As 2014 draws closer, media chatter about health care reform is going to heat up. As a result, employees are bound to become even more curious about how President Obama’s signature law will impact them, and they’ll turn to you for answers.
To avoid employee confusion and potential freak-outs, you’ll want to focus your education and communication efforts on these areas, which are bound to draw the most attention:
1. Are you required to ‘play’?
Many employees are about to assume right off the bat that your company will be required by law to offer them health insurance.
That’s not the case for all employers. Small companies — those employing 49 or fewer full-time employees — are not required to comply with the “shared responsibility” mandate, meaning they don’t have to offer their employees health coverage.
Also, employers with 50 or more full-timers aren’t required to extend coverage to part-timers who work fewer than 30 hours per week on average.
Of course, you’re free to offer coverage to whomever you please. But if you’re a small employer that hasn’t offered insurance in the past, and you plan to maintain that stance, you may be asked to defend that position by employees who thought they’d get coverage in 2014.
If your plan is “grandfathered,” meaning it was in place before March 23, 2010, the date the Patient Protection and Affordable Care Act was signed into law, it is exempt from a few of the law’s mandates — among them, the requirement to provide preventive services at no charge to employees.
If applicable, you’ll want to highlight what your plan’s grandfathered status means to employees.
Employees are going to hear the term “affordable coverage” thrown around a lot. This could stir up a lot of false assumptions.
Example: They may take that phrasing to mean the cost of their health insurance will come down significantly — or it may even be free. However, unless your company is planning to drastically reduce benefits (while still meeting the feds affordability requirements), this obviously won’t be the case.
Be prepared to explain to employees that what the IRS means when it uses the term “affordable” is that to avoid penalties a plan’s premiums cannot exceed 9.5% of the individual’s household income and the plan must cover at least 60% of the cost of covered procedures/care.
You’ll also have to be ready to explain that this requirement doesn’t apply to coverage for spouses or children. The IRS doesn’t require coverage that’s extended to an employee’s dependents to meet the IRS’ definition of affordable.
Employees will also hear a lot of talk about subsidies, and they may get excited by the thought of the government picking up a big part of the tab for their individual or family coverage.
Be ready to explain to them the scenarios in which they may qualify for a subsidy. Many employees may be under the impression that even if they’re offered “affordable” individual coverage their family members will still be eligible for health care subsidies. However, the IRS has said that will not be the case.
If you don’t plan to offer affordable coverage, and you employ over 50 full-time employees, let them know they will be eligible for a subsidy to purchase coverage on a health exchange — as long as their income is less than 400% of the federal poverty level ($94,200 for a family of four in 2013).
Also mention that subsidies will be offered on a sliding scale, depending on how much money an individual makes.
4. Health care exchanges
All employers will be required to provide a notice to employees of the availability of health insurance through state exchanges.
The feds are still ironing out the details, but they have revealed the notices will be required to explain three things:
- Health coverage will be available through state-wide exchanges beginning Jan. 1, 2014
- If the company plan’s share of the cost of health care coverage is less than 60% of the total cost of care, an employee may be eligible for a tax credit and cost-sharing reductions to help pay for insurance purchased through an exchange, and
- Depending on an employee’s household income, a federal income tax credit might be available to help pay the premiums for insurance purchased through an exchange.
The notices will need to be issued this fall, although no official deadline has been set yet.
However, it’s best to be ready to outline these things now for curious employees.
You’ll also want to include information on the exchanges in any COBRA discussions with employees who might be leaving the company.
Yes, departing employees can stay on COBRA for 18 months, but there may be an exchange plan better suited to their needs.
5. The ‘Cadillac’ tax
When employees hear the term “Cadillac” tax, they may fear it impacts them. Chances are, it doesn’t.
First of all, let them know it doesn’t kick in until 2018. That should quell most of their concerns.
Secondly, if none of your health plans will trigger the 40% excise tax on high-value — “Cadillac” — health plans, assure employees the tax won’t apply to any of the benefits you offer.
If you suspect some of your plans will trigger the tax, describe what that will mean for employees.