Helping Employees Shoulder the Individual Mandate
The Affordable Care Act now requires all non-exempt individuals to have health insurance or risk financial penalty. Known as the individual mandate, this responsibility doesn’t have to fall on employees’ shoulders alone. Some employers are now facing new and increasing requirements as part of the Employer Shared Responsibility (ESR) provision, and even those not subject to the requirements of this provision can help employees obtain and manage the cost of health insurance.
To help employees understand and identify the best coverage, employers are required to provide written notices to existing employees about their health care coverage options by October 1, 2013. The notice must provide a full explanation of current health care offerings for qualifying individuals, plus information on both federal and state health insurance marketplaces. The marketplaces enable all employees the option to purchase coverage, and are scheduled to begin enrollment on October 1, 2013, with coverage beginning January 1, 2014.
One new option available to employers this fall for providing health insurance to employees is the Small Business Health Options Program (SHOP). Through the federally facilitated SHOP marketplace, employers will be offered one plan option in 2014, with the full range of options available on January 1, 2015. Alternatively, some employers can opt for defined contribution plans, which will allow them to contribute a fixed amount of money that employees can then use to buy or help pay for insurance they choose themselves.
To help supplement employee financial burdens, many employers are adopting consumer-driven health care options, like HRA, FSA, and HSA accounts. Both HRA and FSA accounts can be used with or without a health insurance plan, while the HSA requires a qualifying high-deductible plan.
Each consumer-driven health care option has its own advantages. With an HRA account, employers have the option to reimburse employees for eligible medical expenses not covered by a company health insurance policy and contributions are all tax-free. HRA accounts also lower employer and employee taxes. As an added benefit, funds can be rolled over to the next plan year. FSA accounts allow employees to pay for qualified medical expenses on a pretax basis, which can reduce an employee’s taxable income, and for employers, it reduces FICA and FUTA liabilities. HSA accounts on the other hand allow employers to reserve tax-free funds for their employee’s qualified medical expenses.
To learn more about the individual mandate and other health care reform provisions, visit www.paychex.com/health-reform.