Last Thursday (6/28) the Supreme Court of the United States upheld The Affordable Care Act.
To keep you from having to wade through the 193-page opinion (read it here) complete with tons of LawyerSpeak, a convoluted discussion of the "essential features of a tax", and a total of twelve - TWELVE! - references to broccoli, I thought I'd put together a summary of the top five implications of the decision for employers.
1. Reporting value of health benefits. Beginning with 2012 W-2 statements distributed in 2013, employers are required to report the value of health benefits. Seems like a no-brainer, right? It's just an additional box and an extra number. But filling in that extra number is going to take a good amount of coordination between payroll, benefits, and HR. Start planning now to gather the information you need and update your payroll systems so you can get your W-2s out on time.
2. Automatic enrollment. Under the Affordable Care Act, employees who are eligible for group health plan coverage will automatically be "opted in" to coverage. This is in contrast to the current "default" state, where employees are required to affirmatively elect to participate in group health plan coverage. The thinking behind this requirement is as follows: automatic opt-in is likely to increase plan participation, which will in turn lead to higher plan subsidy costs for employers. Most employers with 200 or more employees will be affected by the automatic enrollment requirement, which is expected to be implemented in 2014. Implementation has been delayed to allow regulatory agencies adequate time to issue guidance on this requirement.
3. Non-discrimination requirements. The Affordable Care Act prohibits most group health plans from discrimination in favor of highly-paid employees. If an employer's plan does discriminate, significant financial penalties may be imposed. If employers offer different plans, eligibility periods, premium subsidies, etc., to different groups of employees, in most cases offerings will have to be adjusted to comply with this requirement. As with the automatic enrollment requirement, implementation has been delayed to allow regulatory agencies to issue guidance. Implementation is expected in 2014.
4. Employer "Play or Pay" mandate. This is a big one. Employers with 50 or more full-time employees (including full time equivalents) are required to provide "adequate" and subsidized group health plan coverage to all full-time employees - and their families - beginning in 2014. Failure to do so will result in penalties of $2,000 per full-time employee per year (the first 30 employees are excluded from the calculations). But just offering coverage to full-time employees and their dependents isn't enough - there's the "Unaffordable Coverage" clause that says the coverage offered has to be both "affordable" and "valuable." If at least one full-time employee enrolls and is certified to receive government subsidies because the employer's coverage is considered unaffordable and/or of low-value, the employer is subject to a financial penalty of $3,000 per full-time employee eligible to receive government subsidies.
5. Summary of Benefits and Coverage. This is another big one, and word on the street is that employers are focusing most of their efforts on this requirement. Beginning with the next open enrollment period, employers must distribute a Summary of Benefits and Coverage. The content requirements for this summary are very detailed - they must be "culturally and linguistically appropriate", contain cost-sharing details, a glossary with uniform definitions of specific medical and coverage-related terms, etc. There's even an overall maximum page length for the document! The requirements are very granular, and penalties for noncompliance are sizable. Be sure to get some guidance from your benefits advisory team and/or legal counsel to make sure your SBC satisfies all of the detailed requirements.
Many employers have held off on making modifications to their group health plans and related documentation because they were waiting to see how things would shake out with the Supreme Court's decision. Well - the Court has officially spoken, and it's time to get started on making those modifications.
There's a lot of hard work that needs to be done to get plans in shape and compliant with the new rules and regulations. Failure to do so could result in some pretty steep penalties. You're probably going to be spending more on your group health insurance plan anyway - don't throw away precious dollars unnecessarily on fines and penalties.
There's one other lesson to be learned from the Supreme Court's decision last Thursday - mistakes happen when we try to be "first", rather than trying to be "correct". Just like the word problems of homework we all completed decades ago, you have to read the WHOLE THING before you can answer the question! It's just as true today as it was back then.
Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc. and is the host of The Proactive Employer. Follow her on Twitter at proactivemployr.