Not only are the requirements of the Affordable Care Act difficult and complicated for businesses to understand, but in many cases those aspects that businesses and their advisors think they understand are already slated to change in the future, according to one expert.
John Hodson, president of employee benefits consultancy True Benefit, also told an audience at the National Conference of CPA Practitioners’ Long Island Tax Professionals Symposium that businesses will need to start acquiring and developing better data and information to help them make decisions.
Speaking in a session called “The Impact of the ACA: What Does It Mean for You and Your Clients?” Hodson covered a wide range of issues related to the health care reform legislation popularly known as Obamacare. Among the areas he warned businesses and their advisors to pay particular attention to:
- Don’t be complacent about “pay or play.” While the mandate for businesses to decide whether they’ll provide health care or pay the ACA-mandated fine has been pushed off, Hodson suggested that companies should be tracking data throughout 2014 to try to get more information on which to base a decision.
- Don’t expect an easy decision on “pay or play.” “It’s too early to know what’s common” when it comes to making the decision, Hodson said. Some companies will decide to “throw in the towel and say I’m out of the insurance business,” while other companies, particularly those with high-wage employees, may find they can’t afford to not offer a valued employee benefit.
- Make adjustments in 2014. Since businesses can no longer discriminate between different levels of employees in terms of their health care options, he also suggested they use the next year to narrow the gap between what is offered to high-level employees and everyone else.
- Watch the definition of “small group.” Currently, the “small group market” is defined as companies with between one or two and 50 employees in a state; the ACA had required that the upper limit be raised to 100 employees, but allowed states to seek a waiver which every single state then sought, as many expect that a larger risk pool in the small group market will lead to higher premiums for healthier individuals. The waiver only lasts until 2016, however, at which point the limit will automatically rise to 100 employees and potentially higher premiums.
- Beware the “Cadillac tax.” While this 40 percent tax on health care plans with premiums of over $10,200 for individuals (or $27,500 for families) does not kick in until 2018, “It will be massive,” Hodson said, citing as an example a company that projected that its Cadillac tax would top $68,000.
- Take a look at high-deductible plans. “By 2018, most plans that aren’t high-deductible will be subject to Cadillac rules,” he predicted.
- Know what you can't know. For those companies that are required to offer health plans, the cost of premiums to their employees cannot exceed 9.5 percent of their household wages. “How’s the employer supposed to know what the wages are for an employee’s entire household?” Hodson asked. Rather than ask intrusive questions about spouses’ wages, he expects many companies to elect the safe harbor of basing the cost on 9.5 percent of just the individual employee’s wages which could have significant repercussions for the cost and the value of the plans on offer.
- Get your numbers right. With so much depending on variables like the number of hours employees work or what constitutes 9.5 percent of their household wages, companies will need to check and double-check their calculations and make sure they’re based on the right data. “You’d better have an integrated technology solution” to bring together payroll, time and attendance, HR and other systems, Hodson said. “And you’ll need an audit trail.”
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