Life Saver on BeachHaving attended various seminars on the still unfolding, Patient Protection Affordable Care Act, aka, Obamacare, one thing becomes obvious: It is still a work in progress. The federal departments who seem to be leading the charge are, predictably, the US Department of Labor, the US Dept. of Health and Human Services and the IRS. At the state level, the leading player will be the Health Insurance Exchange, if one is offered in your state. (Otherwise, a federal exchange will be offered.) In California, its health insurance exchange is called, “Covered California.” These federal and state departments are the “go-to” locations for definitive (?) guidance on the rules and regulations unfolding for comprehensive, health care reform.

Defining Full-Time Employment, or its Equivalent: For the purpose of Obamacare, full-time employees are defined as 30 or more hours per week on average. Full Time Equivalents (FTE’s) are defined as 15 hours per week on average. So, in this example, 100 FTE’s would be the equivalent of 50 full time employees. These definitions will be used to determine whether an employer is subject to the “Employer Shared Responsibility Provisions” of Obamacare, as defined by the IRS.

Coverage Mandates: How Many Full Time Employees or Equivalents Do You Employ?: For California’s employers, like all employers nationwide, the health care coverage requirements to which your business may be subjected depends on the size of your workforce. As of January 1, 2014, if an employer has less than 50 FTE’s, there is no mandate for coverage; nor any penalties for failure to cover; nor penalties for providing inadequate coverage to employees. These employers can actually SHOP (see below) at the exchange for small group coverage. Employers of 50 to 200 FTE’s are subject to fines for failure to provide coverage if at least one employee obtains subsidized coverage at the exchange. However, employers of over 200 FTE’s have a mandate. They MUST provide coverage or they will be immediately subject to yearly statutory penalties. Anticipate that many employers will consider these limits when determining staffing needs to avoid the coverage mandates. The IRS has already warned employers that individual companies with common ownership/control may be subject to the coverage mandate if joint employment totals meet the employment threshold.

Effective Date – Accommodating the Employer’s Fiscal Year: The Employer Shared Responsibility Provisions of Obamacare generally go into effect on January 1, 2014 but, according to the IRS, will be delayed for those employers who offer health care coverage through a plan that operates on a fiscal year that runs past January 1, 2014. These employers may have a safe harbor to the end of their fiscal year in 2014 IF they meet certain IRS guidelines, generally determined by reference to the percentage of employees to whom the health plan was offered or, alternatively, the percentage of employee who were covered by the health plan during the fiscal plan year. Depending on these percentages, some employers may delay coverage mandates until their new fiscal year begins in 2014. However, at the beginning of their 2014 fiscal year, these employers will also be required to offer “affordable” (see below) coverage that satisfies the Employer Shared Responsibility Provisions of the Act.

Coverage Requirements for Employers: Employer plans must be 1). “Affordable,” (defined as an employee health insurance premium that is no more than 9.5% of an employee’s W-2 wages), 2). Provide Minimum Value: The Employer must bear at least 60% of total plan cost, and 3). Generally, must include all Essential Health Benefits (EHB’s-this refers to a specific list of covered services that must be offered, which in California includes acupuncture but NOT chiropractic care – go figure). Doing the math, for an employee who makes $15.00/hr, his employer offers “affordable” healthcare if the employee’s monthly premium does not exceed $247.00. When working the numbers, it appears that Obamacare will definitely shift more of the cost of healthcare to employers that are subject to its mandate.

Penalty Calculation for No Coverage: According to the IRS, If an employer with at least 50 FTE’s doesn’t cover at least 95% of its full-time workforce and at least one employee gets subsidized (premium tax credit) coverage through the exchange, then an employer will be subject to a penalty equal to the number of full-time employees, minus 30, multiplied by 1/12 of $2,000.00 for each month that such coverage was not provided. On the other hand, if the employer offers its workforce “affordable,” minimum value coverage (employer pays at least 60% of total plan cost), then there are no penalties, even if the employee goes to the Exchange.

Penalties for Inadequate Coverage: If the employer’s plan does not provide at least the minimum, “catastrophic coverage” (60% of all out-of-pocket costs), to its employees, then the employer will be charged $3,000 for each FTE who goes to the exchange to get coverage. As with penalties for failure to provide coverage, penalties for inadequate coverage will be due annually.

Employer-Provided Notice of Exchanges Delayed: On a humorous note, the US Department of Labor required employers to notify their employees, in writing, of their respective, state health care exchanges by no later than March 1, 2013. But, since DOL didn’t have the actual, employer notice template prepared, this notice requirement has been delayed while the feds figure it out. Stay tuned on this one. Once DOL creates the notice template for employers, the employers’ requirement to provide notice of state health care exchanges could literally be reinstated at any time.

“Covered California:” The official name given California’s Health Insurance Exchange, Covered California has already been approved by the federal government, and summary health plan descriptions are already popping up on its website. The exchange will be available to both individuals and small employers (less than 50 full-time employees or full-time equivalents) under SHOP. For individuals, there are four levels of coverage that must be offered, referred to as Bronze, Silver, Gold, or Platinum, referencing the percentage of coverage provided for each. Bronze coverage, at 60/40 cost share, is the minimum standard, (which is actually referred to as “catastrophic coverage” at the Exchange); Platinum coverage, at 90/10, is the highest.

Open enrollment-Coverage Effective Dates: For all Californians, Open Enrollment on Covered California begins October 1, 2013, with coverage to take effect on January 1, 2014. This means that, as of this date, Californians should be able to shop the Exchange to obtain coverage to be effective January 1, 2014.

Small Employers May SHOP Covered California: Hopefully, the good news is that small employers may also utilize the Exchange under the Small Business Healthcare Options Program, which will be a separate website. This will be open to all businesses with less than 50 employees. In theory, at least, this exchange is supposed to offer small employers economies of scale on coverage, by joining a large risk pool.

Only time and employer experience will really determine if the promise of affordable, comprehensive, health care reform is fulfilled. So far, from an employer cost standpoint, it appears that the cost of doing business just increased for employers with at least 50 employees that are subject to its coverage mandates.