By Glenn Duhl, Esq. & Melanie Dunn, Esq.
The Patient Protection and Affordable Care Act, referred to by some as the “Affordable Care Act” or “Obamacare,” was signed into law in 2010. It was challenged in the courts, and a U.S. Supreme Court decision in summer 2012 limited the Act’s expansion of Medicaid, but upheld the majority of the law, including its individual health insurance mandate. Here is what businesses and individuals should know about the major components of the law:
- By January 1, 2014, employers with at least 50 full-time employees must provide health care for employees who work 30 or more hours per week, or pay a penalty of $2,000 per employee after the first 30 workers. The health care plan offered by employers must cover at least 60% of medical costs, and cost less than 9.5% of an employee’s income.
- All individuals not covered by an employer-based health care plan must purchase and maintain their own health insurance by January 1, 2014. As with the employer mandate, individuals who can afford to purchase private health insurance but choose not to do so will pay a tax penalty beginning with their 2014 returns.
- The individual mandate does not apply to persons age 65 or older who are covered by Medicare, or to individuals who are between jobs and without insurance for up to three months; have religious objections; are undocumented immigrants; are incarcerated; or are members of an Indian tribe. The tax penalty will not apply to any individual or family not required to file a return due to low income, or for those whose out-of-pocket cost for private health insurance would be more than 8% of their taxable income after employer contributions.
- For all others, the individual mandate annual penalties for the 2014 tax year will be $95 per adult and $47.50 per child, up to a family maximum of $285 or 1% of family income, whichever is greater. The penalties will increase in the following year, with dramatic increases in 2016. However, subsidies provided in the form of tax credits to certain individuals who purchase insurance through a state exchange are expected to offset health insurance costs.
- State Health Insurance Exchanges: November 16, 2012 was the deadline for each state to report to the federal government whether it would set up a health-benefit exchange for the purpose of creating a private health insurance market. The creation of these competitive marketplaces is to simplify the purchase of health insurance.
- Tax credits will be offered to individuals who earn up to four times the federal poverty level and purchase health insurance plans through an exchange. The average benefit for eligible individuals in 2014 is expected to be $4,780. Small businesses having 25 or fewer employees and paying average annual wages below $50,000 will also qualify for a tax credit of up to 35% to offset the cost of providing employee health insurance.
- The federal government will implement an exchange where states are unable or unwilling to do so. Another option is for states to enter into a partnership exchange operated jointly by the state and federal governments.
- Connecticut and New York are among the many recipients of federal grants designed to assist states that are in the process of establishing their exchanges. Massachusetts has maintained an exchange since 2006, the first of its kind, and implemented updates to its exchange in 2012 in preparation for the requirements of the Affordable Care Act. Unlike Massachusetts and Connecticut, both of which passed legislation creating their respective exchanges, New York’s exchange will be a product of an Executive Order signed by its governor in 2012, after the state legislature failed to pass implementing legislation.
As employers and states prepare to implement the new health care requirements, insurance companies plan adjustments in order to keep their products competitive and look to the adoption of federal regulations that will control the finer points of the law. The finalized regulations are expected to include details on the types of benefit plans that must be offered and the minimum essential coverage required, as well as the definitions of full-time and part-time employees that will apply when determining employer responsibility for coverage.
Glenn A. Duhl and Melanie Dunn are management-side employment and litigation lawyers at Siegel, O’Connor, O’Donnell & Beck, P.C. They represent management in preventive employment law and litigation of all employment matters. Please visit www.siegeloconnor.com.
The information contained in this article is general in nature and offered for informational purposes only. It is not offered and should not be construed as legal advice.