Healthcare Reform Considerations for 2013
There is little doubt in any expert’s mind that healthcare reform will bring substantial changes to the benefits provided to the average American worker. Large companies will use their in-house HR departments to perform this function while smaller companies will have to rely on far fewer resources to accomplish the task.
The job may seem daunting to many small business owners especially in light of the fact that the changes are complex, spread over a long period of time and have some particularly onerous penalties for non-compliance. Fortunately, an affordable alternative exists in the form of Professional Employment Organizations (PEOs). These companies are experts in human capital management and are uniquely positioned to help small business owners with the following PPACA requirements:
Employer Reporting Obligations
- W-2 Reporting – This seeming simple exercise will now require employers to track another metric; specifically the aggregate value of any employer-provided coverage. It is intended to allow for the levying of an excise tax on any high-value health coverage provided by private insurers.
- Automatic Enrollment – Initially limited to companies with more than 200 employees, the requirement is expected to decrease as more companies opt for government funded plans. In any event, this provision requires that all new employees be automatically enrolled in the company health plan unless they specifically opt out.
- New Plan Disclosure Obligations – Every new employee upon hire and every existing employee at insurance reenrollment time must be provided with a timely and accurate “New Plan Summary.” This document must detail any benefits exclusions and company cost-sharing requirements. Amazingly, non-compliance is punishable by a fine of $1,000 for each affected employee.
Coverage Considerations
- Health FSA Limits – One of the key provisions of the PPACA as it applies to all business regardless of size - all employees are limited to providing a yearly, maximum contribution of $2500.
- Free Rider Surcharge – This surcharge is offered as an “incentive” to employers to offer some sort of qualifying healthcare plan. In the event that the employer declines to provide coverage, the law states that they pay a penalty of $2,000 per employee per year. Remarkably, this fee is significantly less than the premium costs that the employer would otherwise pay. Even more remarkably, the uncovered employee will face the same choice; pay a government mandated penalty or provide health insurance for his family at an exorbitant cost.
- Small Business Tax Credit – The tax credit is intended to help small businesses bridge the gap from not providing any health care plans to embracing the idea by paying one-third to one half of the premiums. As with any government program, the proper forms and supporting documentation will have to be provided in a timely and accurate manner.
Employee Benefits & Fairness
- Non-Discrimination Testing – Another provision intended to create a level playing field for all those involved in the healthcare process. The government will establish specific criteria to ensure that executives, owners and other highly compensated individuals do not receive preferential health care coverage.
- Mandated Benefits Phase I (2012) – Touted as the real breakthrough in healthcare reform, this portion of the PPACA prohibits the denial of benefits for those under the age of 19 by any and all healthcare plans. It is also the loophole through which many employees and companies will “game” the system. Instead of paying full premiums while not actually sick, the non-covered will just pay the much lower penalties and then avail themselves of the General Insurance program if struck by a devastating illness.
- Mandated Benefits Phase II (2014) – In Phase II of mandated benefits, employers will be required to offer benefits after no more than a 90 day waiting period (60 days if you employ more than 50 people). Fines for non-compliance of this provision range up to $600 per affected employee.
January 1, 2013 and Beyond
The PPACA is a complex and very involved piece of legislation that will affect essentially every employer and employee in the United States. While the gains remain largely potential, the real, immediate ramifications to businesses start at the very beginning of the New Year. A prudent respect for the power of this new government bureaucracy demands that you and your company prepare for its implementation. Consider the benefits of using a PEO to help implement and then maintain the HR component of your business. Not only will your time be more profitably spent on building your own business but you will have the assurance that all of the proper steps and associated documentation will be performed in complying with the new PPACA.
Carolyn Sokol is a founder of PEOcompare.com which helps match small businesses with the best PEO company for their particular needs. Her background is in marketing and communications, employee education and training, development of policies and procedures and the ongoing delivery of outstanding customer service. As a frequent contributor to PEOcompare’s library, she writes about PEOs and HR Outsourcing as well as other small business interest topics.
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