Questions Employers Should be Answering Now in Preparation for 2014 Employer Shared Responsibility Provisions
Beginning in 2014, applicable large employers who do not offer their full-time employees and dependent children "affordable", "minimum essential" group health plan coverage that provides "minimum value" are subject to potential penalties under the employer shared responsibility provisions of the Patient Protection and Affordable Care Act ("PPACA"). Preparation for the 2014 implementation of these new provisions must begin as soon as possible in order for employers to effectively weigh their options and plan for health care costs. In planning for these rules, employers should ask and answer the following questions:
- Is the employer part of a "controlled group" or "affiliated service group" in which related entities also have employees?
If so, then the controlled group/affiliated service group employees are combined with the employer's employees for determining if it is an applicable large employer.
- Did the employer, in combination with controlled group/affiliated service group entities, employ an average of 50 or more full-time employees (including full-time equivalent employees) on business days during the prior calendar year (i.e., 2013 measurement period for testing 2014)?
If no, then it is not subject to PPACA's employer shared responsibility provisions in 2014. If yes, then it is an applicable large employer subject to these provisions.
- Would the employer benefit from using the six consecutive month "look back" safe harbor for determining applicable large employer status for 2014?
The safe harbor is only available in 2013, and it could decide whether the employer is an applicable large employer for 2014.
- If the employer is an applicable large employer, how will it calculate/determine who is a full-time employee for purposes of offering them group health plan coverage and calculating applicable penalties?
Determining an applicable large employer's full-time employees for offering group health plan coverage and calculating penalties depends on the "measurement periods", "stability periods", and "administrative periods" it has established, as well as rules governing service counted towards full-time employment and rules applicable to employee classifications (e.g., seasonal employees). The rules are complex and employers should be analyzing them now.
- If the employer is an applicable large employer, does it offer at least 95% of its "full-time employees" and their dependent children the opportunity to effectively enroll in its group health plan at least once each year?
Failure to offer health coverage to at least 95% of full-time employees and their dependent children could result in substantial penalties assessed against the employer.
- Does the group health plan coverage offered by the employer provide "minimum essential coverage"?
If the employer is an applicable large employer, the health coverage offered to the employer's full-time employees and their dependent children must provide minimum essential coverage to avoid potential penalties. The definition of "minimum essential coverage" is still being developed and will likely be clarified in future guidance.
- Does the group health plan coverage offered by the employer provide "minimum value"?
If the employer is an applicable large employer, the employer must offer health coverage to its full-time employees and their dependent children that provides minimum value (in general, reimburses at least 60% of covered expenses) to avoid potential penalties.
- Is the group health plan coverage offered by the employer "affordable"?
If the employer is an applicable large employer, it must offer health coverage to its full-time employees that is "affordable" to avoid potential penalties (i.e., cost of single coverage is not more than 9.5% of household income, though there are regulatory safe harbors that let employers make the affordability determination based on W-2 wages, rate of pay or the federal poverty level for single persons; these regulations are detailed).
- Does the group health plan coverage offered by the employer provide coverage to dependent children up to age 26?
Coverage must be offered to full-time employees' dependent children up to age 26 (but does not have to be available to spouses), to avoid potential penalties.
If you have any questions regarding the PPACA contact Ed Hammond at (248) 988-1821 or firstname.lastname@example.org , Kristi Gauther at (248) 988-5854 or email@example.com or another member of Clark Hill's Labor and Employment Practice Group.