The IAA One Minute Blog

With the New Year comes new information on the Patient Protection and Affordable Care Act (PPACA). Insurance Administrator of America is here with updates on the PPACA.

New Rules on Family Coverage

On December 31, 2012, the Obama administration stated that though employers must offer health insurance to their employees and their dependents, employers will not be subject to penalties if the family coverage offered is unaffordable. The Internal Revenue Service (IRS) says that an employer's obligation is to provide affordable insurance to their full-time employees. The new rules do not offer a guarantee of affordable insurance for a worker's children or spouse.

For employers to avoid a tax penalty, the government said employers with 50 or more full-time employees must offer affordable insurance. The IRS has said that "coverage for an employee under an employer-sponsored plan is affordable if the employees' required contribution for self-only coverage does not exceed 9.5% of the employees' household income." The same does not apply to the worker's contribution for family coverage.

An employer could avoid paying a penalty by offering individual plans to workers that are considered affordable under the law, but setting family coverage higher. Employees would get coverage for themselves that would only cost 9.5% of their income at most, but employers would ask them to pay a higher rate for covering dependents.

This new rule provides a strong incentive for employers to put money into insurance for their employees, rather than their dependents.

Transitioning Into Play or Pay in 2014

By 2014, employers must "play or pay,"  meaning that they must offer full-time employees affordable health insurance or pay a penalty. The IRS is allowing transition relief to employers under certain circumstances:

• Transition Relief for Fiscal Year Plans: For an employer that as of December 27, 2012, offers health coverage through a plan that operates on a fiscal year, transition relief is available. The employer will not be subject to a potential payment until the first day of the fiscal year plan starting in 2014.
• Transition Relief for Applicable Large Employer Determination in 2014: Rather than be required to use the full 12 months of 2013 to measure whether a company has 50 full-time employees, an employer may measure using any six consecutive month period in 2013.
• Transition Relief for Measurement Periods for Stability Periods Starting in 2014: Employers intending to use the "look back" measurement method for determining full-time status for 2014 will need to begin their measurement periods in 2013 to have corresponding stability in 2014. The IRS and Treasury Department recognize that employers intending to adopt a 12 month measurement period and in turn, a 12 month stability period, will face time constraints in doing so. Due to transition relief, employers may adopt (for 2014) a transition measurement period that is shorter than 12 months, but no less than six months and that begins no later than July 2013.

Not every transition relief item applies to everyone, so if you have any further questions about transition relief; please reach out to IAA.

What IAA has to Say

With all the new rules and regulations, IAA understands that the PPACA can be confusing at times. IAA is here to keep you informed on the PPACA and any other healthcare issue. Remember, with IAA one call does it all.

Want to read more blog posts on the PPACA? Click here and here.