The Affordable Care Act –Demystified
(Part 1 of a 3- part blog series)
January 1, 2014 is “D-Day” for many companies…the day when a large portion of the Patient Protection and Affordable Care Act’s (PPACA)* comprehensive health insurance reforms roll out.
*NOTE: The Patient Protection and Affordable Care Act (PPACA) is also known by its abbreviated form – Affordable Care Act (ACA) and as Obamacare”.
Any new law brings uncertainty, but for some reason, the complexity and lack of guidance around the Affordable Care Act (ACA), has increased the level of apprehension. Many business owners, in an effort to educate themselves, have formed committees, hired consultants and conducted lengthy Google searches.
Confusion and misinformation are running rampant. Guidance is slowly being published by the various governmental agencies responsible, but questions remain. In fact, over 40% of Americans are unaware that the ACA is even a law. Of that group, 12% believe that it was repealed by the Supreme Court last year, and 23% say that they do not know enough about it to even know the status of the law.
For employers, the major question is whether or not they are required to comply with the law.
How do you know if you are required to comply?
If your company has more than 50 full-time equivalent employees, your business is expected to comply with the mandates of the Affordable Care Act (ACA).
Once you determine you have over 50 full-time equivalent employees you have to decide to either:
- Pay, you chose not to provide healthcare coverage and instead pay an annual penalty of $2,000 per full-time employee (less the first 30 employees).
- Play, you chose to provide “robust” and “affordable” coverage within 90 days of a hire date. If the provided insurance does not meet the requirements of being robust and affordable, you must pay a penalty of $3,000 per employee who leaves your program and receives coverage from a health insurance exchange (also known as an “exchange”).
“Paying” is not a simple way out….
The decision to pay is tempting for many business owners. Many consider “paying” the annual penalty of $2,000 to be simple, clean, and requiring very little administrative work. The line of thinking continues that if your insurance offering does not meet requirements of being “robust” and “affordable”, another more expensive fine has to be paid anyway. Is this right? In many cases, no. This is because the penalty for offering a less-than robust and affordable healthcare insurance coverage is not inclusive of all your employees. There are other (perhaps more severe) consequences to “paying”, including:
1) Disadvantage in recruiting talent – companies that offer healthcare coverage will probably be more attractive to candidates.
2) Employer brand erosion – people need health insurance, and your employer brand could degrade if there is a perception that a $2,000 penalty is a better deal than the health and well-being of your employees.
Next January, this country’s healthcare system will change forever. The amount of information is scarce; the number of opinions and amount of misinformation is huge. During the month of June, Snelling is looking to help. This blog will continue to provide information on the ACA – information that you can use. The wording and language used in both the law and the updates are extremely complex….we are here to help. Stay tuned for more installments of our ACA updates in the Snelling Blog. Better yet, sign up for our RSS feed to stay up-to-date!
