Health care reform and its impact in 2014 for oil and gas companies.

• Author: Roman, Laura L.

Like other employers, oil and gas companies throughout the United States need to be prepared for several provisions of the Patient Protection and Affordable Care Act, P.L. 111-148 (PPACA), that go into effect in 2014. However, the nature of the industry raises some special concerns for oil and gas employers.

Some of the relevant provisions are:

* Health plans may not exclude adults with preexisting health conditions;

* Health plans offered by employers and new plans in the individual market cannot have annual coverage limits;

* States will offer policies through health insurance exchanges for individuals and small employers;

* Individuals will be required to obtain health insurance or face a possible penalty;

* Penalties will be assessed on employers with at least 50 employees that do not offer qualifying coverage. (Treasury announced in July that it plans to postpone enforcement of the penalty until 2015.)

How individual oil and gas companies comply will hinge in large part on the specific nature of their workforce. Companies with employees sited in numerous states need to consider offerings from those states' health insurance exchanges. Smaller companies may want to use PPACA's Small Business Health Options Program (SHOP) for purchasing coverage within those exchanges.

The steps companies take for compliance will also be influenced by their number of full-time, variable-hour, seasonal, or part-time employees. Once an individual is hired, an employer faces time constraints for determining what designation applies to that new employee. Oil and gas companies often have high employee turnover, so they will need to pay close attention to how long a particular employee is on the payroll and what employment designation should be applied to that person. The number of individuals designated as full-time employees, in turn, affects an employer's compliance requirements, as does employee household income. Employers face excise tax penalties for noncompliance.

Given the magnitude of the changes, each employer must prepare to comply with the act, understanding the relationship between workforce size and compliance options.

Small Employer Health Insurance Credit

Companies with 25 or fewer full-time equivalent employees are currently eligible for a tax credit of up to 35% of what they pay for employee health insurance (Sec. 45R). This tax credit took effect for the 2010 tax year. To qualify for it, the average annual salary of the employees cannot...