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Breaking Down the Affordable Care Act

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Kurt Zimmer says it sounds simpler in car terms.

“You don’t have to provide a Rolls Royce or anything; just something safe that gets people around,” says Zimmer, owner of Kurt’s Autobody Repair Shop Inc. in Bloomington, Ill. “The new health care laws and regulations are pretty complex, but you just have to break it down to protecting your employees.”

That’s the simple way of putting it.

Of course, to many business owners, the Affordable Care Act (ACA) is anything but simple. Employee benefits attorney Brian Pinheiro of Ballard Spahr LLP says the law is best summarized in “about 1,000 pages or so of regulations.”

For his part, Zimmer says he’s done whatever he can to get the most information possible on what his 42-year-old business needs to do to adapt.

“But there’s a lot of misinformation out there,” Zimmer says. “And the choices businesses need to make are going to be dependent on each individual business.”

Zimmer runs a relatively large independent facility with 21 full-time employees and more than $4.5 million a year in sales.

He’s provided health care coverage to his employees for nearly the entirety of the company’s history. And he doesn’t have any plans of changing that.

But, figuring out what’s best for your shop will depend on a number of key factors, Pinheiro says.

From number of full-time employees to the set up of your new employee eligibility standards, Pinheiro helps break it down.

For Everybody, Regardless of Size

Pinheiro says there are a number of things shops of all sizes will be required to comply with or run the risk of receiving fines and penalties. Some, he says, are items shops should already be familiar with (and practicing).

Notices. There are two main notices that employers should have already issued to their staff.

The first is the notice of summary of benefits and coverage, which was supposed to have been given out last year. This is a four- to eight-page document that summarizes the terms of the employer health care plan. It also provides general information about its coverage and financial terms.

This is an annual requirement for all businesses.

Also, shops were supposed to inform employees of their options through the ACA insurance exchanges by Oct. 1.

While there is no penalty for not complying with this, Pinheiro strongly suggests all shops follow through, if they haven’t already, to ensure there will be no legal action taken against them down the road.

This is a simple step to take, Pinheiro says, and the U.S. Department of Labor has even supplied sample forms for shops to use online.

Substantive Changes. Regardless of the size of your shop and the type of insurance coverage you select, there are a number of changes that will be made to every plan, Pinheiro says, some that are already in place, and others that need to be completed by the end of 2014.

Here are the most critical to note:

Already in Place

• All plans must allow for children of the insured employee up to age 26 years of age to be covered.

• All plans must provide preventative coverage without cost sharing.

• All flex spending savings accounts must limit employee contributions to $2,500.

Starting Jan. 1, 2014

• No employer plan can have an eligibility waiting period for new hires exceed 90 days.

• Any business wishing to allow employees to seek coverage under the new health care exchanges when they open on Jan. 1 that does not have its enrollment period open by that date must have an amendment put into its plan to allow employees to break away from the current coverage provided by employers. Otherwise, employees will have to wait for the next enrollment period to leave the employer’s coverage.

Fees. There are also two separate fees that need to be paid by all employers providing health care coverage to employees.

The first is the Patient-Centered Outcomes Research Institute (PCORI) fee, which helps fund the government-supported institute. The fee, which is $1 per dependent on your company’s coverage, must be reported annually by July 31.

The other is the Transitional Reinsurance fee, which is designed to stabilize premiums and support high-cost dependents in the individual market between 2014 and 2016. The fee ($63 per dependent on your company’s coverage) is due by the end of 2014.

The fees can add up in a hurry, but Pinheiro says that shops with insured coverage will often have it taken care of by their insurers.

“But you can’t rely on your insurer to take care of it for you,” he says. “There is the opportunity of screwing it up and paying a penalty if you’re not careful. The biggest thing is just being informed.”

The ‘Play or Pay’ Rule

For larger shops, Jan. 1, 2015, is the single most important date to remember, Pinheiro says. This is when the ACA’s “Play or Pay” rule officially goes into effect. By this date, all employers with 50 or more full-time employees will be subject to penalties unless they provide affordable and adequate health care coverage to at least 95 percent of their full-time staff. The penalties, Pinheiro says, can be severe, and will be determined on a business-by-business basis.

Determining Full-Time Employees

According to the ACA regulations, a full-time employee is anyone who regularly works more than 30 hours per week. This includes part-time equivalents, meaning employers must add up the amount of hours worked by part-time employees and combine them for this calculation, Pinheiro says.

To avoid this, shops must alter their workforce prior to Jan. 1, 2014, Pinheiro says.Your shop’s workforce for the 2014 calendar year will determine your number of full-time employee equivalents for the ACA.

If you do not have 50 or more full-time employees for 2014, you are exempt from the “Play or Pay” rule.

For Multiple-Shop Operations (MSOs). Any group of shops operating under common control is considered one business under the ACA’s “aggregation rule,” Pinheiro says. This includes separate shops, companies or brands that are owned by one larger parent company.

Common control, Pinheiro says, is defined as “at least 80 percent of each business being owned by the same parent company.”

For Franchises. Independently owned franchises are treated as single, independent businesses. However, there is also an aggregation rule that applies for individuals or companies that own multiple franchise locations: If the same five or fewer individuals or companies own more than 80 percent of multiple franchises, those franchises are considered one business under the ACA.

Defining Adequate Care

All businesses that fall under this 50 or more full-time employee designation must provide adequate insurance coverage or face penalties. Pinheiro says it’s just a simple, actuarial calculation that looks at whether 60 percent of expected health care costs are covered under the plan.

“The vast, vast majority of businesses with existing coverage will already comply with this part,” Pinheiro says.

Defining Affordable Care

For a health care plan to be “affordable” under the ACA, Pinheiro says the cost for employees must be below 9.5 percent of that employee’s listed W2 wage for 2014. This is true regardless of whether or not the employee is on the plan as an individual or has dependents. 

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