Are you overwhelmed, yet? Hired that extra staff to handle compliance? Sent your HR staff to school to learn how to do what all needs to be done? The good news for Employers is that we’re here to help you understand your obligations, responsibilities, and potential exposure as a consequence of health care reform.
On February 19, I spent the entire day sitting in a room of 300 other professionals from across Kentucky who are committed to being your professional advisors. We dutifully listened to Sharon Clark, the Kentucky Department of Insurance Commissioner, advise us on the status of our state operated exchange. We asked questions so we might be able to offer you more information. We learned that 57 more Department of Labor Auditors have been hired for the Commonwealth of Kentucky who are going to be out getting their feet wet in the next few months. We learned how important it is to comply with ERISA and why you need to do your non-discrimination testing. Needless to say, I took away A LOT that should help you in the coming months.
One interesting fact about yesterday’s session was the different interpretations everyone has about the law. I attended a webinar last week discussing the definiton of affordable under the law. The understanding provided by that entity differed slightly compared to that of the gentleman who helped develop other exchanges throughout the country. I’m sure HHS is diligently reviewing the comments and will provide effective guidance soon (I hope), but for now let’s consider the following:
One of the ways the excise tax can be imposed if you are a large employer (50 or more full-time equivalents at any point during the calendar year) and offer a group health plan, is if your plan doesn’t meet the minimum value standard or isn’t considered affordable. The law defines affordable as the single employee cost of the health insurance to be less than 9.5% of the employee’s W2 wages (Notice, we have to look at each individual employee…think of the compliance and reporting). So, let’s put some real numbers to that thought. If you have an employee that you pay $22,000 per year and the cost for that employee’s health insurance is $500 per month and you, the employer, are paying 50% of that cost, the employee is still left with $250 per month of expense or $3000 per year. That $3000 per year EXCEEDS 9.5% of the employees W2 wages so you, the employer, will incur a $3000 penalty for every employee that is in the same situation. Wait, you thought the law was supposed to encourage more people to obtain insurance and make it easier to get it? I know, I did. What we didn’t expect was this burden on employers.
The moral of this story is reach out to your professional advisors. Let’s sit down with your CPA, your tax attorney, your HR staff and let’s plan. If we don’t take steps now to comply with our obligations, we may just find ourselves owing a big non-deductible tax. The other moral to this story if you’re a small employer is that it may not be better on you or your employees to drop group health coverage. But, that’s a blog for another day. You can always call me.
While I’m not saying it’s impossible to keep up with this, I am asking are you prepared to keep up with it? If not, you’re going to have some expensive surprises.