The New Health Care Law – Part 2 on the Affordable Care Act

We are moving toward the implementation of the Affordable Care Act, commonly known as ObamaCare.  October 1^st is the deadline for employers to provide Notice letters to their employees.  The marketplaces (or exchanges) are to be operational on October 1^st and the initial open enrollment period begins on October 1^st and runs through March 31, 2014.  Coverage selected through the marketplace becomes effective on January 1, 2014 for those who have enrolled prior to that date.

The rumors of layoffs and reduction in hours available to employees below the new fulltime level of 30 hours per week or 130 hours per month abound.  We still await the actual rates to be charged for the new plans.  Some states are suggesting that rates will be lower than before while other states are talking about increased rates.  Projections by the Office of the Commissioner of Insurance for Wisconsin show increases in rates for the plans filed and approved for sale in exchanges in Wisconsin.  A 21 year-old person in Dane County can, according to the percentages calculated by the office, expect to see an increase of some 125% in rates.

Against this backdrop, the federal government has waived penalties (originally $100/day/employee) for employers that do not issue the Notice letters on time, and has waived any employer penalties for non-qualifying health plans for the entire 2014 year.  It is reasonable to presume that employers will take advantage of this waiver of penalties in order to gain another year before having to decide what they will do to comply with the new law.

ObamaCare needs the ‘young invincibles’ to enroll in large numbers in order to gain money with which to cover the costs of the older people, but the waiver of penalties for employers seems to fly in the face of that need.  Given the elimination of ‘pre-existing conditions’ that were often not covered without a significant waiting period before ObamaCare, there now is little or no urgency felt by younger people who are in good health to feel they need to enroll when the cost of health plans may be a strain on budgets, and when there will be another open enrollment period next year.  This applies to those who may be employed as well as those without access to an employers’ health plan.

A recent IRS ruling eliminated the ability of employers to contribute tax-free dollars to employees for health plan premiums by issuing its Notice 2013-54 reversing the long-standing rules on HRA and PRA plans.  That also appears to contradict the need for more enrollees since it will impact the actual costs of the employees where those plans have been in place.  With this change in place, employers are now only able to provide after-tax dollars to employees where, before, they were able to provide full value dollars.

There will no doubt be more changes so stay tuned to this blog for updates.