Preparing for the Effects of Health Care Reform
Still wondering how the federal Patient Protection and Affordable Care Act (”PPACA”) will affect you or your business? Not sure what changes you may need to implement to avoid penalties? You’re not alone. While the nation attempts to navigate the overhaul of the health care system, here are a few key points to help you understand some aspects of this complex law:
Dependent Coverage
For all employer-sponsored health care plans that provide coverage to dependent children of covered employees, PPACA will now require that the dependents’ coverage continue until the dependents turn 26 years old. This requirement is effective for all plan years beginning on or after September 23, 2010.
Penalties for Individuals
Starting January 1, 2014, individuals will incur a penalty for each month that they do not have health insurance coverage. In 2014, that penalty cannot exceed $95 for the year. In 2015 and 2016, the maximum penalty increases to $325 and $695, respectively, for each year.
Penalties for Large Employers
PPACA defines a “large” employer as one that employs 50 or more full-time employees working 30 or more hours per week. Large employers must offer “acceptable” health care insurance to employees starting January 1, 2014, or face penalties. “Acceptable” coverage means coverage that is affordable to the employee.
If a large employer does not provide any coverage, and for that reason an employee qualifies for a subsidy (or “premium credit”), the employer faces a monthly penalty, calculated as follows:
No. of full-time employees – 30 x $166.66 = Monthly Penalty
The $166.66 represents 1/12 of $2,000.
If a large employer does not provide “affordable” health insurance coverage, the monthly penalty assessed for each full-time employee that qualifies for a subsidy because of the lack of affordable coverage is 1/12 of $3,000. This penalty is not based on the number of full-time employees; only the number of employees that qualify for a subsidy.
It is still unclear whether the penalties imposed by PPACA might still be less than the cost of providing acceptable health care insurance, as some critics of the law have suggested.
Julie Pfitzenmaier