By Susan Roberts, CPA, Partner, SB&F PLLC and Michelle Dortch, Executive Director, Group Benefits Division, Resolutions Benefits|Design

Ready for another TLA (that’s a three letter acronym)? Here comes the ACA.

Much debated and still controversial, the Affordable Care Act will have quite an affect on businesses and lives.  This article is to help pull everyone out of denial and into the light of day about the Act and get business owners and employees ready for the changes upcoming and those now in place.

“Out of denial” might sound a bit severe, but it’s actually the way it is, especially for those businesses that have fewer than 50 employees.  In the past, smaller businesses were exempt from many of the regulations that applied to larger employers.   That’s no longer the case, with the ACA. No matter your size, we know you’re interested in requirements and the bottom line financial impact to expect.   So now is the time to learn about, understand, and prepare to enact requirements.

To help your assessment and decision making, here are 10 questions that test the waters of your knowledge about the impact of the ACA and answers that can add to your understanding:

Q: What are the actual enactment dates?           

A:  The Patient Protection and Affordable Care Act was signed by President Obama into law March 23, 2010 with the initial key provisions starting for Plan Years beginning after September 23, 2010.

Q:  Isn’t this Act likely to be repealed?

A:  That possibility is definitely the great debate, one that appears to be split along party lines.  Many predict that if the Republicans win the White House during the next Presidential election, the bill will be repealed as early as 2013.  However, there is the possibility that the Supreme Court could rule the individual mandate as unconstitutional which in turn could potentially dismantle the entire bill. 

Q:  What provisions will affect me, given our size of 42 employees?

A:  First, it is important to understand that full and part-time employees must be counted as it relates to employer size.  While those employers with less than 50 employees escape the Employer Coverage Requirement Penalties, the majority of the provisions still apply if you offer group healthcare coverage to your employees.  The provisions are staggered, and implementation has already begun on renewals after September 23, 2010.

Q:  Are there penalties for not offering health insurance to our employees?

A:  Yes.  This is an interesting aspect, called pay or play. Some of the penalties may be less expensive than offering health insurance coverage.  If you are an employer with more than 50 full-time equivalent employees and you elect to NOT offer coverage (pay), you will have a penalty that is the lesser of $2,000 for each full-time employee after the first 30 or $3000 for each employee who receives a government subsidy for health insurance.  If you decide to offer coverage (play) you will encounter a penalty of $3,000 for each person who is certified to receive government subsidies if your plan is considered unaffordable and of low value.

Q:  Is there anything we are required to do right now?

A:  There is. Several plan design changes have already gone into effect.  If you are fully insured, your carrier is required to implement changes for both grandfathered and non-grandfathered plans.  Specific disclosures were and are required at this time for all employees who are currently receiving coverage at their place of work.  If you have a flexible spending account your plan required amendments as of 1/1/11 to account for the ACA provisions.  Delayed into 2012 is discrimination testing of all plans.  There are several other provisions that started as early as 2010.

Q: What are the reporting requirements?

A:  Depending on whether you are fully insured or self-funded, your company’s medical plans have several reporting requirements as it pertains to quality of Care and Uniform Summary of Coverage disclosures.  W-2 Reporting requirements as it pertains to the cost of healthcare will begin to take effect for larger employers for the 2012 calendar year

Q: Are any plans grandfathered?

A:  Yes, but very few.  It is predicted that less than 10 percent of group plans will continue to be grandfathered heading into 2012, and many of these are the larger, self-funded plans.  Because only minimal changes can be made to a healthcare plan as it relates to employee contribution and plan design, the vast majority of employers found it impossible to maintain grandfathered status.

Q:  What’s my greatest vulnerability as an employer, considering this Act?        

A:  There are several.  One is misunderstanding of the provisions of the Act.  This could already be leading to inadvertent non-compliance.  Even if inadvertent, non-compliance could lead an entity to lose the grandfathered status of its plan. We’ve seen a great number of employers who are not in compliance, which could lead to penalties for individual taxpayers.

Q:  I’ve heard there are tax revenue raisers lurking in the plan, ones that will likely increase my individual tax due on my personal income tax returns.  Can you tell me about that?

A:  Effective January 1, 2013, the employee portion of the hospital insurance part of FICA taxes will be increased by .9 percent of wages or self-employment income in excess of $200,000 (or $250,000 in the case of a joint return or $125,000 in the case of married filing a separate return).

Q:  Frankly, the Act looks pretty good to me, with a number of benefits. Am I missing the disconcerting parts?

A:  The vast majority of Americans definitely agree that something needed to be done about the rising cost of healthcare and that some Americans find healthcare unaffordable and even unobtainable.  Unfortunately, the act— now with well over 5000 pages including interim regulations— did not truly address this rising cost of care.  While many of the initial coverage provisions such as covering dependents until age 26, unlimited preventive care and expanded coverage for essential health benefits are “appealing” to the average American, this bill will impose a huge burden on insurance carriers and employers causing many employers to drop employer-based coverage all together. That could force employees to have to purchase coverage through a government run healthcare exchange.  As well, some insurance carriers have decided to drop out of certain coverage markets.  The result is that many are already seeing premiums rise directly related to these provisions, with no end in sight.  Expanding coverage will definitely have a price tag; though no one is quite sure of what that ultimate cost will be, some are arguing that the ultimate quality and access of care will be negatively impacted.

If you have additional questions about the Affordable Care Act, there are a number of resources on the web, including http://www.ffis.org/issues/health-care-reform  and http://www.healthcare.gov/law.  You can also contact your HR group or call SB&F at 817-877-5000.  The harsh light of the ACA is already being felt; information and understanding can screen you from unnecessary ‘sunburn’ from these changes.

Susan Roberts, CPA, is an officer and partner at Sanford, Baumeister, and
Frazier PLLC, a Fort Worth-based accounting firm. With over 16 years of
experience in public accounting, her focus is on devising customized solutions
for businesses and their owners, providing strategic consulting on corporate
taxation, entity selection, and multi-state taxation issues. An avid writer and
in-demand lecturer, she is recognized nationwide for her educational seminars
on important tax law changes for CPAs.  She is an active member of the Fort
Worth Chapter of Texas Society of CPAs and is currently president of the
organization. SB&F is an independent member of DFK International/USA, an
international association of independent
accounting and management consulting firms.

With 28 years experience, Michelle L. Dortch, HIA, RHU, REBC,
is Executive Director of Resolution Benefits Design, LLC, which offers health
and welfare consulting services to corporate organizations nationwide.
Her strong underwriting background enable her to offer creative solutions
in today’s challenging health and welfare environment, serving clients of all
sizes who face the unique challenges of group benefit plan design.
Following formal education at the University of Nebraska at Omaha
majoring in Finance, Michelle  first worked for employee
benefit firms in Nebraska and Missouri. She is an active member
of a number of professional associations and has served on several
insurance related boards.  A frequent speaker, she is past president
of the Kansas and Nebraska Association of Health Underwriters.