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Employers, Start Your Engines

Supreme Court upholds the Affordable Care Act's federal subsidies in recent King v. Burwell decision.

On June 27, the U.S. Supreme Court ruled to uphold federal subsidies for approximately 6.4 million Americans who have obtained health coverage through a federally-facilitated exchange. This ruling sent a clear message to employers that the Patient Protection and Affordable Care Act (PPACA) is here to stay. In a 6-3 vote, King V. Burwell is the second U.S. Supreme Court ruling to uphold PPACA legislation since it was signed into law in 2010. 

Know your health reform compliance dates and reporting deadlines“Today’s ruling represents a call to action for employers who have either ignored the law hoping it would go away, or those that delayed signing contracts or postponed making benefit design changes,” said Sibyl Bogardus, JD, Chief Compliance Officer, Western Region, HUB International. “It is now more important than ever for employers to know their health reform compliance dates and reporting deadlines.”

Although the King decision centered on subsidy payments, the ruling affirms many of the PPACA regulations scheduled to take effect soon. The following are of immediate concerns to all employers: 

Reporting duties:  For employers with more than 50 workers, addressing PPACA IRS reporting requirements looms as a critical immediate concern as failures could lead to significant penalties. 

Mandate on plan year anniversary: PPACA reform regulations allow employers to begin mandate compliance on their plan anniversary date in 2015 (or 2016 for middle sized employers), but unless key conditions are satisfied to start on your plan anniversary date, the default date is January 1. 

Employer Mandate: The Employer Mandate, in effect now for large employers and coming soon to smaller groups, requires businesses to offer every full-time employee and their dependents health care coverage, or face stiff penalties. Furthermore, the Employer Mandate will identify organizations with 50 to 99 lives as “small businesses,” previously a distinction reserved for those only with two to 49 lives. Premiums for small businesses of two to 99 lives will now be determined using standard "manual" rates rather than taking into consideration their own industry code or claims history. They will be mixed into a larger pool of companies with a variety of demographics, leading to increased rates for many.

Cadillac Tax: Employers of all sizes will be subject to the PPACA’s Cadillac Tax, an excise tax on “Cadillac” health care plans scheduled to take effect January 1, 2020. This 40% excise tax penalty on employers offering coverage that is too rich (generally, plans with a value over $10,200 single and $27,500 for families) will apply to every size business, even those under 50 lives, and could hit small businesses sooner if their premium rates increase (as described above). Larger employers -- and particularly those on the East coast where health care costs are highest -- may already be hitting Cadillac Tax thresholds. Avoiding this tax for as long as possible will be crucial.  The government estimates 60% of plans will pay the tax in the first year. 

“Many employers were probably hoping on some level that everything was going to go away – closing their eyes wishing for some good outcome that would protect them from the looming change they’d have to make down the road,” said Dennis Fiszer, Chief Compliance Officer, Eastern Region, HUB International. “This ruling means employers won’t be shielded by the Supreme Court. The status quo has been maintained and everything will proceed on schedule.”

Plan Ahead: Create a strategic employee benefits plan now

So many new requirements means employers have to prepare today to be in compliance tomorrow. HUB suggests creating a three-to-five year strategic employee benefits plan to rollout potential benefits changes for all size employers including medical, voluntary, wellness and more.

“Employers need to now ask themselves – ‘How am I going to prepare my workforce for these changes?’ Communicating that an organization may be required to reduce benefits will not be an easy message to share,” said Bogardus. “A three to five year employee benefits plan allows an employer to focus on where they’re going to land in 2018 and will help optimally position them to help mitigate the possible pain down the road. Now is the time to start preparing.”