TEAM RESPONSE—Principal Darrell Smalley, left, and Director Scott Miller of Ernst & Young tell the African American Chamber PowerBreakfast audience that it will take a team of professionals to address compliance risks and costs related to the Affordable Care Act. (Photo by Christian Morrow)
If the number of questions raised during the hour-long presentation on the business ramifications of the Affordable Care Act given by Ernst & Young representatives were any indication, they could have spent a day on its issues and still not answered everything.
Knowing this, African American Chamber of Commerce President and CEO Doris Carson Williams wasted no time introducing principal Darrell Smalley and director Scott Miller to the June 14 PowerBreakfast audience.
Smalley wasted no time either, noting that regardless of whether they choose to “pay or play,” companies with more than 50 full-time employees will spend more to comply with the dictates of the Affordable Care Act.
“There are companies out there that haven’t even looked at this—and it begins in 2014,” he said. “This is more than just a human resources issue. You’ll need benefit consultants, attorneys, some people use firms like ours, but others are developing internal teams just for compliance.”
Miller said most companies that currently provide health benefits are opting to continue to do so, but even then they can run afoul of the new regulations.
The first of these regulations to note is that the ACA redefines a full time employee as someone working 30 hours per week. Companies with more than 50 such employees must:
•offer coverage to 95 percent of them;
•make sure the plan offered pays for at least 60 percent of covered expenses, and,
•make sure the employee’s cost of self-only coverage is less than 9.5 percent of the employee’s household income.
THE BOTTOM LINE—President and CEO Doris Carson Williams and board Chair Samuel Stephenson pose with Ernst & Young Director Scott Miller after his presentation on ACA business-related costs at the African American Chamber’s June 14 PowerBreakfast meeting. (Photo by Shawn Hicks)
The first two requirements are easily met, as nearly every health plan covers at least 80 percent of expenses. The last one, however, is a potential problem because employers rarely know whether or not an employee has additional “family” income, let alone how much.
Failure to meet all three of these tests can trigger one of two penalties, which Smalley characterized as “devastating” and “just bad.”
For the first, triggered if an employer doesn’t offer health coverage, the penalty is $2,000 times the total number of full-time employees. Say you have 500 employees and you don’t cover 95 percent of them. Welcome to a $1,000,000 fine.
The second penalty, which kicks in for failure to meet the coverage or affordability criteria, assesses the lesser of the first penalty or $3,000 times the number of employees who went to a (in Pennsylvania’s case) federal health exchange and received a tax credit to buy coverage.
However, as long as insurance meeting the coverage and affordability criteria is offered, if an employee refuses it for whatever reason, then goes to an exchange—there is no penalty.
The main points Smalley and Miller made were that the ACA is “complex” and carries “significant compliance risk.”
“It is one of the most significant business changes since Sarbanes-Oxley,” said Miller.
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