The Affordable Care Act: What Businesses Face in 2015
The Affordable Care Act will introduce new requirements in 2015, representing an important set of milestones for businesses—particularly midmarket companies. According to an NCMM report, more than 90 percent of midsize executives see health care costs as a challenge, and this latest series of provisions will certainly come into play for many companies.
In addition, the shifting calculus of politics in Washington, D.C., as well as a Supreme Court–bound challenge of subsidized care, could cloud the future of what the ACA will ultimately do and the impact employers could face.
New Requirements Take Effect
January marks the beginning of employer mandate enforcement among companies with 100 or more full-time employees (defined as those working an average of 30 or more hours per week). Also taken into account are full-time-equivalent workers, or FTEs, the number of which comes from the total hours worked by non-full-time employees. This year, such companies—including many middle market firms—are required to offer affordable coverage to 70 percent of their employees; in 2016, companies will be required to offer insurance to 95 percent. Companies with 50-plus full-time and FTE employees will also be subject to the employer mandate in 2016 and beyond.
Companies seeing a significant change in head count, whether growing or shrinking, should monitor their actual numbers carefully and work with an insurance broker, consultant, or lawyer to understand what percentage of the workforce will count as FTEs for the year. That number will determine how many employees will need to be offered coverage to meet 2015's 70 percent level. Although employees are not required to accept coverage, many might do so in order to avoid the tax penalties for not having insurance.
Coverage must also meet certain financial requirements. It must cover at least 60 percent of the total cost of expected medical benefits under the plan. To be considered affordable coverage, it also cannot exceed 9.5 percent of employee household income, which must account for other working residents of the employee's household and other income that the employee may receive. Wellness incentives must also meet national guidelines. Work with health insurance experts and your HR department to obtain the necessary information from employees, and run the numbers to be sure your company is compliant and not liable for the significant financial penalties that can accrue.
An Uncertain Future
If you're hoping for more certainty going forward when it comes to ACA legislation, prepare to be disappointed. The results of the November 2014 congressional elections, along with an upcoming Supreme Court review of one key aspect of the Affordable Care Act, could make for a murkier future.
Republicans have tried to repeal or modify the law before, and early in January, the House of Representatives voted to expand the 30-hour workweek requirement to 40 hours a week, although the nonpartisan Congressional Budget Office predicted that such a change would raise the federal deficit by $53.2 billion over the next 10 years and move 1 million additional people off employer-sponsored health coverage.
Congressional action to repeal the entire ACA is unlikely because it would have difficulty succeeding. If President Obama, who strongly supports the ACA as part of his legacy, vetoed any substantial change, Senate Republicans would not likely be able to gather the votes necessary for an override.
A more possible route for disruption is in the Supreme Court with the King v. Burwell case, according to The New York Times. At issue is whether the law as written would allow the government to provide subsidies in the states that opted to let the federal government run insurance marketplaces for them.
If the Supreme Court decides later this year that these subsidies are not allowed in such states, the results could be drastic, greatly driving up insurance costs. Eighty-seven percent of people who find plans through the marketplace in these federally run states are eligible for subsidies, and if said subsidies are dropped, many in this percentage may be unable to afford coverage and drop out of the marketplace. The resultant domino effect is difficult to gauge because the entire program depends on the widespread availability of insurance.
The best that middle market executives can do at this point is to proceed as though there were no challenge to the law while keeping a close eye on Congress and the Supreme Court for changes that could uproot current conditions. Focus on meeting the applicable ACA-mandated requirements, and don't be completely surprised if changes happen.
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Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc. and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter and circle him on Google+.