While much of the focus has been on the individual mandate, there are several other key provisions for which employers should be preparing:
- The employer “play or pay” mandate: This mandate will require large employers (generally, those with 50 or more full-time employees) to provide adequate and subsidized group health plan coverage to all full-time employees and their families beginning in 2014. If an employer fails to satisfy this requirement, it will be subject to a penalty – generally, $2,000 per full-time employee per year. Accordingly, it is very important for employers to start modeling how this mandate will impact their bottom line.
- Nondiscrimination requirements: ACA prohibits most insured group health plans from discriminating in favor of highly-paid employees. If an employer’s plan fails to satisfy this requirement, the employer will be subject to significant financial penalties. While implementation of this requirement has been delayed to give regulators time to issue guidance, it is expected that this requirement will begin applying in 2014.
- Automatic enrollment: ACA requires most employers with more than 200 employees to automatically enroll new employees who are eligible for group health plan coverage. Rather than having to affirmatively elect health coverage, the “default” will be for employers to automatically enroll any eligible employee who fails to opt out. This will likely lead to increases in plan participation and higher plan subsidy costs for many employers. Implementation of this requirement has also been delayed to give regulators time to issue guidance on the requirement. Again, it is expected that this requirement will begin applying in 2014.
In addition to these “long-term issues,” ACA has a host of additional requirements that employers must address right now. The following are just a couple significant requirements:
- New Summary of Benefits and Coverage (SBC) requirement: Beginning with the next open enrollment period, employers must distribute an SBC for most of their group health plans. The SBC is a uniform disclosure of the material terms and provisions of a plan, which is intended to allow employees to more easily compare different plan offerings. The content requirements for an SBC are very detailed and will likely require the assistance of an employer’s insurance carrier or third-party administrator.
- Reporting the cost of coverage on 2012 W-2 forms: Beginning with the 2012 W-2 forms to be distributed by employers in 2013, many employers will be required to report the total cost of any group health plan coverage that was provided to an employee. This cost is not taxable – it is simply an informational item on the W-2. But ensuring compliance with this new requirement will likely require a lot of coordination between an employer’s HR and payroll departments.
Employers may be tempted to delay addressing these and other ACA related issues because they are focused on compliance in 2014. However, these provisions (and the rest of the ACA) will pose a serious challenge to employers irrespective of when they go into effect. Noncompliance will result in penalties. The better approach is to start working on these issues now.
Clarence Belnavis is a partner at the law firm Fisher & Phillips LLP, specializing in labor and employment law. He can be reached at (503) 242-4262.