The ACA's Bottom-Line Impact on Large Employers
Jump to: New requirements, taxes and fees
The Affordable Care Act (ACA) represents a greater challenge than simple compliance with new health-insurance regulations. New taxes, fees and directives mean that businesses gearing up to address the new law must look beyond their human resources departments and consider the impact it will have on their bottom line.
The above chart is for illustrative purposes only and should not be used to determine coverage decisions. Regence recommends that employers consult with a lawyer or accountant to determine their potential liability.
Businesses with more than 50 full-time employees must offer affordable health care coverage or be fined $2,000 per employee, per year. If at least one employee selects subsidized coverage from an exchange, the employer’s first 30 employees are exempt from this tax.
Employers are subject to a $3,000 penalty for any employee who finds the coverage unaffordable and instead receives an exchange subsidy. “Unaffordable coverage” is defined as a premium that exceeds 9.5% of the employee’s wages.
Starting in 2014, eligible employer-sponsored health plans must be found to provide “minimum value.” The determination is relevant to eligibility for the premium tax credit and application of the employer shared responsibility payment. Federal and state health agencies are still in the process of defining “minimum value.”
Employer-provided health coverage reporting requirements
Employers are required to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax, as reported in Box 1. The amount reported is a safe harbor in determining the affordability of employer coverage, and so does not affect tax liability.
Fees to fund research on patient-centered outcomes
The Patient-Centered Outcomes Research Institute (PCORI) fee is assessed at $1.00 times the average number of covered lives (employees and dependents) for the first plan or policy year.
Transitional reinsurance fees
Health insurance issuers and plan administrators on behalf of self-insured group health plans are required to contribute, on an annual basis, to a transitional reinsurance program for a three-year period beginning Jan. 1, 2014. The total fees collected over the three-year period is projected at $25 billion, with $20 billion to the reinsurance program, and $5 billion to the U.S. Treasury. Current estimates show reaching that goal requires an annual contribution of $63 per covered life, but contribution rates are expected to be finalized by 2014.
These reinsurance program fees are considered tax-deductible by plan sponsors as ordinary and necessary business expenses, as well as permissible plan expenses under the Employee Retirement Income Security Act (ERISA).
Here is a downloadable list of the ACA taxes and fees likely to affect health insurance premiums.
If an employer-sponsored health plan covered a worker when the reform act became law (March 23, 2010) and if the plan does not make significant changes that reduce benefits or increase employee costs, the plan can be grandfathered. Grandfathered health plans are exempt from a number of provisions, including the requirement to fully cover preventive benefits and the requirement for external appeals processes.
Beginning 2018, if premiums are in excess of $10,200 for individual coverage and $27,500 for family coverage, insurers of employer-sponsored plans and companies that self-insure their own plans are subject to a non-deductible excise tax of 40% on the annual value of those health plan costs.
Additional Medicare tax
Starting in 2013, a new Additional Medicare Tax goes into effect. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year.