Healthcare Reform Act: Are You Prepared?

The Patient Protection and Affordable Care Act, known by many other names, has withstood several challenges from numerous fronts but has managed to stay intact.  While sections of the Act have already been implemented, some have yet to go into effect.  However, taxpayers of all types need to prepare now for those that will be in effect as far out as 2014.

Even though not all details have been sorted out, there are three main components of the Act to be aware of: 1) All taxpayers will be required to obtain basic health coverage or pay a penalty beginning in 2014 (the “individual mandate”); 2) Employers with 50 or more full-time equivalent employees must provide minimum value, affordable coverage or pay a tax, now beginning in 2015 (the “play-or-pay” requirement); and 3) State insurance exchanges will be set up by the states or federal government to provide a source for individual and small business coverage, with enrollment expected to start in Fall 2013.

The Treasury Department announced on July 2^nd that enforcement of the play-or-pay requirement will be delayed until 2015, one year later than originally planned.  Formal guidance from the Treasury Department is expected soon, but they still strongly encourage compliance in 2014.  This announcement has certainly given the affected employers some room to breathe, although many experts recommend that large employers still ensure their plan meets the minimum value and affordability parameters by the start of 2014.  The Treasury also expressly mentioned in its July 2^nd announcement that the play-or-pay delay does not affect employee access to the premium tax credits.

The delay in enforcement of the play-or-pay requirement does not currently affect the other two key components of the Act, namely the setup of the insurance exchanges and the individual mandate.  The focus has now turned to the exchanges, for which the Obama administration has set October 1^st as the date when individuals who are not otherwise covered can begin shopping for health insurance.  There are two key parts of the law that also drive increased coverage, namely 1) the expansion of Medicaid coverage to low-income individuals, and 2) subsidizing the health insurance payments through a premium tax credit.  The Medicaid expansion has met some serious challenges; however, as more than half of the states have rejected it or are undecided about implementing it on a state-level.  The result is more than 9.7 million uninsured low-income individuals without coverage. 

The individual mandate is still in place starting in 2014, but obviously there is interplay between this rule and the exchange setup.  While it is true that 95 percent of employers already provide health benefits, the remaining 5 percent account for countless jobs and the employees who will be affected by the exchanges and the individual mandate. 

As we have recently joined together in celebrating the birth of our country, Americans will continue keep watchful eyes on the progress of the Affordable Care Act affecting each of us.  The regulations on the now-delayed employer play-or-pay requirement will be released shortly.  The date the state exchanges are expected to be in place is less than 3 months away, and the Obama administration will likely do whatever it can not to have to push back the date.  There is also discussion regarding changing the definition of a “full-time” employee to the commonly-accepted 40 hours per week instead of the 30 hours written into the law.  Such a change could go a long way to help minimize employer reduction in employee hours to meet the play-or-pay requirement.

This blog will continue to update and analyze major events concerning the Affordable Care Act as they are made available.      

-Steven C. Levy

Steve Levy is a Tax Manager at Donovan CPAs and Advisors.  He can be reached at slevy@cpadonovan.com or (317) 745-6411

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