Arcane Affordable Care Act Inanity
The Health Affairs Blog contained the following notice of recent rulemaking related to the Affordable Care Act (http://healthaffairs.org/blog/2012/08/31/implementing-health-reform-a-su...):
Health Affairs Blog
August 31, 2012
Implementing Health Reform: A Summer Lull
By Timothy Jost
Employment Status And Waiting Periods
On August 31, 2012, the IRS released Notice 2012-58 addressing the question of how full-time employment status is to be determined for deciding whether an employer owes a tax penalty for under section 4980H for failing to provide health insurance (or adequate or affordable health insurance) to full-time employees who consequently receive premium tax credits. On the same day, the IRS, Department of Labor, and Department of Health and Human Services jointly released notice 2012-59 addressing the question of how the ninety-day waiting period limit for employment-based health insurance enacted by the Affordable Care Act as section 2708 of the Public Health Services Act would be applied.
The application of both the penalty and waiting period is quite straightforward for employees hired on a full-time basis. An employer that offers health insurance must cover a new full-time employee no later than 90 days after employment. A large employer (with more than 50 full-time-equivalent employees) must offer adequate and affordable coverage to employees hired as full-time employees or risk owing a tax penalty if an employee goes to the exchange to obtain a premium tax credit.
The problem is how to handle employees who work variable hours and seasonal employees. Full-time employment is defined as 30 hours a week (or 130 hours a month), but many employees work 20 hours one week and 45 hours the next, or may work 40 hours a week but only for two months a year during the growing or holiday seasons. The notices address how this situation should be handled.
Notice 2012-58 defines three time periods—measurement periods, stability periods, and administrative periods. New employees who are not expected to work full time (variable hour or seasonal employees) can be employed without health insurance for an “initial measurement period” of between 3 and 12 months, as determined by the employer, during which the employees hours are tracked. If at the end of that period it becomes clear that the employee has been working an average of 30 hours a week or more, the employer must offer health insurance to the employee for a “stability period” of at least 6 months or for the length of the initial measurement period, whichever is longer.
Alternatively, if the employee worked on average less than 30 hours a week, the employer can treat the employee as a part-time employee for a subsequent stability period and not offer insurance. The employer can take up to 90 days for an “administrative period” before the stability period begins during which the employer can determine eligibility and add the employee to its health insurance program. In no event, however, can the combined measurement period and administrative period extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date.
Ongoing employees with variable hours can also be made subject to measurement periods and stability periods, with the measurement periods lasting 3 to 12 months and the stability periods lasting for the same period of time but in no event less than 6 months. If an ongoing employee is determined to be part-time during any measurement period, the employer can deny coverage to that employee without risking a penalty for the next stability period. If the employee is determined to be full-time during the measurement period, the employer must insure the employee for the following stability period or risk paying a tax penalty.
In sum, variable-hour employees may be insured one year, not insured the next, depending on their hours of work during the prior “measurement period.” An employer can take up to 90 days following the measurement period for an administrative period before coverage begins, but if an employee is already covered under a stability period, the employer must make the continuing eligibility determination before the stability period ends to avoid gaps in coverage.
Under notice 2012-59, new employees reasonably expected to work full-time cannot be required to wait more than 90 days to be enrolled in coverage offered by an employer. An employer may, however, impose a measurement period on variable-hour employees of up to 12 months, consistent with the scheme described in Notice 2012-58, before determining that an employee is in fact a full-time employee. An employer may also impose other conditions before enrolling the employee, such as requiring an employee to complete enrollment forms or work a reasonable number of hours (not exceeding 1200) before coverage begins, as long as the condition is not designed to avoid compliance with the 90 day waiting period.
Finally, Notice 2012-58 continues the expressed IRS policy of allowing an employer to avoid penalties as long as the employee’s contribution for premiums does not exceed 9.5 percent of the employee’s W-2 wages, regardless of the employee’s actual household income. The Notice does not address the important question, currently open, of whether affordability is to be calculated based on the employee’s premium share for self-only or family coverage. Employers can rely on the safe harbors provided by both notices through 2014.
Some method is necessary for determining when employees who are hired without an expectation that they will be full-time employees in fact become full-time employees. But giving employers more than a year to figure out whether an employee is working full-time seems excessive. Under previous proposed guidance, a maximum of 6 months was allowed for this determination. This approach will end up increasing the number of the uninsured, or at least those insured through the exchanges without employer assistance, and is to that extent a disappointment to consumers.
What? Can anyone really keep up with this nonsense? Is this really a serious way to deal with health system reform?
Dr. Joe Jarvis