The Patient Protection and Affordable Care Act (PPACA) represents a major regulatory restructuring and government expansion of the US healthcare system. While the ultimate goal of PPACA is to provide insurance coverage for underinsured and uninsured Americans while reducing healthcare costs overall, there are three areas which directly affect employers both financially and operationally. Understanding the changes ahead, coupled with proper planning can help eliminate unnecessary panic.
1. The New Definition of “Full Time.” The first thing businesses will need to do is determine who will be eligible for health insurance as of 2015. The new government rule states that all employees who are “full time” employees – which is defined as working 30 or more hours on average per week, must be offered insurance. Before this change, businesses were able to set full time hours at 35, 37.5, or even 40 hours per week. Now, if an employee worked 33 or 34 hours (on average) a week, he would no longer be considered a part-time employee. This is a huge change to determine whom you have to offer health insurance. If you don’t offer coverage, then you may have to pay a penalty for full-time employees who obtain a premium tax credit on a state or federal marketplace.
2. Changes in the Minimum Coverage Being Offered. Under PPACA, employers have to offer full-time employees a certain level of insurance that meets the new government standards. There will be some financial analysis needed to understand how your plans should be structured for at least one to be considered “affordable” and therefore acceptable under federal guidelines. Additionally, employers will need to understand the potential impact of offering healthcare to more employees as a result of the new definition of full-time, which is explained above. For example, if an employer is required to offer health insurance to an additional 100 people, that comes at a cost. The employer could pass some, but not all, of that cost to employees. These changes shift the entire landscape of employer-sponsored coverage.
3. PPACA Tax Provisions. The PPACA comes with added taxes that fall to employers. One tax, the PCOR tax, starts mid 2013, and another two (the Insurers Fee and the Transitional Reinsurance Tax) take effect in 2014. Even if you had a great health insurance experience in 2012-13 and saw no increase, the new taxes build in an automatic increase, representing huge differences from where we were before PPACA became law in March 2010.