With the recent news coming out of Washington that the Affordable Care Act is bumped a year out to 2015, many financial advisors and small business owners are scrambling to plan ahead for future options, stay afloat and follow the ACA rules and regulations.
The U.S. Treasury released a blog post on July 2, stating that the Federal Reserve will delay the Employer Mandate portion of the ACA in order to streamline the reporting process by which businesses are required to submit. The statement also mentioned the need for companies to have time to transition with proper reporting in place through 2014 to successfully implement the ACA provisions by 2015.
Counter to popular belief, the ACA will only affect 1 percent of small businesses. The vast majority of companies—96 percent—employs less than 50 full-time workers and are exempt, as stipulated by the Employer Mandate. Most larger companies already have healthcare plans in place and will not be affected. Employers that fall within the mandate are responsible for covering their full-time employees who work 30+ hours/week. Currently, there is a push from some employers to consider full-time as 35 or 40 hours/week. Some of these companies are cutting hours to avoid the Employer Mandate, but this is nothing new. Companies were cutting worker hours and benefits for years before the concept of ObamaCare materialized as an idea and prior to the recession, according to statistical data collected by the Employee Benefit Research Institute (EBRI).
The federal government is expected to bring in $3.7 billion in revenue from penalties paid by employers who do not cover their employees, approximately $3,000 per person. With a year delay, individuals seeking insurance may have more comprehensive options in state exchanges that would be subsidized by the government for low-moderate incomes, and depending on where they live – the lowest income levels qualifying for Medicaid. With that said, there may be a challenge to verify the federal subsidies paid out to protect against fraud.
There are several preliminary steps that financial advisors and companies can take, regardless of any future changes to the ACA plan between now and 2015. It’s extremely important to evaluate all company documentation and budget, even though Washington may flex and contract over the ACA regulations. Waiting and doing nothing to prepare for the transition is not an option. It is suggested that companies should utilize the extra time in 2014 as if they were expecting to be audited. Here are some steadfast preparatory measures that will ensure a smooth conversion to ACA provisions:
- Understand exactly who is affected. Only companies who do not provide health insurance to their workers and those who employ 50 or more full-time workers will be impacted, as stated earlier. This is the first step that financial advisors should evaluate with their clients.
- Get familiar with your state-exchanges and prepare employee communication documents. Part-time employees will benefit from this form and qualify for subsidized coverage. The deadline for companies to communicate health exchange options is Oct. 1 of this year. Also, keep in mind that notices for the Fair Labor Standards Act (FLSA) are due at the same time.
- Check to see if coverage is affordable and adequate in order to comply with ACA requirements. It is not enough merely to extend coverage to employees.
- Go over current company documentation and check that all policies verbally agree and revised to conform to the new requirements.
- Prepare documents to disperse to all employees concerning the new changes, plan summaries and other pertinent information.
- Budget for the new requirements. Set aside money to cover reinsurance and other associated program implementation fees.
- Prepare to furnish the necessary employee data for the federal reporting requirements. More information should be released in September of 2013.
- Update and revise all privacy and security policies for all employer health plans.
As we approach 2014, companies will learn more as Washington works to troubleshoot and refine the parameters of the Affordable Care Act, using the delay of the Employer Mandate as a necessary transitional period to help businesses prepare. According to Anne Phelps, Ernst & Young’s Washington Council principal in Washington, D.C., companies should prepare “what data pieces are needed for reporting,” and “we should expect to hear more from the federal government on this topic in September, since companies will need to know specifics in order to carry out IT builds for systems.”
Mike Anderson is an analyst for NerdWallet, a website dedicated to providing unbiased financial information and helping consumers find the best financial advisors, savings accounts, credit cards and many other financial products.