This updated e-book answers over a dozen health care reform questions that directly impact small and mid-sized employers. While the original e-book was released less than two months ago, the new one already contains updated information as reflected in the rapidly changing health care environment. Topics include: • What is a health benefit exchange? • What are “free choice vouchers” and how will they be used? • What are the penalties for employers who do not offer coverage? • How should employers prepare for the upcoming changes? • What is a “Cadillac Health Plan”?

1. The 14 Health Care
Reform Questions Every
Employer Needs to Know
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2. Introduction:
The Unknown
With over 2500 pages and some 450 provisions, the Patient
Protection and Affordable Care Act (otherwise known as
Health Care Reform) is one of the most complex pieces of
legislation ever signed into law. The Act touches every
sector – from individual citizens, to small businesses, to
large corporations, to the Federal government itself.
With numerous unanswered
questions, employers are
understandably overwhelmed:
• What laws apply to them?
• What do they need to do?
• How will it impact their bottom line?
• How can they prepare for the
impending legislation?
In this updated and revised report, we
discuss fourteen important Health Care
Reform questions, with simple, easy-to-
understand answers, explaining their
impact on small employers.
Please note that question #2 (Employee
Vouchers) is no longer applicable, as this
provision has been repealed and is no
longer part of the PPACA.
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3. The 14 Health Care Reform Questions Every Employer Needs to Know
Each state is charged with establishing, as a governmental agency or
nonprofit entity, an American Health Benefit Exchange. These
Exchanges have two functions:
1. To facilitate the purchase of qualified health plans
2. To provide for the establishment of a Small Business Health
Options Program (referred to as a “SHOP Exchange”). A SHOP
Exchange will assist employers in enrolling employees in small
group qualified health benefits plans. States may establish a
single Exchange that performs both functions, or create separate
Exchanges.
Grants will be made available to states by the Department of Health
and Human Services (HHS) for planning and establishing an
Exchange. However, by 2015, Exchanges must be self-sustaining and
may generate revenue through assessments or fees. The HHS will
also provide technical assistance to states on facilitating participation
of small employers in SHOP exchanges.
If a state chooses not to establish an exchange, the Federal
government will set up federal health insurance exchanges.
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4. The 14 Health Care Reform Questions Every Employer Needs to Know
An employer who offers minimum essential coverage and
pays any portion of the premium will be required to provide
free choice vouchers to each qualified employee. A qualified
employee is defined as an employee:
• Whose required contribution to the employer plan, for
self-only coverage, is greater than 8% and less than 9.8%
of the employee’s household income for the taxable year
• Whose household income is not greater than 400% of the
FPL for the relevant family size
• Who does not participate in the plan offered by the
employer.
The voucher will be equal to the monthly amount that the
employer would have contributed toward the plan. The
employer pays the largest portion of plan costs, for either the
employee or, if elected by the employee, family coverage.
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5. The 14 Health Care Reform Questions Every Employer Needs to Know
An Exchange will credit the
amount of a voucher to the
monthly premium of an
exchange plan in which the
qualified employee is enrolled,
and the employer will pay the
exchange the credited amount.
If the amount of the voucher
exceeds the premium, the
excess will be paid to the
employee.
An individual receiving a free
choice voucher will not be
eligible for the exchange
premium credits or cost-sharing
subsidies. No penalty will be
imposed on an employer with
respect to any employee who is
provided with a voucher.
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6. The 14 Health Care Reform Questions Every Employer Needs to Know
Beginning in 2014, an employer
with 50 or more full-time
equivalent employees during
the preceding calendar year, will
be penalized if any of their full-
time employees are not offered
coverage (and obtains a
premium credit through the
exchange). PPACA provides a
formula to help employers
Example:
calculate full-time equivalent, An employer with 80
according to its definition (see employees will be
question #6 below). In 2014, the subject to a penalty of
monthly penalty per employee $8333 per month
will be equal to the number of (80-30 = 50 X $166.66).
full-time employees, minus 30, After 2014, the penalty
multiplied by $166.66 ($2,000 payment amount would
per year, divided by 12) for any be indexed by the
applicable month. premium adjustment
percentage for the
The amount of the penalty will calendar year.
increase in subsequent years.
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7. The 14 Health Care Reform Questions Every Employer Needs to Know
Even in some circumstances,
employers with 50 or more
full-time equivalent
employees that offer
insurance may still be subject
to a penalty.
This applies when the
employer’s plan does not
meet PPACA’s definition of
“affordable” (see question #8
Even in some below), or if the employer’s
plan pays for less than 60% of
circumstances, the covered expenses. If an
employers with eligible employee then obtains
50 or more full- a premium credit in an
exchange plan, the employer
time employees is subject to a penalty.
that offer
insurance may
still be subject
to a penalty.
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8. The 14 Health Care Reform Questions Every Employer Needs to Know
Beginning in 2014, PPACA requires individuals to maintain
health insurance, with some exceptions. Most individuals will
be required to maintain minimum essential coverage. Those
who do not comply, and who are not exempt, will be required
to pay a penalty per individual and tax dependent equal to the
greater of the following:
$95 or 1.0% of adjusted income in 2014
$325 or 2.0% of adjusted income in 2015
$695 or 2.5% of adjusted income in 2016
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2014 2015 2016

9. The 14 Health Care Reform Questions Every Employer Needs to Know
The new federal definition
sets the standard of a full-
time equivalent at 30 or
more hours of actual time
worked during a typical
week, average over the
month. It is based on the
prior 12 months, which will
be the 2013 year. Seasonal
employees working less
than 120 days during the
Example:
prior year are excluded.
Additionally, the law takes
A company employs 35 full-
the hours worked by part-
time workers (working on
time employees into the
aver-age of more than 30
calculation when
hours per week) and 20 part-
considering the number of
timers (working on average
full time employees.
24 hours per week, or 96
hours per month).
These 20 PTE are the
equivalent of 16 FTE. (20 x 96
/ 120 = 16). So for calculation
purposes, this employer has
35 + 16= 51 full-time
equivalents.
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10. The 14 Health Care Reform Questions Every Employer Needs to Know
PPACA includes a requirement that employer provided
benefit plans can not discriminate in eligibility, waiting
period, benefits or contributions in favor of highly
compensated employees. This provision of PPACA was to
be effective in 2010, but has been delayed.
PPACA references the self funded employer non-
discrimination requirements of section 105 (h) of the IRS
code and applies them to insured group health plans.
Failure to comply carries a penalty of $100 per individual
for each day the plan does not comply.
PLEASE NOTE: Because regulatory
guidance is essential to these provisions,
compliance with the non-discrimination
requirements will not be required until
after regulations or other administrative
guidance have been issued.
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11. The 14 Health Care Reform Questions Every Employer Needs to Know
PPACA requires that employers report the value of health
plan coverage on Form W2 for each employee. This includes
both the employer and employee share of the cost of health
coverage, but excludes dental and vision coverage under
separate policies. Reportable amounts also exclude
contributions towards Health Savings Accounts (HSA) or
employee contributions to health flexible savings account
(Health FSA).
Reporting is effective for
2012 Forms W2.
Employers who filed fewer
than 250 W2’s in 2011
W2’s will not be required
to report the cost of
health coverage prior to
2014.
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12. The 14 Health Care Reform Questions Every Employer Needs to Know
Each employer should begin
collecting the necessary information to determine
if they have 50 or more full time equivalent (FTE)
employees. If an employer has fewer than 50 full time
employees, the law does not require the employer to offer
coverage.
If the employer has 50 or more FTE’s then there are several
parts of PPACA that need to be evaluated to determine the
impact to the employer. It is recommended
to consult with a
professional
familiar with the
law and its
implications to
the business.
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13. The 14 Health Care Reform Questions Every Employer Needs to Know
Affordable coverage means the plan
has an actuarial value of at least 60%
of required health care covered
expenses and the employee cost is
less than 9.5% of household income.
The PPACA imposes a 40 percent
excise tax on “Cadillac” health
insurance plans. This new tax will
apply to health plans valued in
excess of $10,200 for individuals
and $27,500 for families. Those
thresholds will grow annually by
inflation plus 1 percent. The tax
takes effect in 2018 and is
projected to raise $32 billion by
2019.
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14. The 14 Health Care Reform Questions Every Employer Needs to Know
Yes, PPACA requires small
group plans limit deductibles
to $2,000 per individual and
$4,000 per family. These
amounts will be indexed to
health care premium inflation.
VISUAL
PPACA does not eliminate or change
COBRA rules. COBRA benefits will
continue to be available to former
employees. Individuals will also have
access to coverage through state
exchanges and may qualify for
premium credits. However, if the state
exchange is higher cost the employee
may elect COBRA coverage.
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15. The 14 Health Care Reform Questions Every Employer Needs to Know
The individual would
likely be eligible for
premium subsides or
the expanded
eligibility for
Medicaid.
What Now? 5 Steps Employers Should
Take to Prepare:
1. Review the decision with a professional to determine
how the law will affect your business.
2. Assess the strategic impact of continuing or dropping
health benefits
3. If you currently offer insurance, determine whether
to retain “grandfathered” status if you decide to
continue offering a health plan.
4. Determine if your existing plan meets qualifying
standards for eligibility and affordability.
5. Calculate the true costs of either offering or not
offering health coverage after 2013.
Source: Business Management Daily
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16. CPEhr:
A Leader in Managing Employer
Health Care Plans
CPEhr, working in close
communication with its brokers and
health care advisers, has invested
hundreds of hours studying and
analyzing health care reform laws and
how they will impact small employers.
As the law continues to evolve, as
conditions of the legislation become
clearer, and as new deadlines
approach, CPEhr will continue
working diligently to ensure its clients
and small business community
receive the most up-to-date news
and information.
Contact CPEhr's Employee Benefits Department to
schedule a no-obligation review of your current
benefit plans and health care reform overview.
Click Here For More Information
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17. About CPEhr
Founded in 1982, CPEhr is a California-based Human
Resources Outsourcing firm, offering businesses an
alternative for handling many HR responsibilities.
Beyond benefits management, CPEhr specializes in the
following key employment areas:
• Employment administration
• Management training
• Employee relations
• Payroll and employment tax compliance
• Workers’ compensation insurance
• Claims and risk management
• Safety consulting
• Comprehensive employee benefits programs.
Headquartered in Los Angeles,
CPEhr has been ranked by the
Los Angeles Business Journal as
one of the “Best Places To
Work”, four years running. It is
currently one of the largest
privately held HR Outsourcing
firms in the state.
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