually by Feb. 15 to elect coverage for that calendar year. The Small Business Health Options Program, or SHOP, Marketplace is open to employers with 50 or fewer full-time equivalent employees to help small businesses provide health coverage to their employees. The online portal for both individuals and small businesses can be found at healthcare.gov
Most of the Affordable Care Act’s provisions become effective in 2014. The provisions most important to retailers are summarized below.
Starting in 2014, the federal government and certain states will operate Small Business Health Options Programs, or SHOP exchanges, in which small businesses will be able to pool together to buy insurance. Alabama opted out of creating its own state exchange, so Alabama businesses use the federal SHOP exchange. For 2014 and 2015, the federal SHOP exchange is only available to employers with 50 or fewer employees. In 2016, employers with up to 100 employees will be allowed to participate in the federal SHOP exchange.
As of 2014, the act requires insurers to cover everyone who applies, regardless of their existing health problems. All plans must cover a comprehensive set of benefits referred to as “essential health benefits” and must provide “minimum value” by limiting the consumer’s out-of-pocket expenses. The law also limits the factors that may affect premiums in the individual and group markets. Rates may only vary based on single or family coverage, rating area, actuarial value of the coverage, age and tobacco use.
GROUP HEALTH PLAN REFORMS
Significant coverage reforms affect group health plans offered by employers. For example, employers may not impose preexisting condition exclusions or establish lifetime or annual limits on essential health benefits. Group health plans also may not impose waiting periods in excess of 90 days as a condition of eligibility. More on health care reforms.
The law also requires that individuals enroll in certain minimum levels of coverage or face a penalty. For individuals with a “hardship exemption,” the individual mandate is delayed until October 2016. For 2014, the penalty was $95 for every person in the household who is uninsured or 1 percent of the household income over the income tax filing threshold. In 2015, the penalty grows to $325 per uninsured or 2 percent of household income over the income tax filing threshold. Finally, for 2016 and beyond, the penalty hits $695 for each uninsured person or 2.5 percent of the household income over the income tax filing threshold. Every year, the greater of the two possible penalties applies. Certain exemptions may apply.
The law also expands Medicaid coverage in states that accept expanded funding. At this time, Alabama has not accepted the extra funding. In states that participate in the expanded Medicaid program, individuals and families with incomes up to 133 percent of the federal poverty limit may qualify for Medicaid coverage.
The U. S. Department of Labor issued new model COBRA notices in 2014 to include information regarding the Health Insurance Marketplace established by the Affordable Care Act, including information regarding the individual’s right to obtain coverage through the Marketplace and information regarding coverage and cost differences between the Marketplace and COBRA coverage.
The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, provides that, under certain circumstances, employees, their spouses and dependents must be allowed to continue health care coverage at the employer’s group rates. COBRA also requires employers to provide two types of notices: (1) a “General Notice” that describes general COBRA rights and employee obligations, and (2) an “Election Notice” that describes the rights to continuation coverage and explains how to make a COBRA election.
Effective Jan. 1, 2015, employers with the equivalent of 100 or more full-time employees are required to offer coverage to all full-time employees (employees who perform an average of 30 or more hours of service per week). Employers who fail to offer any coverage will be subject to a $2,000 penalty per full-time employee, minus the first 80 full-time workers (Beginning in 2016, only the first 30 employees will be subtracted). If an employer offers coverage but the coverage is deemed unaffordable or does not provide minimum value, as set forth under the ACA, the employer faces up to a $3,000 penalty for each employee who seeks coverage on an exchange and receives a subsidy. The company would then be assessed $3,000 for each employee who opts to use an exchange, or up to $2,000 for every full-time worker on the payroll, whichever is less. The worker threshold is calculated based on full-time employees and full-time equivalents, a number obtained by pooling all the hours worked by part-time workers. However, employers are not required to offer insurance to part-time employees (those who work less than an average of 30 hours per week).
TRANSITIONAL REINSURANCE PROGRAM FEES
As of Jan. 15, 2015, certain self-insured group health plans offering major medical coverage, as well as health insurance issuers are responsible for making their first payment of the “transitional reinsurance program fee.” This fee is based upon the entities’ annual enrollment count and is due each Nov. 15 to the U.S. Department of Health and Human Services. The fee is $63 per each covered life. The Affordable Care Act permits the insurance plan/issuer to pass along the cost of these fees to the plan participants.
CALORIE LABELING FOR CHAIN RESTAURANTS
The healthcare law contains language that requires calorie labeling on chain restaurant menus, menu boards, and drive-through displays, as well as on vending machines. The legislation applies to food sold at chains with 20 or more locations doing business under the same name and offering the same or substantially similar menu items. It requires the restaurants to provide additional nutrition information on request. Failure to comply could result in chain-wide enforcement action. The law sets a new national standard rather than the patchwork of state laws that had begun to develop.
The law does not apply to daily or temporary specials and customized orders. Other exemptions may apply, such as to food trucks, independent restaurants, bars or grocery stores, as well as airplane food service.
Covered establishments must comply with the labeling requirements by Dec. 1, 2015.
Employers may offer increased incentives to employees for participation in a wellness program. Depending on the circumstances, employers may offer incentives or penalties up to 30 percent of the cost of coverage (or 50 percent with programs designed to prevent or reduce tobacco use). Employers should proceed with caution, however, as the Equal Employment Opportunity Commission has recently questioned the legality of penalties associated with employees’ refusal to participate in personal health testing, etc. Further guidance on this issue is pending.
On Jan. 1, 2016, the employer mandate goes into effect for mid-size employers, those with between 50 and 99 employees. The same criteria set forth under Employer Mandate in 2015 apply.
OPTIONAL EXPANSION TO SHOP EXCHANGES
States may allow employers with more than 100 employees to offer health care coverage through the state SHOP exchange. Alabama does not have its own SHOP exchange.
EXCISE TAX ON HIGH-COST PLANS (also known as the Cadillac Tax)
Beginning in 2018, group health plans will be subject to a 40 percent excise tax on benefits that exceed the value of $10,200 multiplied by the “health cost adjustment percentage” for self-only coverage or $27,500 times the “health cost adjustment percentage” for family coverage.
- Lehr Middlebrooks and Vreeland Affordable Care Act Quick Reference Compliance Checklist (also linked at the top of this document)