The federal government has recently issued a voluminous set of proposed regulations addressing how employers must comply with the Patient Protection and Affordable Care Act. Much of the guidance addresses the requirement that, effective January 1, 2014, employers must offer qualifying healthcare coverage to all full-time employees or pay a tax. Because of the broad application of the act, this is important information for those in the PR sector.
The proposed regulations provide sufficient guidance for employers to develop a fairly detailed approach to federal healthcare reform, although important legal questions remain unanswered. Failure to address issues now could subject a business to significant new taxes in 2014.
Understanding how to comply with the Patient Protection and Affordable Care Act is crucial for PR agencies – as it is for all businesses – to help them prepare for the new healthcare regulations kicking in next New Year's Day. And prudent employers will work with their legal counsel experienced in benefits law well in advance of next January to avoid the pitfalls. Here are some key steps all companies should follow:
•Determine if your company is subject to the law. The law requires employers with more than 50 full-time equivalent staffers to provide affordable healthcare coverage. An increasing number of PR firms meet this size threshold, which is subject to many qualifications and needs to be reviewed carefully by experienced benefits counsel.
Among the many qualifications to determine if an employer is subject to the mandate are its treatment of seasonal employees, temporary staffers, and employees on the payroll of third-party entities such as employment agencies. This is especially important to those PR firms that might be on the cusp of having more than 50 employees only when their seasonal, temporary staffers and the like are included.
•Identify the controlled group. Many Affordable Care Act rules (and benefit rules generally) apply on a “controlled group” basis. This means that two or more entities are considered as one entity if there is sufficient common ownership between two or more of them.This generally means that an employer should look at its entire business – and the other businesses of its owners (and possibly their families) – in assessing which entities must comply with the Affordable Care Act on a combined basis. The regulations included important relief, which should ease some concerns for many employers with decentralized operations.
•Review the pay or play analysis. This refers to the Affordable Care Act requirement that an applicable employer must offer qualifying healthcare coverage to all full-time employees or pay a tax.
Many employers have looked at the possibility of dropping healthcare coverage altogether, instead opting to pay the tax. An overwhelming number have concluded that paying the tax does not make sense, at least at this stage. Nevertheless, there are nuances to the analysis that need to be considered.
•Decide whether to modify the health plan or offer a new plan in 2014. Some interesting planning opportunities are available, as there is more than one way to comply with federal healthcare reform. Some companies might want to offer a cheaper plan and focus their compliance efforts there. Others might want to combine offerings to ease other aspects of the compliance burden.
Employers should analyze the options and the related legal risks of changing their plans. Employers should also analyze how to comply with applicable nondiscrimination requirements that prohibit discriminating between highly and non-highly compensated employees.
•Identify full-time employees. There are a number of approaches here in meeting the law's requirements. While an employee is full-time when he or she works 30 hours a week over the course of a month, a game plan must be formulated to determine if and how the hours will need to be tracked. Certain “look-back” methods are provided in the regulations.
Additionally, employers must evaluate compliance efforts for non-traditional employees, including temporary employees, union employees, employees on payroll with employment agencies, and others. Misclassified independent contractors, a problem that is rampant throughout many PR firms, can also raise concerns. Tracking the number of hours employees perform in 2013 may influence eligibility in 2014.
Additional issues include how to handle rehired employees and forming an appropriate waiting period. There might be opportunities to designate certain employees as “variable hour employees” and delay coverage.
•Identify increased costs. Even employers that easily comply with the Affordable Care Act might need to estimate the impact on employer costs. This includes evaluating the increased costs due to medical trends and additional governmental fees, a greater percentage of employees participating in health plans, and a requirement to offer healthcare coverage to individuals who are presently not eligible for benefits.
•Evaluate affordability of plan. If a plan is not “affordable” or does not provide “minimum value,” the employer is subject to a significant financial penalty. There are a number of safe harbors available to address these requirements, but this can be a significant concern if an employer does not subsidize enough of the cost of coverage.
•Understand what an exchange is – and what it isn't. The government will establish a website (or websites) that will allow individuals to purchase coverage in a virtual marketplace called an “exchange” (also known as the “marketplace”). Individuals might be able to receive subsidized coverage in an exchange under certain situations. Because many employers will offer coverage to all full-time employees, it is possible that employees offered participation in the employer's plans will not be eligible for a subsidy in an exchange.
•Prepare for governmental audits. The Department of Labor has updated its audit procedures to include a review of group health plans' compliance with the Affordable Care Act, in addition to many other benefit laws (including new HIPAA rules, rules regarding wellness programs, and other ERISA [Employee Retirement Income Security Act] requirements). For all these reasons, prudent PR firms will undertake a compliance review now with their experienced legal benefits counsel to ensure they meet the applicable requirements.
Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at firstname.lastname@example.org