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What Are an Employer’s Responsibilities under Federal Health Care Reform?


Enacted in March 2010, the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148 ), together with the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152 ), form a health care reform package that fundamentally alters the health care landscape for both individuals and employers. While the legislation does not require employers to provide workers with health care coverage, "large" employers (generally, employers with at least 50 full-time employees) will be subject to "play or pay" rules beginning in 2015 (given a one-year period of transition relief). Employees working 30 or more hours per week are generally treated as full-time employees.

A penalty will be assessed on a large employer that:

  1. fails to offer minimum essential coverage to its full-time employees (and their dependents) under an eligible employer-sponsored plan and has at least one full-time employee enrolled in a qualified health plan (via an insurance exchange) for which a premium assistance tax credit is allowed or paid; or

  2. offers minimum essential coverage to its full-time employees (and their dependents) under an eligible employer-sponsored plan but has at least one full-time employee enrolled in a qualified health plan (via an insurance exchange) for which a premium assistance tax credit is allowed or paid (generally because the coverage does not provide minimum value or is not affordable to that full-time employee).

Generally, the applicable penalty for employers that do not offer minimum essential coverage to full-time employees will be $166.67 per month ($2,000 per year) per full-time employee. The applicable penalty for employers that offer minimum essential coverage but have employees receiving premium tax assistance credits or reduced cost-sharing will be $250.00 per month ($3,000 per year) for each employee who receives subsidized coverage. The penalty would apply to employers with at least 50 workers but would subtract the first 30 workers from the payment calculation ( e.g., a firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount).

In addition to the "pay or play" rules, here are some other provisions that impact employers:

  • Extended dependent coverage. For plan years beginning on or after September 23, 2010 (2011 for calendar year plans), health plans that provide coverage for dependents must continue to provide such coverage until the child reaches age 26 (see ¶14,422 ). Because most employer-provided health plans do cover dependents, employers needed to advise employees that they could enroll their adult children who are under age 26.

  • Notice to employees of coverage options. Employers subject to the FLSA must provide each employee at the time of hire with written notice informing him or her about the existence of an insurance exchange, including services provided and contact information. The notice must inform the employee that, if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, the employee may be eligible for a premium tax credit if he or she purchases a plan through a state health insurance exchange. The notice also must notify the employee that, upon the purchase of a plan through an exchange, the employee may lose any employer contribution to an offered health plan, as well as the opportunity to exclude that contribution from federal income tax. See ¶14,426B for more information about the notice requirements and ¶14,426A for more information about health insurance exchanges.

  • Prohibition on employment discrimination. Employers subject to the FLSA are prohibited from discriminating against employees based on the following: (1) receipt of financial assistance for health care; (2) whistleblowing; and (3) retaliation. Employment discrimination is barred whether the employee personally engages in protected activity or an individual acts at an employee’s request.

  • Mandatory breaks for nursing mothers. Employers subject to the FLSA must provide unpaid reasonable break time for a nonexempt employee to express breast milk, each time she has such a need. For more details, see ¶19,100 .

  • W-2 reporting. Effective for 2012 Forms W-2, employers are required to disclose annually the aggregate cost of employer-sponsored health insurance coverage provided to their employees (regardless of whether the employer or employee pays for the coverage). The reporting requirement was scheduled to begin with Forms W-2 for the 2011 tax year, but the IRS later made it optional for 2011. The aggregate amount is to be reported in Box 12, using Code DD. The reported amount is for information only; it is not taxable. For more information about the reporting requirement, see ¶25,464 .

  • Medicare Part D subsidy. Starting in 2013, employers that maintain prescription drug coverage for retirees who are eligible for Medicare Part D will no longer be able to deduct the subsidy.

  • Long-term care. A national voluntary insurance program was to be created for purchasing community living assistance services and support. This provision will no longer be implemented, according to the HHS Secretary (see ¶14,420 ).

  • Early retiree reinsurance. Employers that sponsor retiree medical benefits for early retirees (and their spouses, surviving spouses, and dependents), who are 55 and older and neither active employees nor eligible for Medicare, may be eligible for payments under the temporary Early Retiree Reinsurance Program(ERRP). For more information about the program, see ¶14,427 .

  • Adoptions. The health care reform package made the adoption credit refundable. It also raised the dollar limitations for the credit to $13,170 and extended the credit through 2011. Incentives for adopting children with special needs and the adoption assistance exclusion were also enhanced.

  • Automatic enrollment in health plans (repealed). Under a provision that was repealed before it was implemented, employers subject to the Fair Labor Standards Act (FLSA) that employed more than 200 full-time workers and offered one or more health benefit plans would have been required to automatically enroll new full-time employees in one of the plans (and continue enrollment for current employees). Automatic enrollment had to include adequate notice and the opportunity for employees to opt out. Employers were not required to comply with the automatic enrollment provision until final regulations were issued and became applicable, and the Department of Labor never issued any before the repeal on November 2, 2015.

In addition, there are numerous requirements that directly affect health plans, including employer-sponsored plans.

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