On March 23, 2010, President Obama signed into law H.R. 3590, the Patient Protection and Affordable Care Act. The law overhauls the nation’s health care and insurance system.
This law will fundamentally change the health care system as we currently know it. The following are key provisions that will affect NACS members:
- Individual Mandate: Most Americans are required to have health insurance by 2014 or pay a penalty. The individual penalty would start at $95, or up to one percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. Families have a limit of $2,085.
- Employer Mandate: Firms with 50 or fewer full-time and full-time equivalent (“FTE”) employees are exempt. Larger employers which do not offer insurance would have to pay a $2,000 fine for every person they employ in excess of 30 employees, if one of their employees meets the required income threshold and qualifies for a federal subsidy to buy individual coverage through new health insurance Exchanges that will begin operating in 2014. If such an employer does offer coverage but the coverage is “unaffordable” and an employee qualifies for a federal subsidy, the employer will be fined $3,000 per subsidized employee, with the fine capped at the amount the employer would pay if they simply did not offer insurance at all. Effective January 1, 2014.
- Full Time Employee: Work 30+ hours per week.
- Full Time Equivalent: Total hours worked by part-time employees each month/120
- For example, a firm has 35 full-time employees (30+ hours). In addition, the firm has 20 part time employees who all work 24 hours per week (96 hours per month). These part-time employees’ hours would be treated as equivalent to 16 full-time employees, based on the following calculation: 20 employees x 96 hours / 120 = 1920 / 120 = 16
- Income threshold for Subsidized Employee: family income is less than 400% of the federal poverty level
- “Unaffordable” insurance: 1) the premium of the health coverage provided by the employer exceeds 9.5% of the employee’s income, or 2) if the employee is responsible for more than 40% of the plan’s cost of coverage. If the employee meets the income threshold described above and the employer-provided coverage is “unaffordable,” the employee will qualify for a federal subsidy and the employer is penalized $3000 for each subsidized employee.
- Small Business Exemption/Credit: Employers with fewer than 50 full-time and FTE workers would not face any penalties if they didn’t offer insurance. Employers could get tax credits to help buy insurance if they have 25 or fewer full-time and FTE employees with an average annual wage of up to $50,000. For purposes of the tax credit, full-time equals working 40+ hours/week, and FTE = total annual hours worked by part-time employees divided by 2080. Tax credits of up to 35 percent of the cost of premiums became available in 2010 and reach 50 percent in 2014. The largets credits are available for the smallest firms with low-wage workers, credits shrink as companies’ workforce and average wage rises.
- Employer Plan Benefits Requirements: Effective in 2010, no plan can assess lifetime benefits limits, and there are restrictions on the ability to impose annual benefits limits, with respect to “essential benefits.” “Essential benefits” have not yet been fully defined, but will include major items such as hospitalization, rehabilitation, and preventive services. Starting in 2014, plans will be barred from imposing annual limits. In 2010, no plan can consider pre-existing conditions for children younger than 19; applies to all individuals in 2014. Child coverage now includes those up to age 26 and in 2014 waiting periods for plan participation cannot exceed 90 days. Some benefits provisions of your existing plan may be grandfathered if your plan existed in March 23, 2010 (the date the health reform statute was enacted), but grandfather status can be lost if you eliminate benefits to diagnose or treat a particular condition; increase the percent of co-insurance charges, increase employee co-pays beyond medical inflation + 15% (this is cumulative, not annual), reduce employer contribution more than 5% (again, cumulative). And you cannot add new or decrease annual limits. In addition, for non-grandfathered plans in the small group market (100 or fewer employees), there will be a minimum benefits package and minimum plan value required starting in 2014.
- New Medicare Investment Income Tax: The measure includes a new 3.8 percent “Medicare” tax that would be imposed on the unearned income of individuals with modified adjusted gross income of more than $200,000 and couples of more than $250,000. The penalty will be imposed on income from interest, dividends, annuities, royalties, and rents which are not derived in the ordinary course of trade or business, excluding active S corp or partnership income. Only income in excess of the thresholds is subject to the tax.
- Tax on High Income Individuals: An additional 0.9 percent Medicare tax will be imposed on single tax payers with income in excess of $200,000 and couples filing jointly with incomes in excess of $250,000. Only income in excess of the thresholds is subject to the additional tax.
NACS opposed H.R. 3590, the Patient Protection and Affordable Care Act. NACS advocates repeal of the employer mandate provisions and reform of the grandfathering provisions. NACS is monitoring legislation options for pursuing such changes. In addition, NACS has joined the Employers for Flexibility in Health Care coalition, which is working to develop a common platform to advocate more reasonable provisions as they apply to part-time, temporary and seasonal workers.
President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act on March 23, 2010 and March 30, 2010 respectively. The Administration is in the process of developing the regulations to implement the law and NACS is monitoring that process and will report to its members as appropriate.
On April 5, 2011, Congress passed legislation to repeal controversial provisions that would require companies to report IRS 1099 forms for all payments to contractors in excess of $600. NACS supported this bill. On May 5, 2011, Rep. Charles Boustany (R-LA) introduced the American Job Protection Act, H.R. 1744, to repeal the employer mandate of the health care law. As of March 2012, the legislation had 204 co-sponsors.
On November 14, 2011, the U.S. Supreme Court announced that it would hear a challenge to the health-care overhaul law, with a decision likely to come next summer. The Court said it would decide whether the Affordable Care Act exceeds congressional power by requiring all Americans to have health insurance by 2014 or pay a penalty; whether the law can stand alone without an individual mandate; and whether the court can even pass judgment on the act before a penalty is assessed.