Getting non-profit employers ready for health reform play or pay rules
At WGA, we have found ourselves playing a key role in assisting our non-profit clients in taking advantage of the assistance they might be qualified for under the Patient Protections and Affordable Care Act (PPACA). For one thing, the law includes a tax credit for small non-profit employers (25 or fewer employees) as well as for-profit businesses to maintain health insurance coverage for their employees. This was seen as a fairly big victory for non-profit employers that were wondering where they fit into the puzzle. But now the really hard work starts in trying to figure out how non-profits will comply with the Affordable Care Act and how will they manage to avoid penalties associated with the “play or pay” provision that goes into effect on January 1, 2014.
Although the PPACA picture is still evolving, non-profit employers need to start looking at their health insurance strategy and assess whether what they currently offer will fit the requirements of the PPACA, or if a penalty will apply. There are some important questions that need to be considered. Under PPACA all employers with 50 or more employees, including non-profit employers, are required to provide affordable health insurance coverage or pay a penalty. Non-profits, particularly those in the 50-200 range need to pay close attention to see how the play or pay rules may affect them. For employers that offer some type of group health coverage (that is deemed to provide “minimum value”) here are the steps involved:
- Calculate the number of full-time equivalent employees according to the Employer-Shared Responsibility (“play or pay”) provision to see if you are subject to the provision (it applies to employers with 50 or more full-time employees), if yes, see #4 below:
- Estimate if your health coverage may be deemed “unaffordable” under new PPACA regulations (i.e. does the single premium in the lowest cost plan exceed 9.5% of an employee’s W2 earnings?) If yes, see #4 below:
- Assume that at least one employee will be eligible for and enrolled in subsidized insurance on the health insurance exchange, or marketplace.
- Calculate the penalty liability associated with your plan and compare it to the cost of adjusting your plan to meet the criteria necessary to avoid the penalty.
In March, employers are supposed to notify employees about the availability of federal and state health exchanges (soon to referred to as “marketplaces”), but that is a picture that is also still evolving, as this deadline has been delayed. Some states are developing their own exchanges/marketplace and others are handing off this responsibility to the federal government.
We have been taking a strategic approach focusing on helping clients through this process by recommending the next best steps for each employer, as a full analysis will need to be done by all employers well in advance of the January 1, 2014 effective date. WGA’s Healthcare Reform Advisory Team continues to monitor the emerging regulations of PPACA, and non-profits can continue to count on receiving the support and services they need to navigate their obligations, benefits, and risks under the Affordable Care Act.
About the Author
Kevin Murphy is a Vice President in William Gallagher Associates’ Employee Benefit Group. He manages, develops and maintains strong client, and consults with carriers on negotiable elements of underwriting to obtain the best plan designs at the most effective prices.