If you took a wait-and-see approach to implementing health benefit changes until the Supreme Court ruled on the health care reform law, it’s time to kick your planning into high gear.
On June 28, the U.S. Supreme Court upheld the constitutionality of the Affordable Care Act (ACA), including its controversial heart—the “individual mandate” that requires almost all Americans to have health insurance coverage by 2014 or else pay a penalty.
Also intact: A requirement for most employers to offer health insurance to employees or pay penalties.
A cloud of uncertainty has hung over the law since it was enacted in March 2010. Twenty-six states filed lawsuits challenging the ACA’s constitutionality. Lower courts issued a string of conflicting rulings, paving the way for this year’s historic Supreme Court showdown.
The Court’s 5-4 ruling puts to rest for now uncertainty about how health insurers and HR pros who handle health benefits should proceed. A long list of compliance milestones were established when President Obama signed the ACA, and they remain in full force.
The only thing that could derail ACA implementation is a congressional vote to repeal it—and a presidential signature on the resulting legislation. That’s a long shot, at least in the short term.
“While we expect political debate to continue over health care reform, employers are advised to keep moving forward with implementing ACA and its governing regulations,” said Cara Woodson Welch, vice president of public policy at the nonprofit organization WorldatWork.
Several short-term deadlines are approaching that require HR’s immediate attention (see box below), and significant milestones loom in 2013 and 2014.
2013: Calm before the storm
Next year’s ACA requirements will be relatively easy on employers, with most regulatory attention focused on preparing to set up state insurance exchanges. Specific changes for 2013:
FSA limits. Beginning Jan. 1, employee health care flexible spending account contributions are limited to $2,500.
Nonprofit plans. Consumer Operated and Oriented Plan (CO-OP) program begins, a crucial step toward creating nonprofit, state-based health insurance exchanges designed to cover individuals who can’t buy insurance elsewhere.
2014: Big changes!
The real ACA action begins in 2014, when the individual mandate kicks in and state insurance exchanges go live. That’s also when employers begin facing big penalties if they don’t offer health insurance.
Individual mandate. Effective Jan. 1, 2014, all individuals must have health insurance or else pay a penalty, which would max out in 2016 at 2.5% of household income, plus cost-of-living adjustments.
Employer mandate. Employers with more than 200 workers must automatically enroll employees into a health insurance plan.
Risk pooling. State-based exchanges open for business to help small employers (usually those with 50 or fewer employees) pool risk together to lower coverage costs.
Employer penalties. Employers begin facing big penalties if they don’t offer health insurance. Worst-case scenario: An employer with 50 or more employees that has just one employee receiving a premium tax credit to buy insurance through a state exchange will have to pay a penalty of $2,000 per full-time employee (excluding the first 30 employees).
Minimum benefits. Federal officials define an essential benefits package with which all insurance policies must comply. Some of this work has already begun.
Incentives. Employers can begin offering enhanced incentives for employees who participate in wellness programs that meet new federal standards to be developed.
Final note: Track our ongoing coverage of ACA implementation at "Health reform law: Supreme Court upholds ACA -- What it means for employers."
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