The San Luis Obispo Chamber of Commerce recently brought together three of the most prominent local experts on the Affordable Care Act to discuss the tax implications, compliance requirements and how business owners and managers can share this information with their employees.
The Patient Protection and Affordable Care Act, which was signed into law in March 2010, has altered healthcare plans nationwide and will bring more changes as soon as Oct. 1, leading to even more employer responsibility on Jan. 1, 2014.
“Whether you offer group health insurance or not, most employers beginning Oct. 1, are going to be required to provide the notice of exchange to all employees,” Dan Troy, one of the presenters, said at the July 26 lunch.
Troy, co-founder of Gray & Troy Insurance Services, said the federal plan will provide access to affordable, quality health care to all citizens and legal residents and includes a big push toward preventative care. He also discussed how the law will address challenges in markets, gaps in coverage in certain geographic areas, and the availability of tax credits to make insurance more affordable.
“Continuing on into 2014, these are the changes that we’re going to see and this is really where the heavy lifting begins with the Affordable Care Act,” Troy said. “To this point most of the changes have been subtle changes.”
Individuals cannot be dropped or denied coverage even with a preexisting condition, according to Troy.
Beginning Jan. 1, 2014, all U.S. residents will be required to have some form of insurance or face a penalty — commonly known as the individual mandate. There are a number of affordability efforts including insurance premiums and cost-sharing subsidies to help alleviate the cost, including the implementation of Covered California, the state-based public health insurance exchange.
Covered California will work as a marketplace to compare plans side by side and provide financial assistance to make coverage more affordable.
California has also implemented additional mandates including regulations on waiting periods, creating a 60-day limit from date of hire, shortening the federal 90-day limit and establishing a rule that rates can no longer take into effect the impact of smoking.
“Also significant is the change in the maximum ratio, or the difference between the rate for the oldest covered employee versus the youngest covered employee,” said Dave Morgan, senior employee benefits advisor at Morris and Garritano.
The practical impact, according to Morgan, is that the premium for a group full of 63 year olds may benefit and the premium for a group of 23 year olds may rise to meet closer to the middle.
“As you read articles on the rating impact of health care reform, some are apocalyptic, some are optimistic,” Morgan said. “At the end of the day what is probably most fruitful is to really understand some of the concrete changes to the structure of small group and then you can see how that applies to your groups demographics and positioning.”
Even employers that will not be offering a health plan are obligated to distribute a notice of coverage options to all employees, according to Morgan.
“It’s important that your employees get a good crisp message from you on the exchange, providing context and appropriate resources,” Morgan said.
There are many different tax implications to be considered as well.
The small employers tax credit will be available to businesses with 25 or fewer employees that pay 50 percent of employees’ health insurance costs and have average wages of $50,000.
Planning ahead for tax implications of the Affordable Care Act is important, said Carla Berkefeld, CPA and tax manager at Glenn Burdette.
“Planning for the changes in the health insurance requirements, going to your tax preparer and planning for your upcoming taxes if you know this is going to be applicable to you, that’s going to be your best strategy so that you have a smooth transition,” Berkefeld said.