United States: What Health Care Reform Means For New Hampshire Employers In 2013 And 2014

National health care reform became a reality in March of 2010 by the passage of two pieces of federal legislation, "Patient Protection and Affordable Care Act" and the "Health Care and Education Reconciliation Act of 2010." The legislation was designed to provide access to health insurance coverage for most Americans by imposing new responsibilities on employers, individuals and insurers, Medicare and Medicaid as well as the states. The legislation covers both insured and self-insured employer group health plans, multi-employer welfare arrangements, governmental health plans and individual insurance coverage. The legislation added new provisions to the Tax Code,  ERISA and the Public Health Service Act ("PHSA").

Although numerous reforms have already been enacted such as health coverage for adult children until age 26, elimination of pre-existing conditions limitations on children under age 19, the prohibition of rescission of coverage except for fraud, the elimination of lifetime dollar limits and unreasonable annual dollar limits on essential health benefits, arguably the most important components of the legislation, the individual and employer mandates become effective in 2014. These mandates will be the focus of this article along with several other important changes that will become effective in 2013 and 2014.

Individual and Employer Mandates

The United States Supreme Court ruled that the federal government does not have the power to order people to buy health insurance but it does have the power to impose a tax on those without health insurance. Thus, beginning in 2014, Tax Code Section 5000A provides that individuals (with limited exceptions) who do not enroll in "minimum essential coverage" will pay a tax penalty. Minimum essential coverage includes Medicare, Medicaid, employer plans and exchange-based health coverage. Individuals and small employers (fewer than 50 employees) can obtain coverage through new health exchanges created by the legislation. The Tax Code provides individuals with financial subsidies for exchange coverage through premium assistance tax credits and cost-sharing subsidies. Like many provisions of the Tax Code, the calculation of the penalty under Section 5000A(c) is complex. The penalty is based on the lesser of a) the average national exchange premium cost or b) the greater of a flat dollar amount (indexed for inflation) or a percentage of income as set forth in Section 5000A(c).

Although the legislation does not require that employers provide health care coverage, starting in 2014, large employers must provide compliant health coverage to all full-time employees (30 or more hours per week) or pay a tax penalty as set forth in Tax Code Section 4980H. Section 4980H defines a large employer as an employer that employs 50 full-time equivalent employees (counting full and part timers) on more than 120 business days during the preceding calendar year. The determination of whether an employer is a large employer in 2014 will be based on the number of full-time employees in the 2013 calendar year plus the number of "full-time equivalent employees" or FTEs. The number of FTEs in a month is determined by adding up the hours worked by all non-full-time employees and then dividing the total hours by 120. If the monthly average of FTEs plus full-time employees is 50 or more, the employer must comply with the law throughout 2014. In early 2013, the Internal Revenue Service issued proposed regulations on numerous aspects of the 4980H employer penalty provisions. The proposed regulations include a transition rule under which employers may use any consecutive six-month period in 2013, instead of the full year, to calculate the average number of employees in 2013. Thus, hiring decisions made in 2013 could determine if an employer is subject to the employer mandate. The proposed regulations also clarify that all common law employees of all entities that are part of the same controlled group or affiliated service group must be counted to determine whether the 50 full-time employee level is met.

Section 4980H and the proposed regulations provide for yearly penalties of up to $3,000 per employee if coverage is not offered to substantially all full-time employees and their dependents or the coverage offered is not affordable (less than 9.5% of an employee's salary for single coverage) and of "minimum value" (under new federal standards) and employees obtain tax subsidized coverage through an exchange.  The proposed regulations provide numerous rules on how to determine if an employee is full-time working 30 hours and therefore entitled to employer coverage. These rules include allowing employers the ability to use a look back period to determine full-time status and a future stability period of a comparable length for which coverage is required. It is important to note that employers do not have to provide coverage to part-time employees working under 30 hours per week and receive no benefit for doing so under the 4980H penalty scheme.

Employers also need to be cognizant of the new waiting period limitations of PHSA Section 2708 effective for 2014. Waiting periods can be no longer than 90 days from the date of employment, if the employee is expected to be employed on a full-time basis. The waiting period for variable rate employees can be after the measurement period to determine if the employee is eligibility under Code Section 4980H. In such cases, coverage must commence no later than the first day of next calendar month 13 months after date of hire. IRS Notice 2012-59 provides current guidance on waiting periods. In order to assist the IRS with enforcement of the employer mandate and related rules, employers who employ more than 50 full-time employees will be required to report annually on various aspects of their health plans and workforce.

Other Key Reform Provisions

PHSA Section 2716 adds new nondiscrimination rules "similar to" the Tax Code Section 105(h) nondiscrimination rules applicable to self-insured health plans effective as of 2011 for fully-insured group health plans. Because fully insured plans were not subject to any discrimination rules, employers with fully-insured group health plans were previously able to maintain different coverage with respect to certain highly-compensated employees. Although the IRS stated in Notice 2011-1 that enforcement of the nondiscrimination rules would be delayed pending the issuance of regulations, employers need to be aware of the new rule due to the potential for significant excise tax penalties (up to $100 per day for each employee discriminated against) when enforcement commences. Key details to be determined in regulations include how highly compensated employees are determined and the precise nature of the discrimination tests.

Beginning in 2013, Tax Code Section 4376 imposes a new federal premium tax of $1 on each covered life in a self-insured or fully insured health plan to finance a new private corporation, the Patient-Centered Outcomes Research Institute, formed to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence-based medicine. The tax will increase to $2 per covered life in 2014 and will thereafter be indexed to the medical component of the consumer price index and will sunset in 2019. The legislation also reduced the annual contribution limit for health care flexible spending accounts (FSAs) to $2,500 effective for tax years beginning after December 31, 2012. This limit is adjusted for inflation and does not apply to dependent care accounts. In order to educate employees as to the value of health care, the legislation required employers to report the value of health benefits on Form W-2 starting in 2011. Subsequent IRS guidance delayed the reporting and currently only employers issuing more than 250 W-2s are required to comply.

Lastly, the legislation creates new incentives to promote employer wellness programs and encourage opportunities to support healthier workplaces. Effective January 1, 2014, the maximum reward under a health-contingent wellness program will increase from 20 percent to 30 percent of the cost of health coverage, and the maximum reward for programs designed to prevent or reduce tobacco use will be as much as 50 percent.

John E. Rich, Jr. is a Director at McLane, Graf, Raulerson & Middleton, Professional Association who specializes in employee benefits, pension, ERISA and tax-related matters.

Published in New Hampshire Bar News

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions