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Birmingham Bar Association Bulletin - Fall 2013

Healthcare Law Robert S. Ellerbrock, III; Balch & Bingham LLP ACA Employer Mandate Postponement May Offer Some Relief to Employers Preparation for Full Implementation Should Not Be Postponed The administration recently announced the postponement of certain provisions of The Patient Protection and Affordable Care Act (“ACA”). Many provisions are already in effect, and 2014 is still a critical year for ACA implementation as it is the year that the majority of substantial changes take effect. This article is meant to be an overview of many of these provisions. Employer Mandate (enforcement delayed until 2015) TheThe ACA requires employers with 50 or more full-time equivalent employees (“Applicable Large Employer” or “ALE”) to offer their full-time employees and their dependents (for purposes of the ACA, a spouse is not a dependent) minimum essential health coverage. The coverage offered must be both affordable and comprehensive. Failure to do so will result in the ALE having to pay a “shared responsibility payment” if an employee applies for exchange coverage and receives a premium tax credit. Coverage is considered “affordable” if the required employee contribution toward the cost of coverage is 9.5% or less of the employee’s W-2 wages. Affordability is based on “single” coverage only — dependent costs are not a factor in the affordability test. If an ALE offers more than one plan option, the affordability test applies to the lowest-cost option available to the employee. Coverage will be considered “comprehensive” if it provides a minimum value, which means it must pay at least 60% of the total allowed cost of benefits provided under the plan. Like with the affordability test, dependent coverage is not a factor in the minimum value test. An ALE’s potential penalty tax liability is determined by reference to the number of full-time employees employed in a given month. The ACA defines a fulltime employee as “an employee who is employed on average at least 30 hours of service per week.” While part-time employees are included in determining if an employer is an Applicable Large Employer, an ALE is not required to offer parttime employees coverage. Penalties will not be triggered because an ALE does not offer coverage to part-time employees. An ALE cannot escape the mandate by breaking into several entities. If several entities are considered to be part of the same controlled group (Proposed Rule references IRS Rev. Rul. 70-630 (1970-2 CB 229) as guidance), the number of fulltime and full-time equivalent employees must be combined for purposes of determining whether the employer is an ALE. The penalty was originally set to be effective January 1, 2014; however, with the recently announced delay, it is now set to be effective January 1, 2015. The amount of the penalty generally depends on whether or not an ALE offers coverage to “substantially” all full-time employees and their dependents and/or whether said coverage is affordable and comprehensive. For purposes of the mandate, “substantially” means at least 95% of its full-time employees and dependents. The general principles of the penalties are explained below: •  The monthly penalty assessed on ALEs that do not offer coverage to substantially all full-time employees and their dependents will be equal to the number of full-time employees, minus 30, and multiplied by 1/12 of $2,000. This penalty is called the 4980H(a) penalty. •  The monthly penalty assessed on ALEs that offer health coverage to substantially all full-time employees and their dependents will be 1/12 of $3,000 for each full-time employee 26 Birmingham Bar Association


Birmingham Bar Association Bulletin - Fall 2013
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