Our Human Resources Blog

After a year of intense and controversial political debate, President Obama signed into law this week the Patient Protection and Affordable Care Act. Despite the over abundance of media attention and information, employers are still left scratching their heads wondering what the reality is and how the legislation will impact their business?

Although the total impact to businesses is still uncertain, the direct affect to employers with less than 50 employees will be minimal. The legislation will affect employers in several ways including:

• Employer Responsibilities. Beginning in 2014, the legislation will require an employer with more than 50 full-time employees to pay $2,000 per employee if the employer fails to offer health coverage and has at least one full-time employee receiving a premium assistance tax credit or cost-sharing reduction created by the legislation.
• Breaks for Breastfeeding. The legislation will amend the Fair Labor Standards Act to require that employers provide unpaid breaks for employees to express breast milk. The legislation will also require that employers provide a private location for employees to have these breaks.
• Automatic Enrollment. The legislation will require that employers with more than 200 employees automatically enroll full-time employees in health coverage. The legislation will allow employees to opt-out of the coverage after automatic enrollment.
• Tax Credits for Small Employers.For small businesses that choose to offer healthcare coverage to employees, the law offers tax credits beginning in 2010 of up to 35 percent The full credit will be available to firms with 10 or fewer employees with average annual wages of $25,000, while larger small employers will see smaller tax credits. In 2014, tax credits will be up to 50 percent of premiums for the smallest employers.
• Tax on "Cadillac" Plans. Beginning in 2018, there will be an excise tax on any "excess benefit" of employer-sponsored coverage. The legislation defines "excess benefit" as one that exceeds $10,200 for individual coverage and $27,500 for family coverage.
• Dependent Coverage.Beginning in six months, health plans that provide dependent coverage will be required to provide it up to age 26. In addition, the legislation prohibits health plans from excluding coverage of pre-existing conditions for children. This provision is effective six months after enactment and applies to all employer plans.
•  Ban on Annual Limits. In 2014, the use of annual limits will be banned for all employer plans. Before that ban goes into effect, there will be restrictions on annual limits for all employer plans.

In addition to these changes, employers should keep their eyes on the following:

• Changes to Flexible Spending Accounts (FSAs) - The first change to FSA plans is scheduled to occur in 2011, when over-the-counter medications will no longer be eligible for reimbursement from these plans. The more significant change to FSA plans takes place in 2013 when pretax contributions to health flexible spending accounts will be capped at $2,500 per year.
• Health Coverage Costs on W-2 Forms - Starting with W-2 forms prepared for 2011, employers will be required to include the cost of health insurance on employees' W-2s.
• High Earners to Pay Additional Payroll Tax - Starting in 2013, individuals whose wages exceed $200,000 (single taxpayers), or $250,000 (taxpayers filing a joint return) will pay an additional 0.9% in Medicare tax on wages over $200,000 (or $250,000).
• Increased Wellness Incentives - The new law allows employers to provide "rewards" of up to 30 percent of health plan costs to employees who participate in a wellness program. 

Needless to say there is still a great deal of confusion about this bill. Unfortunately, it doesn't look like clarity will be coming anytime soon, as the concrete implications of the legislation will take place years from now and oh yeah- there is also the potential for repeal!