What should employers be telling their workforces about healthcare reform?
The healthcare reform law is in constant flux. Regulations governing how to comply with it keep being released in dribs and drabs, rewritten, delayed and rewritten again.
Here’s an example of just how confused employees are: The new Health Tracking Poll by The Kaiser Family Foundation discovered that four out of every 10 American adults aren’t even aware that the Affordable Care Act (ACA) is still the law of the land and being implemented. Yikes!
That’s a scary thought for employers who will have to bear the burden of educating their employees on the ins and outs of the law. After all, employees can’t just call up the feds and get answers. So they’ll come knocking on your door — especially after you issue them health exchange notices, which are due by Oct. 1.
Those notices will inform employees once and for all the ACA is law and will affect them.
In the meantime, however, you can do yourself and your employees a big favor by educating them about a few key points of the ACA that will impact them in the months ahead. This will help prevent your HR/benefits office from being flooded with an avalanche of reform-related questions after you issue the notices.
The best way to avoid over-complicating matters is to focus not on every aspect of the law, but just the provisions that matter now.
Here’s what to communicate prior to issuing the exchange notices:
1. Obamacare is law
Clear this up right away: Tell employees that no matter what they’ve heard about the federal government delaying health reform requirements, the ACA is still in effect.
To help that sink in further, explain the changes the ACA has already brought to health plans — like extending coverage to adult dependents and covering preventive services with no deductibles or co-pays.
At the very least, you’ll want to explain what this means for health plans moving forward.
- Insurance companies will be required to accept everyone who applies for coverage, regardless of any health condition applicants may currently have.
- Employers sponsoring health plans won’t be allowed to force employees to wait longer than 90 days to be eligible for plan coverage.
- Everyone will be required to obtain health insurance (either through their employer or a plan they purchase on their own) or be assessed a tax penalty.
2. The ‘individual mandate’ is still in place
You’ll want to elaborate on that last bullet point: Everyone will be required to obtain health insurance in some form. Tell employees that while they may have heard that the “play-or-pay” mandate has been delayed until 2015, that delay only applies to large employers.
The reality is, all individuals must have health insurance by Jan. 1, 2014, in order to avoid a tax penalty. The penalty for not obtaining health insurance that meets the government’s minimum coverage requirements is:
- The higher of $95 or 1% of taxable income — in 2014.
- The higher of $325 or 2% of taxable income — in 2015.
- The higher of $695 or 2.5% of taxable income — in 2016.
Those who can’t afford health insurance and aren’t offered an affordable, minimum-value plan from their employer will be eligible for a tax credit to help them purchase coverage on a healthcare exchange — as long as their income is less than 400% of the federal poverty level ($94,200 for a family of four in 2013).
You’ll then want to explain what the feds define as being an “affordable, minimum-value plan.” It’s a plan that covers at least 60% of the cost of covered medical procedures for a premium cost that does not exceed 9.5% of the employee’s household income.
In addition, it’s important to point out that these requirements don’t apply to coverage for an employee’s spouse or children. As long as the employee is offered affordable, minimum-value coverage, he or she isn’t eligible for a government tax credit to purchase coverage on his or her own.
Don’t forget to point out whether your plan passes the affordable, minimum-value test.
3. Health exchanges will be available
Yes, the health exchange notices employers are required to distribute to employees by Oct. 1 will inform employees of their right to forgo employee-sponsored coverage (if it’s offered to them) and buy a policy on an exchange.
But simply issuing the exchange notices without further explanation is likely to lead to some confusion.
There are two inherent problems with the government’s messaging about the Obamacare exchanges:
- The notices, which explain that tax credits are available, may give employees the impression that everyone is eligible for a tax credit — and that’s not true.
- The government’s public advertising efforts for the exchanges, when combined with the employer-provided notices, may give employees the impression that they’ll get a better deal by purchasing coverage via an exchange and forgoing an employee-sponsored plan — which isn’t likely to be the case when offered an employer-sponsored plan.
Those are two big reasons you’ll want to begin communicating to employees about the ACA prior to issuing the exchange notices.
Some other important facts you’ll want to touch on about the exchanges:
- Exchange coverage will begin Jan. 1. The exchanges are expected to start accepting applications for coverage on Oct. 1, but that coverage won’t begin until at least Jan. 1, 2014.
- Whether your company will help pay for exchange coverage. Employers aren’t required to contribute to health insurance coverage employees purchase on an exchange. And if you choose not to (as most employers will), tell employees that they’ll be on their own if they purchase coverage through an exchange. If you sponsor a health plan, you may even want to explain how much you contribute to employee premiums — so they know what they’ll be missing and have a better idea of how much more they’ll have to pay for insurance in an exchange.
- Exchanges may be good for some. Employees who are currently not offered health insurance, like part-timers, may be able to purchase an insurance plan via an exchange cheaply — especially if they qualify for a tax credit. The same applies to spouses and children who may not be offered much, if any, coverage under an employer-sponsored plan.
How the tax credits will work. For the benefit of those who are at least exploring the option of purchasing coverage via an exchange, explain how the tax credits will work. You may even want to do the calculations yourself and tell employees whether or not they’ll qualify.
This post orginally appeared on our sister website, HRBenefitsAlert.com.