October 1 Affordable Care Act Deadline Will Affect Local Employers

September 25, 2013

By Rebecca Sczepanski, HunterMaclean

For Savannah Morning News

In July, the Obama administration announced delayed implementation of certain requirements of the Affordable Care Act, creating some confusion about exactly which deadlines have or have not been delayed. Many have not; one such deadline is the Affordable Care Act’s October 1 compliance deadline for providing written notice to all current employees about health exchange options remains unchanged by the government’s recent announcement. Open enrollment for health insurance coverage through the Health Insurance Marketplace still begins in October, with coverage starting as early as January 1.

Employers subject to the Fair Labor Standards Act (FLSA) must provide this mandatory notice to employees before October 1. These employers must provide a written notice to full-time and part-time employees informing employees about the coverage options available to them through the Health Insurance Marketplace. While there is no specific penalty for failing to do so, a model notice has been issued to ease the compliance burden, available on the U.S. Department of Labor’s website.

As far as implementation goes, very little has been delayed. The employer mandate–which requires employers with 50 or more full-time equivalent workers to pay a tax penalty of $2,000 to $3,000 per employee if they do not offer health insurance plans to those workers or if those plans do not meet ACA standards–has been delayed until 2015. In addition, the cap on out-of-pocket costs ($6,350 for an individual and $12,700 for a family) has been postponed until 2015 for employers offering separate plans, such as for medical care and pharmacy benefits, to keep out-of-pocket limits separate for each.

If an employer provides coverage, it still must be provided in accordance with the rules, which include no annual or lifetime limits on essential health benefits, a 90-day maximum waiting period, women’s preventive healthcare and maximum out-of-pocket limits.

One important thing for local employers to know: there seems to be some confusion about how the 90-day maximum waiting period works. Ninety days is the maximum an employer can make an employee wait after all other conditions for eligibility have been satisfied. An employer’s plan can still limit eligibility to specific classes of employees–or require employees to meet service or other eligibility requirements–so long as the eligibility requirement is not merely a subterfuge to avoid the 90-day waiting period maximum.

In an at-will employment state like Georgia, “probationary” periods of employment have no legal significance. However, many employers still like to call the initial employment periods “probationary” because they’ve always done it that way. Proposed rules on the 90-day waiting period would allow plans to require up to 1,200 hours of employment service for plan eligibility, after which an employee may be made to wait up to an additional 90 days for plan enrollment. This means an employer may still be able to have limited “probationary” periods during which health care need not be offered, as long as the plan documents accurately reflect what the employer is doing and are written in accordance with the health reform requirements. If health care is offered, COBRA rights will be triggered by a subsequent termination.

Remember that the 90-day waiting period maximum is separate from the large employer requirement to offer all full-time employees coverage beginning in 2015. A company’s plan may legitimately exclude some employees from coverage under the 90-day rule. Large employers may still have to pay a penalty for not covering all full-time employees in 2015, so employers need to evaluate their choices carefully and from the perspective of the whole law.

As Affordable Care Act implementation deadlines approach, it’s critical for employers to comply with federal regulations, both small and large employers. Consult with an employment benefits attorney to determine whether your company is taking adequate steps to satisfy Affordable Care Act requirements and to avoid potential penalties in the future.

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