3 Facts Employers Should Know About the PPACA

The healthcare reform law is a source of confusion around insuring diverse populations of hospital employees, making compliance complicated—unless you understand three things.

The PPACA means many things to many people and organizations: controversy, fear, confusion. There are few industries where these reactions resonate more strongly than in healthcare.

Not only does the PPACA transform multiple elements of the American healthcare industry, but for healthcare employers, it creates confusion around insuring diverse populations of hospital employees.

"There are no legal…. differences [between healthcare and non-healthcare employers regarding insuring employees], but it may be that hospitals and health systems have a very complicated workforce, composed of everything from minimum wage employees… up to the most highly trained technical professionals," says Catherine E. Livingston, a partner with Jones Day law firm in Washington, DC.

"When you have a complex workforce with lots of different categories of workers, working lots of different schedules, complying with the employer mandate becomes very complex."

Here are three things healthcare employers should be aware of regarding the complexity of insuring healthcare employees.

1. Size Matters
In the eyes of the US government, being a larger organization means being responsible for insuring employees. "The Affordable Care Act creates an employer mandate—a penalty—that can apply to employers of a certain size that fail to offer good, affordable coverage to their full time employees," says Livingston. "Virtually any hospital or health system is going to be large enough to be subject to that penalty."

The threshold for being required to provide adequate coverage is fifty full-time employees or the equivalent, which even most small hospitals will easily exceed.

Hospitals and health systems must pay attention to the employer mandate, unless they have fewer under 50 full-time employees. To be in compliance, organizations must "offer coverage to avoid the penalty, plan for the possibility of the penalty, and also take account of the new IRS information reporting requirements that apply to all employers," says Livingston.

Healthcare employers might not be very different legally from other large employers, but the variation within a single organization among employee roles, schedules, compensation, and skill levels is fairly unique to healthcare, Livingston says.

2. Seasonal Means Seasonal
If your hospital is in an area with a seasonally variable population, such as a resort or college town, seasonal or part time employees such locum tenens physicians, travel nurses, and even temporary employees in non-clinical areas can be a huge relief. One benefit of such arrangements is not having to extend benefits such as health insurance to these workers.

But think twice and ask yourself: does the government consider this employee to be seasonal?

"In the regulations that implement the [PPACA] employer mandate, there are specific definitions, including a definition of seasonal employees," says Livingston.

Moving forward, neglecting to offer a regular employee health insurance could lead to facing a penalty under the PPACA. Mistakenly misclassifying an employee as seasonal when she should have been a regular employee is not an excuse the IRS will accept.

The technical definition of a seasonal employee is someone who's annual employment is four months or less. So, if an employee works for your organization more than 120 days yearly, this employee isn't seasonal. Be sure to cap seasonal work at 120 days or the equivalent.

3. The 'Cadillac Tax' is Coming. Get Ready.
One of the most controversial parts of the PPACA is the so-called "Cadillac Tax," a payment by employers of a non-deductible tax on high-cost employer sponsored health coverage.

The amount of this tax is currently slated to be 40% of the cost of health coverage that exceeds predetermined threshold amounts. The threshold where the tax is invoked is currently set at $10,200 for individual coverage, $27,500 for family coverage, with some exceptions. These thresholds will be reevaluated in 2018, when the tax takes effect.

Some hospital leaders may decide to delay thinking about the tax until after the next election, but Livingston says this is a risky course of action. "There is no guarantee [it will be repealed], and the tax goes into effect in 2018. In order to prepare to deal with it, you need some lead time," she warns.

Ask your insurer or plan administrator what the projections are regarding whether or not your organization's plan costs will exceed the thresholds, then play out the projections through 2021.

Knowing whether or not your organization is likely to trigger the tax can help both your organization and your insurer to better design plans that will fit your organization's needs, taking into account whether or not the organization is comfortable paying the tax.

"If you think the cost of your coverage is going to cross those thresholds, you have to plan for the possibility that you're not only going to have the cost of the coverage, but the excise tax on the cost of coverage that exceeds the threshold—and 40% is a substantial rate," says Livingston.

But with the election looming next year, no one knows what the future holds for the PPACA. Several candidates have expressed a desire to either repeal it or give it an overhaul. So, anything could happen—which is why it's important to keep an eye on politics and see how things play out in upcoming elections.