TONY WILSON: Pay attention to detail when navigating the maze of Health Care Reform

While many employers are still celebrating the one-year delay of the employer coverage mandate of Health Care Reform and hoping for more changes as a result of next year's mid-term elections, it is important to understand the mandate requirements as outlined under the law.

Under the Patient Protection and Affordable Care Act, the mandate requires groups with 50 or more full-time equivalent employees to offer minimum essential coverage or pay an annual penalty. The penalty is $2,000 per employee over the 30-employee mark.

As we pointed out last week, the delay only applies to the employer coverage requirement. Individuals still face a "play or pay" requirement under PPACA, and that requirement still is set to take effect Jan. 1. In the coming weeks, we will review in detail the individual play or pay mandate.

Employer groups with less than 50 FTEs are not subject to the play or pay mandate, but the members of those groups, including the owners and employers, will be subject to the individual mandate requirement, which we will cover in the coming weeks.

Minimum essential coverage is coverage offered, for example, through an employer-sponsored health plan, certain government sponsored health plans and individual health plans. There are other coverages that qualify, but these are the most common.

But simply offering the opportunity for employees to enroll in an MEC might not be enough for an employer to avoid the penalty. The MEC offering must satisfy a minimum value requirement. An employer-sponsored plan provides minimum value if the plan's share of the total allowed costs of benefits provided under the plan is at least 60 percent of such costs.

The Department of Health and Human Services along with the IRS will develop a minimum value calculator for use by self-insured plans and fully insured large group plans to help employers determine if their plans meet the 60 percent threshold.

Other options will be available to employer groups, including a safe-harbor checklist employers can use to compare and value their plan. Also, plans with non-standard features have the option of hiring a professional actuary to determine the plan’s minimum value.

Large employers that offer employees the opportunity to enroll in an MEC plan also must meet the affordability requirement as outlined in PPACA. Meeting this requirement is essential in order for an employer to avoid the "shared responsibility" also referred to as a penalty.

If an employer's MEC plan is deemed unaffordable, then an employee may be able to receive a premium tax credit which would lead to the employer owing the penalty. Employers may use the Form W-2 Safe Harbor option to determine if its MEC is affordable to employees.

Under the W-2 Safe Harbor, the employer’s plan is deemed affordable if the employee's annual W-2 wages (as reported in Box 1) and the employee's contributions for the full calendar year for the employer's lowest-cost employee-only coverage provides minimum value (the 60 percent outlined above) and if the employee's contribution for that plan is less than 9.5 percent of his W-2 wages for the calendar year.

Another option, which may be easier for employers to use, is the Federal Poverty Line Safe Harbor. If an employer's coverage offering is affordable to all employees who earn more than 100 percent of the federal poverty line, then the affordability requirement is satisfied.

Employer-provided coverage is affordable under this option if the employee's monthly cost for self-only coverage does not exceed 9.5 percent of the federal poverty line for a single individual.

Next week we will wrap up our review of the employer mandate by taking a look at how the “shared responsibility payment” is impacting businesses now even though the mandate is not effective until 2015.

Questions or comments? Feel free to email me at twilson@nfp.com.

Tony L. Wilson is a principal with NUVISION Financial Corporation based in Conyers. NUVISION is a subsidiary of National Financial Partners Corp., which provides benefits solutions for companies.