How our FAQ works

Health care reform brings many questions for people and businesses. We have assembled an extensive list of frequently asked questions and answers to help you get a deeper understanding of these provisions.

When did health care reform become law?

In March 2010, the Patient Protection and Affordale Care Act (ACA) was signed into law by President Obama. ACA and its companion legislation, called the Health Care and Education Reconciliation Act of 2010 (HCERA), contain new laws related to health care. Together, they are known as the Health Care Reform Acts, commonly referred to as health care reform.

Will my adult child be allowed to stay on my health plan?

Under the new law, health plans that provide dependent coverage must provide coverage for adult dependents under age 26 on their parents’ policies, effective with plan years beginning on or after September 23, 2010.

For more complete information, read the Extension of Dependent Coverage to Age 26 provision.

You also may want to watch our “Adult Child Coverage” video.

Who is going to pay for reform?

The expansion of health care coverage under the reform law is being paid for in several ways. About half of the money will come from cutbacks in government payments to hospitals, doctors, nursing homes, health insurance companies, and home care services. The other half of the money will come from a variety of taxes on high-wage-earners, drug companies, medical device manufacturers, and health insurance companies, as well as penalties on individuals who don’t buy health insurance and employers who don’t offer insurance. The new fees and taxes will likely mean medical costs and health insurance prices will continue to increase at unacceptable levels.

Will everyone be required to have health insurance?

Yes, subject to specific exemptions. Beginning in 2014, all U.S. citizens and legal residents will be required to buy health insurance. They will have to pay a penalty if they fail to maintain coverage.

The penalty will be phased in over time, beginning at $95 in 2014 and increasing to the greater of $695 or 2.5 percent of taxable income in 2016 and beyond. Individuals may be exempt from the mandate if they can’t find affordable health insurance, as defined by the government, or if an individual’s income does not meet the federal tax filing threshold.

Do employers have to provide health insurance?

Health care reform does not include a mandate for employers to offer health care coverage, but there are penalties that would apply to certain employers that do not offer coverage and have employees that would qualify for federal subsidies to purchase coverage on insurance exchanges.

Beginning in 2014, employers with 50 or more employees that do not offer minimum essential coverage and have at least one full-time employee who receives a federal tax credit to purchase health insurance on his own through an exchange must pay the federal government a $2,000 for each full-time employee penalty. The first 30 employees would be excluded from this assessment.

Employers with 50 or more employees that do offer minimum essential coverage, but have at least one full-time employee who receives a federal tax credit to purchase health insurance on his own through an exchange, will be assessed a penalty that will be the lesser of $3,000 per employee receiving a premium tax credit or $2,000 for each full-time employee, excluding the first 30 employees.

Large businesses – those with more than 200 full-time employees – that offer health insurance will have to automatically enroll workers into a health plan. An employee, however, may choose to opt out of this automatic enrollment into their employer’s health plan.

Small businesses may be eligible for new tax credits on their health insurance premiums as incentives to provide coverage to their employees. Read the Small Business Health Care Tax Credit provision and use our Small Business Tax Calculator to determine your company’s eligibility for the credits.

What are the penalties if employers do not offer coverage beginning in 2014?

Employers are not required to provide coverage. However, large employers, which employ an average of 50 full-time employees or the equivalent, are subject to a penalty if one full-time employee purchases insurance coverage through a state
exchange and qualifies for federal premium assistance. The annual penalty is $2,000 per full-time employee after the first 30 employees.

If a large employer offers insurance coverage, but employees can’t afford the coverage because their contribution exceeds 9.5 percent of household income or the plan does not give what the PPACA defines as minimm value, the employer is subject to a penalty. The annual penalty is either $3,000 for each employee receiving premium assistance or $2,000 per full-time employee after the first 30 employees, whichever is less.

The provision states that any “bona fide resident of any possession of the United States” shall be “treated as having minimum essential coverage.” If individuals residing in a territory (Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa) are deemed to have minimum essential coverage, they may not be eligible for federal premium assistance to purchase exchange coverage (if established in a territory), and this may affect their employer’s decision on whether to provide coverage.

Will there be longer wait times at the doctor’s office and restricted access to necessary services?

Health care reform is expected to increase the number of people with health insurance, and widespread concern exists about a shortage of internists, family practitioners, and other primary care physicians to treat them.

The law tries to address this potential gap by proposing increased funding for training programs, scholarships, and loan repayments for those entering the medical field of primary care. Primary care physicians will also receive higher reimbursements for treating patients covered by Medicaid, a program that will grow as more people
become eligible.

The law also appears to recognize that more health care is being delivered in new settings — besides hospitals and physician offices — through a more team-based approach to health care. New programs will be established to support school-based health centers and nurse-managed health clinics. Additionally, funding has been increased for community health centers to support a patient-centered medical home model to manage and coordinate the care of people with chronic medical conditions.

Read The Community Living Assistance Services and Supports (“CLASS”) Program provision for more information on a new program for purchasing community living services and support.

What are these exchanges and how will they work?

Each state will be required to establish an exchange by the beginning of 2014. If a state does not or cannot create an exchange, its citizens will be served by an alternate federally run exchange. The exchanges will be a marketplace where small employers and individuals not covered by a government program or an employer-sponsored insurance program can shop for health insurance.

It is too early to know how people will interact with the exchanges — on the phone, at a store location in a shopping center, via an online computer purchase, or by using all of these methods.

The primary purpose of the exchanges is to simplify the purchase of health insurance for individuals and small companies by creating a competitive, regulated marketplace where people can easily compare a number of available health plans.

The U.S. Department of Health & Human Services has issued guidance for the states on these exchanges.

The exchanges must maintain an Internet Web portal where consumers can compare and apply for insurance policies. The exchanges will offer a range of health plans, all of which must include essential health benefits to cover a comprehensive range of services.

To learn what employers’ obligations will be, read the Employer Notice to Employees of Exchange Coverage Option provision.

Franchise Benefit Solutions has excellent health insurance options to suit many needs; visit our Portfolio of Products for details.

Will everyone be eligible for coverage regardless of their health?

Yes. Beginning in 2014, the new law requires that all individuals have coverage, and insurers must offer coverage to anyone regardless of health status and cannot vary premiums based on health status.

In addition, the law provides that, effective in plan years beginning on or after September 23, 2010, for individual, group plans, and self-funded health plans, pre-existing condition exclusions are prohibited for children under age 19.

Does health care reform affect college health plans?

Yes. In 2011, the Department of Health and Human Services (HHS) issued a notice of proposed rulemaking and subsequent guidance clarifying how the provisions of the Affordable Care Act will apply to student health plans offered at colleges and universities for policy years beginning on or after January 1, 2012. Specifically, HHS has defined student plans as “individual health insurance coverage,” except for plans that are self-insured by colleges and universities (please check your plan information), affording student health plans the consumer protections granted to individual health insurance coverage in the ACA.

The new protections include: Elimination of Lifetime Dollar Limits on health plans, Limitations on Rescissions of health coverage and Prohibition on Pre-Existing Condition Exclusions on Children Under Age 19.

In addition, with regard to Restrictions on Annual Dollar Limits, student health insurance plans may have annual dollar limits on essential health benefits of no less than $100,000 for policy years beginning before September 23, 2012. Student health plans with policy years beginning after that date must fully comply with the ACA’s annual limit restrictions.

I am currently uninsured. How can I get health coverage?

Franchise Benefit Solutions offers low-cost health insurance options that you may be able to enroll in today.

The federal government has created a Temporary High-Risk Health Insurance Pool to provide coverage to individuals with pre-existing medical conditions who have not been covered during the prior six-month period or do not have access to coverage.

Beginning in 2014, state health insurance exchanges will enable consumers to compare benefits, prices, and provider networks and purchase coverage.

Franchise Benefits Solutions has excellent insurance options to suit many needs, visit our products portfolio for details.

How will people with a pre-existing medical condition get coverage?

Individuals with pre-existing medical conditions are eligible to buy health insurance through the Temporary High-Risk Health Insurance Pool progam, which is available until the insurance exchanges are put in place in 2014 — or until the $5 billion dollars in federal funding appropriated for the program is exhausted. People must have been without coverage for at least six months before seeking coverage through the high-risk pool.

In addition, the law provides that, effective with plan years beginning on or after September 23, 2010, for individual, group health plans, and self-funded health plan, and self-funded health plans, pre-existing conditions exclusions are prohibited for children under age 19.

Beginning in 2014, all insurance companies will be required to make coverage available to everyone, regardless of their health status, and will be prohibited from excluding coverage to anyone on the basis of pre-existing conditions.

What if I can’t afford to purchase coverage?

Franchise Benefit Solutions offers many different options, including many that are much more affordable than many people may realize. Talk with a representative
about insurance options that could fit your needs.

Consumers who purchase coverage on their own may qualify for federal subsidies to help offset higher premiums beginning in 2014. Federal agencies must work out how these subsidies will be paid. The Congressional Budget Office (CBO) estimates that about 20 million American households will be eligible for subsidies. In addition,
eligibility for Medicaid, the federal-state program that provides health coverage to millions of Americans, will expand to cover families with incomes up to 133 percent of the federal poverty level.

What is the impact on people with low income?

Low-income earners will have more health insurance options. The reform measure expands Medicaid eligibility to non-elderly individuals earning up to 133 percent of
the federal poverty level (FPL), beginning in 2014. According to the U.S. Department of Health and Human Services (HHS), the 2011 FPL for a family of four in all states and the District of Columbia, but not in Alaska or Hawaii, where guidelines are somewhat higher, is $22,350.

Individuals who do not qualify for Medicaid are eligible to purchase health insurance through the insurance exchanges, beginning in 2014. The reform law also establishes subsidies, on a sliding scale for individuals and families with incomes from 133 to 400 percent of the federal poverty level (FPL), to help people buy coverage through the exchanges.

What does health care reform mean to small business?

Health care reform has several implications for small businesses.

Beginning in the fall of 2013, more individuals will be seeking health coverage that’s effective January 1, 2014 due to the Individual Mandate to Purchase Health Insurance Coverage that requires most individuals to be enrolled in a plan or program that provides health coverage, or pay a penalty. For health coverage, individuals will turn to their employers for workplace coverage, or to insurance providers, or health insurance exchanges that are required in each state under health care reform, where subsidies will be available.

Small employers will not be penalized for not offering health coverage to their employees (and their dependents) unless they meet the employer size requirements of the Employer Responsibility Requirement under the ACA, listed next.

The Employer Responsibility Requirement to offer health coverage beginning in 2014 or pay penalties applies to employer that have at least 50 full-time eployees. Importantly the employer responsibility requirement requires full-time equivalents (FTE’s) to be included in the calculation of the number of full-time employees. This means that the employer must include the hours worked by part-time employees each month divided by 120 to determine the number of full-time equivalents. For example, if two part-time employees work 60 hours each in a month, the employer must count them as one full-time employee for the purpose of the employer size calculation.

If your business had fewer than 50 full-time employees in the preceeding calendar year, then a penalty will not be imposed upon your business under the employer responsiblity requirements.

The Small Business Health Care Tax Credit may provide significant savings to small businesses that qualify, effective now and increasing in value in 2014. The small business health care tax credit provides for a sliding-scale tax credit that can be claimed now for qualified small employers with fewer than 25 full-time equivalent employees and average individual annual wages of less than $50,000 (to be adjusted in future years for cost of living) that purchase health insurance for their employees.For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers.

According to the IRS at this link, “an enhanced version of the credit will be effective beginning Jan. 1, 2014. Additional information about the enhanced version will be added to as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.” This credit will only be available to employers that use the Small business Health Options Program (SHOP), often called the small group exchange, to allow their employees to choose their health plan, and it is only available to the small employer for two consecutive taxable years, beginning with the first taxable year in which the small employer offers one or more qualified health plans to its employees through an Exchange.

Beginning on Oct. 1, 2013, the new Health Insurance Exchanges in each state will offer new options to individuals and small businesses by providing them with an additional marketplace to shop for and purchase health plan coverage.

The law requires that residents of each state have available by October 1, 2013, an online health insurance exchange that permits qualified individuals to purchase qualified health plan coverage that is effective beginning on January 1, 2014, the date when most individuals will be required to purchase health insurance coverage.

Through these public exchanges, individuals will be able to determine whether they are eligible for financial assistance with their health insurance premiums (in the form of tax credits) and/or reduced cost sharing. They will also be able to learn if they are eligible for government health coverage such as Medicaid and the Children’s Health Insurance Program (CHIP).

The Affordable Care Act also requires state exchanges to operate a Small business Health Options Program (SHOP).

Generally, small employers with 1 to 100 employees would be permitted to purchase coverage for their employees through the SHOP. States, however, would have the option to limit participation in SHOP to groups of up to 50 employees until 2016. It is believed that employer access to SHOP coverage will be limited to those with 50 or less employees until 2016. In 2016, the ACA requires that all SHOPs open participation to groups of up to 100 employees. Thereafter, beginning in 2017, states can elect to let businesses with more than 100 employees buy group coverage on the SHOP.

For 2014, employers eligible to use the SHOP to provide coverage for their employees will select the coverage plan that is offered. In future years, it is expected that employers will have the added flexibility of selecting a metal level of coverage (bronze, silver, gold, or platinum) and simply define their contributions toward their employees’ coverage. Employees will then make the coverage choices among plans that best fits their needs and budget.

Private insurers will continue to offer competitive, small group plans off of the exchange and through private exchanges that will offer models and plans that will help employers control costs while offering high-quality coverage. Contact us to explore our newest plans and solutions.

The Essential Health Benefits Package will be required of all insurance plans and policies sold in the individual and small group markets, on and off of the exchange, and is expected to drive up costs.

On February 20, 2013, HHS issued the Final Rule on the standards related to the Essential Health Benefits, Actuarial Value and Accreditation (“Final Rule”). The Final Rule sets forth the standards for coverage of the ten (10) categories of Essential Health Benefits, cost-sharing limits, nondiscrimination rules and actuarial value requirements for non-grandfathered health plans in the small group and individual markets beginning on January 1, 2014.

The Essential Health Benefits package is important because while it makes plans more uniform, it creates new specifications about what is included in plans and policies as well as their benefits and their value. The Essential Health Benefits package is unfortunately expected to increase the cost of premiums in the small group market because many employers will be forced to “buy up,” or buy more comprehensive coverage than they would want or need. It is estimated that the Essential Health Benefits Package will raise costs by 2 to 3 percent.

Insurance market reforms and other taxes and fees in the law will also drive up the cost of premiums. For example, in 2014, separate new taxes are imposed on medical device manufacturers, on pharmaceutical companies and on health insurers. Insurers project that the tax on health insurers alone will add 1.9 to 2.6 percent to premiums in 2014 for fully insured business customers, individual members and those who purchase Medicare plans.

In addition, beginning in 2014, insurance market reforms are likely to make health insurance more expensive for small employers. These reforms include guaranteed issue, insurance rating reforms, the prohibition on pre-existing condition limitations, guaranteed renewability of coverage, no annual limits on essential health benefits and the elimination of lifetime dollar limits.

Franchise Benefit Solutions is working closely with our small employer customers to help them understand the law, their options, the newest health benefits financing and network solutions and reform’s increase in employee wellness program incentives.

We are working with all of our customers to find affordable plans that meet our customers’ needs. We want to ensure that your health insurance continues to work for you and your employees, providing the safety and security you’ve come to expect from Franchise Benetit Solutions.

Many other provisions of health care reform that apply to both small and large businesses and can be reviewed in the Key Provisions section of this website. For example, you may wish to review the Provision to Disclose Value of Coverage on W-2 Forms, the High-Value Health Plan Excise Tax, and Grandfathered Status of Health Plans.

What does the Supreme Court’s recent ruling on health care reform mean?

On June 28, 2012, the United States Supreme Court ruled to substantially uphold the Affordable Care Act, also known as health care reform.

Importantly, the Court upheld the portion of the law that requires most individuals to carry health insurance beginning in 2014, or pay a shared responsibility payment that the law refers as a penalty. This provision is referred to as the individual mandate. While the Court did not find the individual mandate to be a valid exercise of Congress’ authority to regulate interstate commerce, they upheld the constitutionality of the individual mandate as a valid exercise of Congress’ authority to tax.

On the other hand, the Supreme Court found the Affordable Care Act’s expansion of Medicaid was unconstitutional because it was “unduly coercive” toward states. However, a majority of justices agreed to strike down only the provision allowing the federal government to withhold all Medicaid funding unless a state agrees to the expansion.
Under the high court’s remedy, the federal government can make new Medicaid funds contingent on a state’s compliance with expansion requirements but not revoke existing funding as a penalty.

What does the Supreme Court’s ruling mean to you?

For Individuals The ruling means that under the law’s individual mandate to purchase coverage, U.S. citizens and legal residents are generally required to be enrolled in minimum essential health coverage or pay a penalty beginning in 2014.

Several exemptions from the penalty will apply, including members of certain religious groups and Native American tribes; individuals who are not lawfully present in the United States; incarcerated individuals; individuals with income below the income tax filing threshold; individuals whose period without coverage does not exceed three continuous months; and individuals whose health insurance premium contributions for the calendar year exceed eight percent of household income.

The penalty for not having coverage in 2014 is the greater of $95 per person for the individual and each dependent without coverage, up to $285 or 1% of income. The penalty increases in 2015 to the greater of $325 per person for the individual and each dependent without coverage, up to $975 or 2% of income. In 2016, the penalty will become the greater of $695 per person for the individual and each dependent without coverage, up to $2085, or 2.5% of income. In 2017 and beyond, the $695 amount will be adjusted thereafter annually to reflect changes in the cost of living. For each individual under age 18, the penalty is one-half of the dollar amount set forth above, as follows: the 2014 penalty is $47.50; the 2015 penalty is $162.50; the 2016 penalty is $347.50; thereafter the amount will adjust. Income maximums still apply as indicated above.

The Affordable Care Act will bring about the establishment of new health insurance exchanges where individuals and small businesses can buy coverage, starting in 2014.

In addition, federal subsidies will be available beginning in 2014 to help qualified individuals buy coverage through an exchange. The Affordable Care Act established both premium tax credits and cost-sharing subsidies
for people with low and moderate household incomes who are eligible to purchase coverage through a health insurance exchange. This assistance is available to people who are unemployed, self-employed, or who work
for businesses that don’t offer adequate or affordable coverage, provided they have incomes between 100 percent and 400 percent of the Federal Poverty Level (FPL). Today, for a family of four, this ranges between $23,050
and $92,200 a year.

For individuals with incomes at or below 133% of the federal poverty level The Supreme Court ruling means that states now have the option of whether or not to expand their Medicaid program and some states may not elect to
expand their programs.

Medicaid is health coverage funded by both the state and federal government. Traditionally, those eligible for Medicaid included people with low incomes, seniors, people with disabilities, and some families and children.

Effective January 1, 2014, in states that elect to participate in the expansion, eligibility under the Medicaid program will include all individuals under age 65 with incomes at or below 133% of the FPL who were previously ineligible for Medicaid. (Some states elected to “phase in” coverage of these individuals under this program beginning as early as 2010.)

The Secretary of the Department of Health and Human Services clarified in a letter to governors on July 10, 2012, following the Supreme Court’s June 28, 2012 ruling, that in states that do not elect to participate in the Medicaid expansion, “the Affordable Care Act exempts individuals who Congress determined cannot afford coverage from the individual responsibility [mandate] provision. As to the very small number of affected individuals who would not qualify for the statutory exemption, Congress provided additional authority, which we intend to exercise as appropriate, to establish any hardship exemption that may be needed.” The Department is expected to offer
additional clarification on this matter in the future.

Individuals in states that do not expand Medicaid could find their insurance options under health care reform limited. Existing Medicaid programs will continue.

For Employers In states that opt out of the Medicaid expansion, if employers do not offer affordable coverage to their employees, those with incomes below 100% of the federal poverty level (at current levels $23,050 for a family of 4) could be left with limited options for health coverage, a consideration for employers. In addition, employees with income between 100 and 133 percent of the federal poverty level in that state could enroll in a plan available through a health insurance exchange in that state and receive a premium tax credit or cost-sharing subsidy, thereby potentially subjecting the employer to the penalties under the employer responsibility requirements. For more information about health coverage options, Franchise Benefit Solutions can help you. This site enables you to explore health coverage options by Web, or by phone, where a specialist can offer assistance.

What is minimum essential coverage?

By being enrolled in minimum essential coverage, individuals are able to avoid the individual mandate penalty.

All private and public employer-sponsored health coverage will be considered minimum essential coverage, even if they don’t necessarily cover all essential health benefits. Under the ACA, many employer plans must begin covering all essential health benefits in 2014. However, certain employer plans (for example, large insured and self-insured group plans) have the option of choosing to cover all essential health benefits, but are not required to do so.

Regardless of the differences in benefits that employer-sponsored plans can choose or are required to cover, it is important to know that by enrolling in available employer-sponsored health coverage, the individual mandate penalty will not apply. Other health plans are also considered under the mandate’s rules as providing minimum essential coverage, including Medicare, Medicaid, CHIP, TRICARE, state-based risk pools and certain other government-sponsored coverage recognized by the Department of Health and Human Services (HHS).

Coverage purchased in the individual health insurance market also qualifies. Coverage under an “excepted benefits” plan alone, however, such as a standalone dental plan that individuals may purchase, does not qualify as minimum essential coverage.

What is the PPACA rule on enrollment waiting periods?

The PPACA prohibits employers from imposing enrollment waiting periods that exceed 90 days beginning January 1, 2014. This provision applies to both grandfathered and non-grandfathered plans.

What is the Cadillac Tax begins in 2018?

The Cadillac Tax rule puts a 40 percent tax on employers that provides rich benefits to some employees.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) rule determines benefits that should be taxed. This rule accounts for:

  • All employer-sponsored coverage
  • Premiums
  • Flexible spending accounts
  • Health reimbursement accounts
  • Health savings accounts
  • Supplementary coverage

The employer must calculate the tax and report it to the plan administrator, who pays the tax to the Internal Revenue Service.

Beginning in 2018, health care reform limits benefits to $10,200 for single person plans and $27,500 for other plans, such as family plans. There are higher benefit limits ($11,850 for individual coverage and $27,500 for other coverage) for retirees and for people in high risk jobs. Beginning in 2019, PPACA matches the benefit limit to the urban consumer price index. Vision, dental, accident, disability and long-term care benefits are not included in the limits under the Cadillac Tax rule

If employees are covered by a collective bargaining agreement, do employers have to follow health care reform rules, or is the plan grandfathered until the next bargaining agreement? Also, how does the law impact multiple unions in one benefit option?

Collectively bargained agreements must follow reform rules. If these plans were in place when the law passed on March 23, 2010, they are a grandfathered plan. If a grandfathered plan gets rid of some benefits, increases costs or reduces what employers pay than it would lose its status and have to follow health care reform rules.

All of the PPACA rules that apply to grandfathered plans also apply to grandfathered collectively bargained plans for all plans beginning on or after September 23, 2010. The law also allows self-insured plans with collective bargaining agreements to remain grandfathered under the same rules.

The PPACA says insured collectively bargained plan may maintain grandfathered status until the last of their agreements in place before March 23, 2010 ends. PPACA rules then apply after the final termination date, and then all plans must comply with health care reform.

If there are three collective bargaining agreements under one plan, then the PPACA will not apply until the last of the three agreements ratified prior to March 23, 2010 ends.

How will health care reform affect flexible spending account annual contributions?

Beginning in January 13, 2013, health care reform limits an individual’s annual maximum contributions to $2,500 for flexible spending accounts. The amount will be adjusted for inflation beginning in 2014.

The Department of Health and Human Safety is expected to decide how often the cap will be adjusted and when adjustments will take place.

What might an example be of how the look back, administrative and stability periods work together ?

The following simple example illustrates how the Treasury safe harbor method would apply in a hypothetical situation:

John is an employee and his hours vary.

His employer has selected the maximum 12-month initial measurement period to determine whether its employees are “full-time.” [An employer can choose a measurement period of between 3 -12 months.]

John’s employer has also elected the maximum 3 month administrative period during which to gather the hours worked data, crunch the numbers, make the determination as to full-time status and to notify its employees regarding the
eligibility for coverage.

For purposes of the employer mandate that begins on January 1, 2014, John’s employer would look back at the average monthly hours John worked during the 12-month initial measurement period of 10/1/11 through 9/30/12, and
during the 90-day administrative period of 10/1/12 – 12/31/13, John’s employer determines that he is full-time employee and communicates to John his eligibility for coverage.

Beginning on January 1, 2014, John’s employer must thereafter treat John as a full-time employee for a 12-month stability period that ends on 12/31/14 even if John’s average hours worked during this stability period are fewer than 30 hours per week. [The stability period can be no less than the measurement period used by the employer to determine the employee’s status for the stability period.]

John’s employer will thereafter reassess his status going through the same process for the next stability period that commences on 1/1/15.

What is the individual mandate under health care reform?

The individual mandate under health care reform imposes tax penalties on individuals who do not maintain minimum essential coverage beginning January 1, 2014 and is referred to as the individual mandate. The penalty is on a sliding scale for three years
and is 1/12th of the greater of:

  • For 2014, $95 per uninsured adult in the household or 1 percent of the household income over the filing threshold
  • For 2015, $325 per uninsured adult in the household or 2 percent of the household income over the filing threshold
  • For 2016, $695 per uninsured adult in the household or 2.5 percent of the household income over the filing threshold

The penalty will be 1/2 of the amounts for individuals under the age of 18.

The following exceptions to the penalty for not maintaining minimum essential coverage apply to individuals:

  • Religious reasons
  • Not lawfully present in the United States
  • Incarceration
  • Inability to afford coverage where required contributions toward coverage exceed 8 percent of household income
  • Income below 100 percent of the poverty level
  • Hardship waiver obtained
  • Not covered for a period of less than three months during the year

The provision states that any “bona fide resident of any possession of the United States” shall be “treated as having minimum essential coverage.” If individuals residing in a territory (Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa) are deemed to have minimum essential coverage, they may not be eligible for federal premium assistance to purchase exchange coverage (if established in a territory), and this may affect their employer’s decision on whether to provide coverage.

What will happen to limited medical plans or mini-med plans come 2014?

Franchise Benefit Solutions will continue to offer its limited medical policies until 12/31/13, after which health insurance exchanges, premium cost subsidies, and employer group plans will begin providing affordable coverage alternatives for our current limited medical customers. Franchise Benefit Solutions will continue working with its limited-medical clients and customers to help them prepare for 2014. Franchise Benefit Solutions looks forward to continuing to serve the voluntary market through our current and expanding portfolio of voluntary ancillary products.

Does the employer mandate extend to part time employees?

The employer mandate applies to large employers, defined as employing an average of 50 full-time employees (i.e., employees working at least 30 hours per week) or equivalent.

Volunteers are not considered part-time employees under the new law. To determine whether an employer meets the PPACA’s 50-full-time-employees threshold, take the aggregate number of hours worked by the part-time employees in a particular month and divide that total by 120 to determine the equivalent number of full-time employees.
Add the full-time equivalent number to the total number of actual full-time employees to determine whether the employer meets the 50-full-time-employees threshold. The calculation is used for the purpose of determining whether an employer is a large employer, and subject to the employer mandate. The provision does not apply to an employer’s part-time employees.

What are the 2010 – 2016 definitions of small employer?

For most purposes, PPACA defines “small employer” as an employer employing 1-100 employees, but the rules allow states to use their own definition until 2016. Up until 2016, most states define small employer as 2-50. In 2016, the standard definition of “small employer” automatically becomes 1-100. This could represent a significant change for a group with 85 lives, for example. Until 2016, they’re considered a “large” employer group and if their group health plan is insured,
the insurer is not required to provide coverage for essential health benefits. But, starting in 2016, the employer will be considered a small employer, and if it insures its coverage, the carrier will be required to cover all essential health benefits – which may impact their premium rates.

What are the rules relating to W-2 reporting of the value of employer-sponsored health coverage?

Starting with the 2012 tax year, the PPACA requires employers who distribute 250
or more Form W-2s for the tax year to include the value of applicable employer-sponsored coverage on each employee’s W-2 Form. This is not considered taxable income and is for information purposes only. Employee premiums may still be made on a pre-tax basis.

IRS Notice released October 12, 2010, made this reporting requirement for the 2011 tax-year voluntary. Employers that choose not to report the aggregate cost of employer-sponsored coverage for the 2012 tax year and beyond will be subject to tax penalties. While the Form W-2 has not changed, the IRS added a code “DD” that employers should put in box 12 to report the value.

It is important to note that this requirement applies to employers who distribute 250 or more W-2s, not simply to employers with 250 or more employees. A high-turnover employer with 200 employees may send out more than 250 W-2s.

See the IRS sample W-2 form

What gets reported on the 2012 W-2, total premium or just what the employee pays for coverage?

Total premium reflecting both employer and employee contributions is required to be reported.