Understanding Some Implications of the Affordable Care Act
The Patient Protection and Affordable Care Act (oftentimes called "Obama-care" in the media and by politicians on both sides of the aisle), includes among its many provisions, employer "assessments" and excise taxes which will likely change how many employers (including school districts) provide group health insurance or employer contributions on behalf of employees.
Both before and after the Affordable Care Act was upheld by the Supreme Court last June, the various federal agencies responsible for its implementation, including the IRS, have begun to release a high volume of announcements and proposed and final regulations. Unfortunately, as we enter into the time of year when we begin thinking about collective bargaining, renewing or entering into new employment contracts, and planning for the 2013-2014 school year, many of the important regulations are not yet issued by the IRS and/or the other federal agencies responsible. However, school districts must still plan for the future in advance of the implementation date for significant aspects of the Affordable Care Act. Many especially important provisions become effective January 1, 2014.
As federal agencies issue new announcements and final regulations are issued, boards of education and superintendents should have time in most situations to address any changes to employer practices that may be required or wise. Of course, those changes made in response to the Affordable Care Act may at the same time also have IRS, TRS or individual or collective bargaining implications that could make these issues complex. At this time, it is important that we wait to know what the rules actually will be and not guess prematurely what the precise requirements will be. In other words, the sky isn't falling.
Yet some aspects of the law are already in effect. Contracts or other employment practices that remain unchanged in light of what the law already provides (or what regulations are likely to provide) could be both unwise and very expensive.
The statute itself and federal agencies' many announcements regarding proposed regulations and already-issued final regulations should guide our path. The key for implementation success will be preparation and deliberate consideration of the consequences of various paths to action.
In this correspondence we have identified three of the most significant issues that are likely to impact most school districts under the Affordable Care Act:
1. School districts which qualify as "large employers" as defined by the Act (most will) must ensure that they are providing "minimum essential coverage" to all "full-time employees" (as defined by the Act), or else face substantial employer "assessments."
2. School districts which provide health insurance plans must ensure that the health insurance coverage provided to all full-time employees is "affordable," (as defined in regulations) or else face substantial employer "assessments."
3. School districts must not provide group health insurance benefits or coverage that discriminate in favor of "highly compensated employees," or else face potentially very significant excise taxes. The nondiscrimination regulations, while not yet announced by IRS, are likely to change the way school administrators - and other employees - receive compensation in the form of employer-provided group health care coverage or employer contributions to that coverage.
Without question, these three issues are layered, complex, and may not have easy solutions. Also, our quick summary of the issues here certainly over-simplifies the issues. We intend to work closely with clients as to how these changes will impact bargaining language, employment contracts of school administrators and others, and the provision of group health insurance benefits or eligibility for both highly compensated and other employees.
Be on the lookout for more information on these topics and others related to the Affordable Care Act as the regulations are issued and the implications and responses become clear.