March 20, 2014 – The Obama Administration has delayed implementation of two essential provisions of the Affordable Care Act (ACA) — extending the phase-in period for employer “shared responsibility” obligations and allowing insurers to renew non-qualifying health care policies for an additional two-year period.
The ACA requires that any employer with an average of 50 full-time employees (including full-time equivalents, or “FTEs”) must offer its employees qualifying health care coverage. Qualifying coverage must be both “affordable” and provide “minimum value” — as those terms are defined by the law and regulations. Failure to offer qualifying coverage may result in penalties of up to $3,000 a year per employee (though limits may apply.) Collectively, these requirements are known as the “employer shared responsibility” obligations.
Extension for Employers
Initially, the effective date of the ACA was January 1, 2014, but in July 2013 the administration delayed implementation of the “employer shared responsibility” obligations for one year. Recently-issued regulations push back the scheduled phase-in even further. The schedule that applies to your business will depend on the number of its full-time employees. Generally, firms with 50-99 employees will have reporting requirements for 2015 but no “shared responsibility” obligations until 2016. For firms with 100 or more full-time employees, “shared responsibility” obligations will begin one year earlier — in 2015. However, an employer may avoid the penalties by offering qualified coverage to 70% of its employees in 2015 and to 95% in 2016.
Renewal of Non-qualifying Policies
On March 5, 2014, the Department of Health and Human Services (HHS) announced that health insurance companies may renew non-qualifying policies (and affected individuals and eligible businesses may choose to re-enroll in such coverage) for an additional two-year period.
HHS had previously announced an extension on November 14, 2013, stating at that time that health insurers could renew non-qualifying policies through October 1, 2014. This most recent announcement extends that period to October 1, 2016.
According to the announcement, issuers may renew policies even if they had previously notified the policyholder that the current policy was being cancelled and even if the policy fell short of meeting essential ACA requirements, such as those relating to the cost of premiums and guaranteed renewability.
Before the insurer may issue such renewals, several conditions must be met. One is that the state in which the insurer operates must allow such renewals. Additionally, issuers must provide policyholders with specific notices (models are provided by HHS) informing them that (1) their renewed policy may not provide all the protections of the ACA, (2) the policyholder has the option of seeking a different policy through the Health Insurance Marketplace, and (3) additional information may be obtained at Healthcare.gov or a toll-free phone number.
Our Health Care group is doing our best to keep up with the changes. Contact your Dopkins advisor or Al for help answering your questions about the application of the new ACA rules to your business.
About the Author
Albert A. Nigro CPA, CVA
Al provides accounting, tax and consulting services for privately held companies and their owners. He consults on income tax planning, financial and operational management and business valuation.