The Affordable Care Act and Springfield businesses
By David A. Kelm
Another election season has passed, much like a kidney stone, and America has put in place a new power structure in Washington D.C. In many states, including Illinois, Republicans won office but many progressive referendum questions passed with large majorities. While increasing the minimum wage found electoral approval, Americans are still hesitant to embrace the Affordable Care Act (ACA) a full year after initial implementation. According to Gallup, 56 percent of Americans disapprove of the ACA. In coming months and years, further phase-in of the ACA promises to greatly impact businesses of all sizes with complex rules, tighter regulations and stiffer penalties.
Businesses of all sizes have had a reprieve, of sorts, as the ACA has rolled out. Initially set to impact individuals and businesses in short succession, the federal government pushed back implementation of the ACA for businesses with 100 or more full-time equivalent employees to this coming year and delayed implementation until 2016 for businesses with 50 to 99 full-time equivalent employees (“FTE”). The final roll out will be the 40 percent excise tax for “Cadillac” health insurance plans.
The ACA will require all businesses with 50 or more employees to provide minimum essential coverage or “MEC” in 2015 and 2016, respectively. If employers do not provide MEC for at least 95 percent of FTEs, they will be subject to penalty of $2,000 per FTE. Businesses that do provide insurance can also get hammered by new penalties. Employer provided insurance must be “affordable” and of “minimum value.” If not, employers will face a tax of $3,000 per FTE that seeks a subsidy and buys coverage on an exchange.
With the help of Mike Noonan, senior manager at Sikich LLP, we present a quick ACA math primer. In order to determine the number of FTEs, an employer begins with true full-time employees. If an employee works 30 or more hours a week, they are considered a full-time employee for ACA purposes. In order to determine how many part-time employees will equal FTEs, thus triggering the ACA, a business counts all hours worked in a month by part-time employees and divides by 120 to come to a total FTE. If more than 99, the ACA is applicable in 2015 and if 50 to 99, the ACA is applicable in 2016.
To determine if a business is open to a penalty based on affordability or minimum value, a business has to look at insurance offered. The ACA finds employer-offered insurance “unaffordable” when the employee’s share is more than 9.5 percent of family income. It falls to the business owner to determine a family’s annual income and if coverage is “affordable” for each employee. The ACA’s requirement that an employer plan be of “minimum value” is found if a plan covers at least 60 percent of the total allowed cost of benefits expected to be incurred under the plan. Helpfully, the U.S. Department of Health and Human Services and the Internal Revenue Service have calculators on their websites to figure “minimum value.”
To add another level of queasiness and instability to the ACA brew, a couple of weeks ago the U.S. Supreme Court decided to hear another challenge to a large part of the health care law. The ACA provides subsidies for individuals who seek health insurance through a health insurance exchange – specifically, an exchange set up by a state government. Only 14 states and the District of Columbia established their own health insurance exchanges. The other three dozen states, including Illinois, have either a federal exchange or a hybrid exchange with the state and feds sharing responsibilities. Illinois has a hybrid exchange. In Illinois, subsidies received by the federal government have reduced individual premiums by about $200 per month, according to the feds. The U.S. Supreme Court is going to hear arguments and rule in 2015 whether such subsidies run afoul of the law. Such a ruling, some speculate, would result in a collapse of the ACA because of affordability issues.
The Illinois Chamber of Commerce, on behalf of its members, is closely watching the changing ACA landscape, including court challenges. Jennifer Hammer, associate vice president and legal counsel for the Illinois Chamber, said that many Illinois businesses are still adopting a wait-and-see attitude. “Business owners and plan administrators are attempting to comply with the rules and regulations,” Hammer said. “But with all of the potential changes, and potential for large fines, our members are being very careful in decisions involving health insurance for their employees.”
Stepping into the uncertainty of the ACA, especially for employers that are right at or just over the 50+ employees, several businesses are developing products to assist employers to provide appropriate coverage. Blue Cross Blue Shield of Illinois has developed a health insurance exchange for small businesses, Blue Direction, to enable smaller companies to provide group coverage with little or no employer contribution. “Employees are able to pay their premiums with pre-tax dollars,” said Kevin Cassidy, senior vice president of Illinois markets at Blue Cross. “Blue Directions is available in conjunction with the 2015 Health Care Marketplace open enrollment period that runs from Nov. 15 to Feb. 15, 2015.”
For many small businesses, an exchange or traditional coverage is still cost-prohibitive to provide employees. At the same time, however, business owners are barred from discussing Medicaid options with employees who might qualify. While insurance brokers and business owners cannot discuss Medicaid as an option, Combined Insurance has developed a consultancy, BeneStream, to work with businesses to determine which employees may qualify for federal benefits such as Medicaid. “As a third party, we are able to perform an audit for any sized business and classify each of their employees,” said Sean Whaley of Combined Insurance. “Once we have an idea of each employee’s situation, we are able to advise them on health benefits that they qualify for and also save the business a great deal of money in the process.”
The ACA’s impact on business in the Springfield area is not fully known and is expected to play out for years to come. Clearly, 2015 and 2016 will be periods of change for employers and employees. Given the political changes in Congress and challenges still working their way through the courts, the ACA is certain to remain in flux for years to come.
Dave Kelm is a Springfield-area attorney who can be reached at DavidAKelm@gmail.com