Despite delays, ‘employers need to begin addressing issues now’
Amid recent postponements in the implementation of the Affordable Care Act (ACA), North Bay experts are trying to keep vintners, growers and other companies up to date with the rapidly changing health insurance environment.
Workshops are being held throughout the region to inform employers about the ACA — such as one convened August 1 for the Sonoma County Vintner’s Association, sponsored by Vantreo Insurance Brokerage in cooperation with Kaiser Permanente.
Additional sessions are planned as ACA rules are revised, new insurance rates are released and start dates change.
For example, in July the White House announced that the ACA requirement that large employers offer affordable insurance to their workers in 2014 would be delayed one year.
A second delay was issued for the start of a process to verify incomes of people claiming eligibility for government subsidies in order to buy health insurance on state exchanges.
‘Pay or play’ delay ‘good news’ for wine business
The latest change, revealed last week, delays implementation of rules governing how limits on out-of-pocket medical costs will be determined.
“Although many of the health care reform bill regulations won’t go into effect until 2014 or beyond, employers need to begin addressing issues now to continue to offer meaningful employee benefits and compensation plans,” said John Fradelizio, managing director of North Bay employee benefits for Wells Fargo Insurance Services USA, Inc. “In coming years costs will escalate, tax incentives will change and compliance rules will continue to evolve. It is important to begin creating proactive strategies for minimizing employee health benefit costs by comparing coverage options while also meeting business objectives.”
The one-year delay until Jan. 1, 2015 of the “pay or play” mandate, for large employers with 50 or more full-time equivalent (FTE) workers to offer health coverage, gives employers more breathing room.
Mr. Fradelizio said this delay is especially good news for the wine industry that employs large numbers of seasonal and part-time employees, as well as for small retail and hospitality businesses. He said if this requirement had become effective in 2014, it would have had a negative impact on health care costs for these groups.
To determine part-time status, take hours worked by all designated part-time employees in a month, and dividing that amount by 120. Seasonal workers are not counted in this calculation for those working up to 120 days in a year.
“Leading up to 2015, businesses with over 50 employees need to track hours closely for those working less than 30 hours a week to make sure their hours don’t creep up,” said Victor McKnight, principal with EPIC, a retail property and casualty and employee benefits insurance brokerage firm.
“If workers exceed 30 hours, employers may need to offer them coverage for six to 12 months. The whole process of change is complex and employers should consult with their insurance carriers for guidance,” Mr. McKnight said.
“Winery owners, for example, with fewer than 50 employees who also own another business with additional workers, could have to combine both employee totals when determining insurance exposure,” he added.
Chris Reiter, senior vice president with Woodruff-Sawyer & Co.’s employee benefits practice, said he knows of a business with 120 employees that must add another 50 workers in 2015 who were not previously covered.
“This could increase their insurance costs by 30 to 50 percent,” Mr. Reiter said. “Firms should look at this newly eligible population and reassess coverage strategies and how to deliver it.”
Changes have also been made affecting the waiting period allowed before coverage takes effect.
In the past, employers could delay coverage until the first of the month following up to a 90-day or even a six-month waiting period, according to Michael Parr, employee benefits broker at Northwest Insurance Agency, Inc., a division of George Petersen Insurance Agency.
New rules require such coverage to be effective the first of the month following a 60-day or less waiting period after Jan. 1. Assembly Bill 1083 was designed to conform state rules to match those of ACA.
“If an employee takes longer than 60 days to accept offered coverage, the employer is not in violation of the 60-day limit,” Mr. Parr said.
A Transitional Reinsurance Tax Program will also be effective from 2014 to 2016, according to Mr. Parr. This program is designed to help stabilize premiums in the individual health insurance market for those with pre-existing conditions.
Health insurance issuers and third-party administrators will pay the assessment to fund state nonprofit reinsurance entities, which will establish high-risk pools for the individual market. This tax amounts to about $63 per enrolled member annually.
Tax-credit changes for small businesses
Small business health care tax credit changes are also coming. For tax years 2010 through 2013, the maximum tax credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.
An enhanced version of this credit will be effective beginning Jan. 1, according to the IRS. In general, these rates will increase to 50 percent and 35 percent, respectively, this January.
There is good news for small tax-exempt employers. The credit is refundable, so even if employers do not have taxable income, they may be eligible to receive the credit as a refund, so long as it does not exceed their income tax withholding and Medicare tax liability.
“The small business tax credit available in 2014 only applies to an employer for two consecutive tax years, but it is potentially available for six years, since the initial credit was available from 2010 to 2013 plus the two-year credit beginning in 2014,” Mr. Parr said.
Small employers can claim the full credit if they meet the following two criteria:
- The employer has 10 or fewer FTE employees. That’s calculated by dividing the total hours worked by employees during the tax year by 2,080 — with a maximum of 2,080 hours worked for any one employee.
- The employer’s average taxable wages are $25,000 or less. This is calculated by dividing the aggregate amount of wages paid to employees during the year by the number of FTE employees (rounded to the nearest $1,000).
For calculating FTEs and their wages, the term “employees” excludes seasonal workers, self-employed individuals, a 2 percent shareholder in an S-corporation, a 5 percent owner of an eligible small business, or someone who is a relation or dependent of these people.
There are new rating methods for small groups. Currently small groups have a rate adjustment factor (RAF) that is plus or minus 10 percent from a standard state-filed rate.
“The RAF is going away in 2014, and non-grandfathered plans will be rated at standard,” said Mr. McKnight. “Rates will be based on the employee’s home Zip Code.”
He said rates today for small groups are banded within the following age brackets: 20–29, 30–39, 40–49, 50–54, 55–59, 60–64 and 65-plus. A spouse or partner is rated based on the employee’s age, and dependents are charged one rate regardless of how many a person may have.
However, next year the age bands will be annual. So a 32-year-old will pay a different rate than a 33-year-old. Spouse premiums will also be based on age. A person will pay for each dependent under age 21 up to the first three, and pay adult rates for dependents ages 21–26.
Mr. Parr noted that plans will also change for almost all groups to mirror the “metallic” plans (platinum, gold, silver, bronze) available through the Covered California, the state’s electronic exchange for the purchase of healthcare insurance coverage.
By Oct. 1, employers must provide notices to all employees (whether covered by a health plan or not) regarding the existence of an electronic marketplace.
On the Internet: Covered California (coveredca.com), sample employee notices for companies with plans (dol.gov/ebsa/pdf/FLSAwithplans.pdf) and sample notices for those without plans (dol.gov/ebsa/pdf/FLSAwithoutplans.pdf). Vantreo has scheduled two more workshops for September and October.
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