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July 1, 2014

What are employers' responsibilities under health reform?

Daily Briefing

    The Supreme Court's Monday ruling in Burwell v. Hobby Lobby concluded that the government cannot require closely held corporations to provide contraceptive coverage to employees if doing so conflicts with the religious beliefs of the corporation's owners.

    In the wake of the decision, the Daily Briefing team compiled an updated look at where employers stand with regard to the Affordable Care Act's mandates, and the implications of the Supreme Court's decision.

    Who is required to offer coverage under the law?

    Members have consistently asked about employers' responsibilities under the law—specifically, which organizations will be subject to the ACA's penalties if they fail to offer affordable health coverage.

    In the short-term, companies are protected: While the ACA's employer penalties were slated to take effect this year, the Department of Treasury and the Internal Revenue Service postponed the employer mandate's implementation earlier this year.

    The employer mandate's updated requirements are below:

    • For employers with fewer than 50 employees: The ACA's penalty will not apply to the employer. Importantly, small employers that have fewer than 26 employees and offer average wages of $50,000 or less may be eligible for health insurance tax credits.
    • For employers with more than 100 full-time employees: The penalty is $2,000 annually times the number of full-time employees minus 30. The ACA also calls for plans to increase the penalty each year to mirror the growth in insurance premiums. To avoid fines, large employers only need offer coverage to 70% of workers in 2015, rather than 95%. They will need to start offering coverage to 95% of workers in 2016.
    • For employers with 50 full-time employees who offer insurance but it is not affordable: The ACA imposes penalties on larger employers whose workers need to shop for health insurance through an exchange. For a firm where employees are seeking out insurance from the exchanges and therefore receive a tax credit, the employer will be penalized $3,000 per employee who receives a tax credit. The ACA sets a maximum on these penalties at $2,000 times the number of full-time employees minus 30.

    Additional resources

    We recommend that members review this IRS resource for a breakdown of tax provisions that were established by the ACA as well as information on grandfathered plans, coverage of family members under the age of 26 and employer tax credit.

    What must be included in the coverage that employers offer?

    Under the ACA's contraceptive coverage mandate, most businesses with 50 or more employees are required to offer FDA-approved methods of birth control in their employer-sponsored health plans. 

    In 2013, HHS released an amendment to previously issued regulations that permit religious entities that offer their own health plans to choose whether to cover contraceptive services.

    Under the final rules, houses of worship are exempt from the requirement, and religiously affiliated not-for-profits are eligible for an accommodation that ensures they do not have to pay for or directly provide the coverage to their employees.

    Specifically, religiously affiliated hospitals, universities, and other not-for-profits that oppose contraceptive coverage must notify their insurer of the objection. In the case of self-insured not-for-profits, they would notify a third-party administrator. The insurer or third-party administrator is responsible for informing enrollees that it will provide them with contraceptive coverage at no additional out-of-pocket cost.

    The rules also finalize a simpler definition of "religious employer" for purposes of the exemption from the contraceptive coverage requirement.

    Notably, there were more than 100 lawsuits filed against the contraception mandate. The Supreme Court agreed to consider two of those challenges: One filed by retail chain Hobby Lobby, and another from cabinet maker Conestoga Wood Specialties. Both companies are owned by Christian families.

    In the cases, Burwell v. Hobby Lobby and Conestoga Wood Specialties v. Burwell, the companies successfully argued that the policy goes against the personal religious beliefs of the for-profit company's owners and violates the 1993 Religious Freedom Restoration Act, which "protects a person's exercise of religion."

    How many people will be affected by Supreme Court's Hobby Lobby decision?

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