Get the FAQ on PPACA

Even though some provisions of the federal health care reform law – officially, the Patient Protection & Affordable Care Act – have already gone into effect, there remains much confusion and many questions about its ultimate impact on employers and employees. Here are answers to some of the most frequently asked questions:

Q: Is there a mandate that all employers provide insurance to their employees?

A: No, there is not a mandate to provide health care benefits. The employer’s size (based on the number of employees) and annual payroll determine employer requirements.

Examples of the size breakdown include:

• Smallest Employer: Employers with 25 or fewer employees and an annual payroll average of less than $50,000 per employee will receive a subsidy.
• Small Employer: Employers with 26-50 employees and payroll less than $750,000 will not be mandated to provide insurance, but also will not receive a reward for doing so.
• Mid-Size Employer: Employers with more than 50 employees must pay provider insurance or pay fines of $2,000 for each employee who receives a federal subsidy from the “health care exchange” set up by the PPACA.
• Large Employer: Employers with more than 200 employees that choose to provide insurance must automatically enroll employees, but the employees can opt out.

Q: What changes will impact benefits often provided by employers?

A: There are four primary changes:

• Group health plans must cover dependent children until their 26th birthday, a change that has been in effect since September. This is true regardless of whether the child is married or enrolled in school, unless a dependent child is eligible for other group coverage.
• Pre-existing conditions cannot be excluded. This change took effect last year for children under age 19.
• There will be no annual or lifetime limits on insurance coverage.
• The Internal Revenue Service will no longer consider over-the-counter medications as qualified medical expenses that can be paid using tax advantaged funds through health accounts. This includes flexible spending accounts, health reimbursement arrangements and health savings accounts. Flexible spending accounts will be limited to $2,500 per year, and the penalty for non-qualified purchases made with health savings account funds prior to age 65 is increasing from 10 percent to 20 percent.

Q: What is the date of implementation?

A: Full implementation will begin in 2014, but there are steppingstones to full implementation with more imminent deadlines. For instance, employers must report the aggregate value of health benefits on all employees’ W-2 forms beginning Jan. 1, 2012, for 2011 annual earnings. This includes both employer and employee contributions for certain coverage.

Employers should determine the aggregate value of health benefits using employees’ applicable COBRA rates (minus the 2 percent administrative fee, if charged).

Q: Can’t we just keep the same plan we already offer employees?

A: Maybe. Certain plans that were already in place on March 23, 2010, enjoy “grandfather” protection in that some benefit mandates do not apply, while others will only apply at a later date. In order to keep its status, employees must be given notice that their plan is grandfathered, and the employer must not make material changes in the plan that was in effect on March 23.

Prohibited changes include:

• Entering into a new insurance policy;
• Decreasing employer contributions by more than 5 percentage points;
• Increasing co-insurance percentages;
• Imposing undue increases in co-payments, deductibles or out-of-pocket limits;
• Eliminating benefits to diagnose or treat specific conditions; or
• Imposing new limits on overall benefits.

Amber Wilson Bagley is an attorney with Cross Gunter Witherspoon & Galchus in Little Rock. E-mail her at [email protected].