After months of speculation, businesses concerned with their benefit decisions and compliance headaches were given something concrete to plan around. The final employer mandate regulation was released allowing businesses to plan for 2016. The only problem is too many have their heads buried in the sand and there are not enough interpreters available to explain what a 200 page regulation like this one means.
With so many delays of the healthcare reform law, one wonders if there should be a new “czar” to coordinate all of the changes coming from an administration given more authority to implement the Affordable Care Act than many realize. The problem with this delay is it does nothing to solve the problem of un-certainty causing businesses to hold back on growing. It also does not take into consideration all of the consequences of the law.
One of the confusing things about this law is the difference between a full-time employee and a full-time equivalent. The important difference is one has to be offered health insurance and the other does not. A full-time employee is one who works more than 130 hours per month for 90 days under the law. A full-time equivalent is a person or persons who works 30 hours per week or 120 hours per month for 90 days.
The key difference is this. The full-time employee has to be offered health insurance if the business has more than 50 full-time equivalents. Part-time workers do not have to be offered coverage, however, they contribute to the overall total number of full-time equivalents. This is the combination of full-time employees and all part-time hours paid during the month divided by 120. The sum of the two will give you the total number of FTEs under the law.
Look Back/Measurement Period
According to our industry research, most businesses seeing an impact under the law have been choosing either 6 or 12 month measurement because it is most simple from an administrative standpoint. The final regulations make the six month the industry standard.
For example you look back 6 months you will get an idea of which workers work more than 30 hours and these are the ones who must be offered coverage by January 1, 2014.
Remember if your business is over 50, workers who work full-time for three month must be offered coverage after the measurement and administrative period expires. It is confusing and we will be explaining this concept more in depth through this newsletter as more information and understanding of this issue surfaces.
This strategy is mostly for businesses who employ part-time and seasonal workers and offers a method for businesses affected by healthcare reform to determine full-time status for employees working part-time.
Businesses need to be using a measurement period to capture the exact number of full-time employees and then determine which ones need to be offered coverage. If you are a business employing 200 people, but a lot of them are part time, they would go back 6 months to see which employees are part-time and which are full-time working over 30 hours per week. This will allow them to get an idea of their penalty exposure should they decide to disband their group plan.
The total number of full-time employees that need to be offered coverage under that may end up being 75 and the employer is not in as bad of shape as possible. Remember, part-time workers do not have to be offered coverage. Also, a final note, if you hire someone new make sure to have a discussion whether they will be full-time or if they are reasonably expected to work part-time.
Age Banding and Premium Increases
The President has 80 percent of America is already being impacted by the healthcare law that bears his name. He has also famously in the past said “if you like your current coverage, you can keep your current coverage.”
The new normal under the law changes how age bands work. This is one of the main things challenging insurers who are being forced to react to these delays. In the ACA’s insurance market reforms, the oldest sickest person cannot be charged more than 3 times the least expensive healthiest individual. When they allow non-compliant plans to continue, this makes it difficult for insurance companies to price their products and manage the risk.
The premium rate shock many are facing is due to the changes in age banding in the law and the addition of millions of high cost individuals to the pool will drive up costs. So for example, if a 60 year old has premium right now per month is $1,000, and a young individual who is healthy is paying around $150 per month. Under the law, their premiums could go up as much as 100-200 percent.
Under this scenario, the young person will have to pay a $300 premium while the older person would pay a $900 premium under how this law is structured. This is why every company is impacted differently because it bases on the demographics of your workforce.
As you take these steps to get an idea of how the law will affect your company and its future it is important to begin planning now as the official employer report will come here sooner than many realize. As renewals come up, businesses will see sharp increases and be on the look-out other alternatives and E.D. Bellis was to help companies of any size solve their healthcare problems through consultations, assessments, and managing change.
Reading list on the final regulation