Pay or Play, Part 2: How to Prepare for the Health Insurance Exchange

Last week, we shared an overview of new requirements for employee health insurance benefits as discussed in the “Pay or Play” session at the CALA Spring Conference & Trade Show. Since then, the Obama administration has delayed the enforcement of penalties for noncompliance of these new requirements until 2015. This is good news for employers as it gives them more time to prepare. So, how do employers get ready for these changes? During the “Pay or Play” session, Cheryl MacGregor, Vice President of Human Resources for Elder Care Alliance, outlined steps that employers could take now to be ready in 2015.

Pay or Play Session / CALA 2013 Spring Conference & Trade Show

“Pay or Play” session panel members left to right: Andrea Alarcon of Heffernan Insurance Brokers, Judy Boyette of Hanson Bridgett, Cheryl MacGregor of Elder Care Alliance

First, figure out if you’re a large or small employer. One audience member noted that many employers may be hiring more part-time workers in anticipation of this distinction, but panel member Andrea Alarcon with Heffernan Insurance Brokers explained that the employer size depends on a Full Time Equivalent (FTE) calculation, and that these calculations are based data from the previous year. Fellow panel member Judy Boyette with Hanson Bridgett added that, according to the Affordable Care Act (ACA), “full-time” means an average of 30 hours per week or 130 hours per month, even though most employers don’t consider that full-time. According to Alarcon, you add the hours of all your part-time employees (including paid time off) and divide by 120. This will give you your FTE number, which you can then add to your number of full-time employees. If that number is more than 50, you are considered a large employer by the state of California. Heffernan has more information on their Health Care Reform website to help employers figure out this step.

Second, said MacGregor, employers should make sure the benefits they offer comply with requirements. Employer plans must provide essential benefits, offer coverage that meets at least the 60% level of Covered California‘s bronze plans, and be affordable for employees. According to the panel, most HMOs will meet the minimum essential coverage requirements — the issue will be affordability. A plan is only considered affordable if an employee’s contribution is 9.5% of either the employee’s monthly wages, W-2 earnings, or the Federal Poverty Level (FPL). According to Alarcon, 9.5% of the current FPL is about $9 per month. Plans offered by employers must also be offered to 95% of employees and must be offered to dependents, although dependent coverage does not need to meet affordability requirements.

Third, said MacGregor, an employer should examine their record-keeping procedures, especially of those employees who decline coverage. This is important because, though the exchange is supposed to be keeping track of employees who refuse coverage, it has announced that there may be “some errors.” If an employer has a record that they offered coverage which met benefit and affordability requirements to employees who then chose the exchange, Boyette added, penalties will not apply. MacGregor noted that keeping adequate records of hours worked by employees, both full- and part-time, is essential as well in calculating whether you are a large or small employer.

Pay or Play Session Sample Slide / CALA 2013 Spring Conference & Trade Show

A sample timeline for employers, as presented during the “Pay or Play” session

Finally, said MacGregor, it’s important to set a timeline to adequately prepare for these changes. On this timeline, include staff meetings or in-service sessions to explain the changes and give employees the chance to ask questions. Taking it step by step and approaching it in the spirit of helping all employees, employers can ease the transition and ensure that the process is transparent.


One thought on “Pay or Play, Part 2: How to Prepare for the Health Insurance Exchange

  1. Pingback: The Hearth’s 5 Most Popular Posts of 2013 | The Hearth

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