On Thursday, June 28, 2012, the U.S. Supreme Court issued a ruling that essentially upheld the constitutionality of the Patient Protection and Affordable Care Act (PPACA), also known as the Health Care Reform Act.
As part of the ruling, the Supreme Court stated that Congress did not have the constitutional authority to mandate that everyone buy health coverage. They did, however, have authority to impose a tax if an individual did not comply with the mandate. Therefore, the individual mandate has been deemed constitutional by the Supreme Court if instituted as a tax. The employer-centered requirements were designed to support the individual mandate by making it easier for working Americans to obtain affordable healthcare. In addition, Congress can impose conditions on the states to receive federal funding for Medicaid coverage expansion, but may not threaten to remove any existing funding.
What does the High Court ruling mean for employers? The Act’s numerous provisions that impact employers remain intact. While some of the mandates already have been in effect, many more will become effective in 2013 and 2014. Employers sitting on the sidelines in anticipation of a complete repeal or significant changes to the PPACA must catch up in order to be compliant by 2014. Thus, employers must proceed with the Act’s provisions or prepare to pay penalties.
In terms of offering health insurance, PPACA identifies three employer categories – those with:
Fewer than 50 employees: “Small-size” employers do not need to provide employees health insurance coverage. On the other hand, if a small employer chooses to provide employee health coverage, starting in 2014, states are required to establish health insurance “exchanges” for employers who choose to provide health care to employees though a group health insurance policy.
50 – 199 employees: “Mid-size” employers must offer “affordable” health insurance coverage to their employees or be subject to penalties. If an employer chooses not to offer employee health coverage or offers an overly expensive coverage plan, then the employer will be subject to penalties.
200 or more employees: “Large-size” employers must automatically enroll all new employees in their health insurance plan beginning in 2014. If an employer chooses not to offer employee health coverage or offers an overly expensive coverage plan, then such employers also will be subject to penalties.
While further guidelines and explanations are expected from government agencies, immediate employer actions for the remainder of 2012 include, but are not limited to:
- Assessment of the Act’s effect on the business
- Determination of redistribution or usage of Medical Loss Ratio (MLR) rebates
- Distribution of Summaries of Benefits and Coverage (SBC) in time for the next open enrollment
- Reporting of group health plan coverage costs on 2012 Forms W-2
- Revisions to company cafeteria plans to reflect employee contribution limits on health care Flexible Spending Accounts (FSA)
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