As president of a professional employer organization, I spend an enormous amount of time dealing with the complexities of the Affordable Care Act from the perspective of an employer sponsoring a health insurance plan.
The ACA is a large and complex law that has led to much misunderstanding generated by hyperbole on both sides of the political debate. Therefore, it is natural that employers who are not professional health care experts will have misconceptions regarding their role in compliance with the ACA.
Here are a few of the misconceptions I often hear from Indiana employers.
Implementation of the ACA has been delayed until 2015.
There have been a number of delays in implementation, including the important enforcement of the employer mandate. However, the delay of the employer mandate does not equate to the delay of the implementation of the rest of the law. It is scheduled to be substantially implemented on Jan. 1, 2014.
If my company is under 50 employees, I don’t have to worry about compliance.
While it is true the employer mandate applies only to employers with more than 50 full-time equivalent employees, there are compliance issues that all employers need to know about.
1. All employers subject to the Fair Labor Standards Act must have notified health insurance exchanges of their current employees by Oct. 1, 2013. This notification must also be provided to new employees within 14 days of hire after Oct. 1, 2013.
2. Regardless of employer size, if an employer sponsors a health insurance plan, it must make certain the plan complies with ACA coverage mandates, such as rules prohibiting pre-existing condition exclusions and annual or lifetime limits on essential health benefits, among others.
The potential penalty for noncompliance in this case could be $100 per day per employee, but it is unclear whether overlapping violations will multiply this penalty. It is also unclear how the government intends to impose this penalty.
3. Regardless of employer size, if an employer sponsors a health insurance plan, the maximum waiting period that can be imposed on employees is 90 days starting Jan. 1, 2014. The penalty structure for this violation could also be $100 per day per employee, but it is also unclear how the government intends to impose the penalty.
Employers subject to the employer mandate may turn current full-time employees into part-time employees to avoid ACA cost and/or compliance issues.
Employers considering this strategy must be wary. They may run afoul of ERISA Section 510, which prohibits employers from interfering with the right or expectation of coverage. There is no set penalty, but this action could result in a lawsuit with damages similar to an employment lawsuit—back pay of wages, retroactive benefits, court costs, attorney’s fees, etc.
My company is happy with our health insurance plan and we intend to keep it in place, but we would like to place some employees in the health insurance exchange. This way, the employees are off of our plan and they can receive a government subsidy.
If a company provides an affordable health insurance plan, the employees do not qualify for a subsidy in the health insurance exchange. The employee can also lose the pretax deduction enjoyed under the employer plan.
The Affordable Care Act will continue to be a complicated law that requires research and industry knowledge. As with any major health care law, it is important to debunk common rumors and misconceptions.•
Thomas is president of WorkSmart Systems Inc. Views expressed here are the writer’s.