What is the Health Care Reform Impact on my Business?


Beginning in 2015, large employers who meet the definition of an “Applicable Large Employer ” must offer affordable health care coverage to their full-time employees or be subject to financial penalties.  RMHP can help our Large Employer groups understand the new Employer Shared Responsibilities and what they mean for your specific health plan.

Proposed regulations were slated to be effective in 2014, however the IRS announced on July 2, 2013 the rules for mandatory employer requirements and tax penalties have been postponed for one year.  Final Regulations were issued on February 10, 2014 that include notable changes and more Transition Relief for certain large employers.

The Questions and Answers provided here represent the latest guidance from the final rules issued February 10, 2014.

  • What constitutes a full-time employee?
    Effective for plan years on or after January 1, 2014:  Full-time employees work 30 hours or more a week, or 130 hours or more in a calendar month.
  • How do I calculate full-time equivalents (FTE)?
    • If you have employees who work less than 30 hours, you will need to track their hours of service each month.
      • Add their collective hours together for the month and then divide by 120. This will give you the full-time equivalent number.
      • Here is an example: Employer X has 25 employees who each average 80 hours of service per month (20 hours/week)
        • The 25 part-time employees are aggregated (25 x 80 hours) and divided by 120: (25 x 80 = 2,000 / 120 = 16.6)
        • Employers are allowed to round “down” to the next lowest whole number  
        • Employer X has 16 FTEs (Full-Time Equivalents)
  • How do I determine if I am an Applicable Large Employer?
    Reporting of group size postponed until 2015:  If you add together the number of full-time employees and full-time equivalent employees, and the number is 51 or greater, you are an Applicable Large Employer.

    The guidance provided in the final regulations published by the IRS provides this formula: “Calculate the number of full-time employees + the number of full-time equivalents (FTEs) for each month in the preceding calendar year and divide by 12.”

    Updates for 2015 – Transition Relief rule for employers with at least 50 but fewer than 100 full-time employees. Recently issued FAQs from the IRS provide more detail on this transition relief.

    Employers with at least 50 but fewer than 100 full-time employees (including full-time equivalents) in 2015 will not be subject to Employer Shared Responsibility if they meet these conditions:

    1. Employer monitors and reports their average employee count in 2014 following the measurement rules for determining group size.
    2. During the time period of February 9, 2014 and December 31, 2014, employer does not reduce the size of their work force or the overall hours of service of its employees in order to qualify for the transition relief (unless these reductions are part of a bona-fide business reason).
    3. During the time period of February 9th and December 31, 2014, employer does not eliminate or materially reduce health coverage offered to employees and dependents, including contribution levels and eligibility criteria.

  • Who is entitled to health insurance coverage?
    • All full-time employees (30hrs or more/week)
    • Dependent children* of the employee up to age 26 (includes adopted children, foster children and stepchildren). Coverage for spouses is not required.

    *Dependent children coverage will be required in 2015. Employers may rely on employee’s representation regarding children and their ages.

    Updates for 2015 – Transition relief has been extended to not require dependent coverage until 2016.  Recently issued FAQs  from the IRS provide more detail on this transition relief.

    • This transition relief applies only to employers whose plans did not cover (all or some) dependents in both 2013 and 2014 and the employer is taking steps to cover dependents in 2014 and 2015.  If the large employer changed their eligibility criteria in 2014 to exclude dependents, this transition relief is not available for 2016.
  • How do I determine who is considered a full-time employee for purposes of offering health insurance coverage?
    Final regulations provide two Measurement Methods employers can use for different categories of employees. Recently issued FAQs from the IRS provide more detail on these Measurement Methods.

    Measurement methods provide a structured timeline using information about employees you employ during the prior year to determine their full-time status for the following year. The following Measurement methods will become part of the Human Resource functions going forward.

    Standard (Look-Back) Measurement Method – A time period of at least three but no more than 12 consecutive months. This measurement period is used when an employer cannot reasonably predict the employee’s hours of service to average 30 hours of service per week (Variable Hour and Seasonal Employees). The determination made during this period will drive which employees must be offered health benefit during the future Stability Period.

    Monthly Measurement Method (New) - Used for employees who are reasonably expected to work 30 hours or more per week and who are offered coverage following the new hire waiting period.  Employers can document full-time employee status by counting the employee’s hours of service each calendar month, using a standard of 130 hours of service per calendar month.

    Administrative Period - Optional period selected by employer of no longer than 90 days, to begin immediately after the end of measurement period, and ending immediately before the Stability Period.
    During this period the company determines full-time employees, and notifies and enrolls those employees.

    Stability Period - Follows Initial Measurement Period and optional Administrative periods. The Stability Period is the time period in which benefits are administered. This Stability period is the time when the employer actively administers the group health plan to the now-determined full-time employees.
  • How do I determine if a newly hired employee whose hours may be variable should be entitled to health insurance coverage?
    If you cannot reasonably expect the newly hired employee to work on average 30 hours or more per week, you are not obligated to offer coverage.

    You will need to start monitoring their hours through the Initial Measurement Period Method. to determine full-time status  for the subsequent Stability Period (see above).

  • Are there any new reporting responsibilities?
    Reporting Requirements have been postponed until 2015.  The following information is based on proposed regulations and may change with final regulations.

    • Large Employers will be required to provide detailed reports to the IRS on all full-time employees and what coverage, if any was available to them during the prior year.
    We expect to learn more about the reporting requirements and the Health Care Reform impact on business as final regulations continue to be released. Here are some details available today:

    Reports to IRS:
    • Employer group name and EIN
    • Date return is filed
    • Certification that minimum coverage is offered  and all full-time employees have the opportunity to enroll
    • Duration of any waiting period
    • Months during the year when coverage under the plan was available
    • Monthly premium for the lowest cost option in each enrollment category of the plan
    • Employer’s share of the total allowed costs of benefits provided under the plan (must be at least 60% to qualify as minimum coverage)
    • Number of full-time employees for each month of the calendar year
    • For each full-time employee
      • Name, address and taxpayer ID (TIN)
      • Months during which employee was covered under the plan
      • Such other info as may be required