Although a New Year, the HR landscape of issues in 2015, we think, looks pretty familiar for employers. That is, we anticipate that because 2015 is the first year employers must implement the Patient Protection and Affordable Care Act (commonly referred to as the ACA), it will remain a top of mind issue. We also anticipate that various regulatory bodies? interests in assessing (auditing) and/or more clearly defining the proper use of Independent Contractors will remain active. Finally, we predict increased enforcement activities by the National Labor Relations Board who evidenced an increased appetite in 2014 to protect employee rights, particularly for non-union employees, as it relates to various speech and conduct issues lurking in employer policies, processes, and actions. In this first of three blawgs on Key 2015 HR Issues, we will address each of these in turn.
The Patient Protection and Affordable Care Act will continue to confuse and complicate employment benefits decision-making.
As of January 1, 2015, employers with 100 or more employees are now subject to the employer mandate provision of the ACA. This means employers must comply with the ACA and provide ?affordable? health care to their full-time employees, defined as those who work 30 or more hours a week. (The Obama Administration also delayed the employer mandate for employers with between 50 and 99 employees in the final rule implementing the employer ?shared responsibility? provisions. In order to qualify for the delay until January 1, 2016, the rule requires employers in this category to certify to the Internal Revenue Service (IRS) that they did not reduce their workforce in order to qualify for the delay, although they may reduce their workforce for ?bona fide business reasons,? such as layoffs related to changes in the employer?s economic marketplace or termination for performance problems. Requesting employers must also certify to the IRS that they did not eliminate or materially reduce the health care coverage that they offered as of February 9, 2014.) Failure to comply will result in penalties.
Penalties under the ACA generally cover every full-time employee (or their equivalent) beyond the first 30 workers if even one employee receives federal insurance subsidies instead of the minimum employer coverage. That said, in 2015, under the IRS final regulations, the first 80 full-time employees (instead of 30) are exempted from the penalty. In order to avoid penalties, offered employee coverage must be both ?affordable? and ?adequate?. A health plan is considered affordable if the employee?s premium contribution does not exceed 9.5% of household income. A health plan is considered adequate if the plan?s actuarial value (i.e., the share of the total allowed costs that the plan is expected to cover) is at least 60%. The ACA also adds several reporting and notice requirements for covered employers, including W-2 health care costs reporting, notice to employees of the availability of ACA exchanges, new Summary of Benefits and Coverage, and health insurance coverage reporting to the IRS.
Given the fact that Republicans have gained control of Congress, the political appetite to dismantle if not eradicate the law is heightened. Regardless, we think a full repeal of the law is unlikely and counsel employers to work toward compliance regardless of their hopes for avoidance. The provision of the law that defines full time employees as those working 30 hours a week is undoubtedly going to be scrutinized by Congress. We anticipate an effort to change the definition to reflect the provision to the more common definition of full time to those working 40 or more hours a week. This change would bring the language of the law into alignment with the definition most employers now commonly use when providing health insurance. Other provisions that could be targeted include the ACA tax on medical devices and the requirement that individuals have health insurance or face penalties.
A bigger threat to the ACA may be the case that the Supreme Court case will hear in the spring of 2015, King v. Burwell, No. 14-114. The case challenges whether federal tax subsidies for health insurance coverage should be available in states that did not set up their own health care exchanges. According to the statutory language of the ACA, federal tax subsidies are available for health insurance that is purchased through a health care exchange established by a state. There is no mention in the law of exchanges set up by the federal government. Since 36 states declined to create their own exchanges and instead have the federal government run them, this decision could have significant impact on health care funding for the millions of individuals who purchased health insurance through the federal exchange and received federal tax credits.
SMART Tip: Start implementing health insurance coverage requirements if you have 100 or more employees; get prepared to manage compliance requirements in 2016 if you have 50 to 99 employees. Also, be sure you are complying with the ACA?s complex recordkeeping to show compliance and notification to employees of their ACA rights. Consider part-time employees (working less than 30 hours per week) as a possible option to curb health cost expenses.