Beginning Jan. 1, 2015, the Patient Protection and Affordable Care Act, P.L. 111-148 (PPACA), and the Health Care and Education Reconciliation Act, P.L. 111-152, potentially subject large employers to shared-responsibility payments. Sec. 4980H(c)(2)(A) defines a large employer as one that employed at least 50 full-time employees during the preceding calendar year. To avoid substantial penalties, large employers must provide their employees an opportunity to enroll in minimum essential health care coverage that is affordable and provides minimum value. Treasury announced in July that it plans to postpone enforcement of the penalty until 2015.
Minimum Essential Coverage
Minimum essential coverage includes coverage under certain government programs including Medicare and Medicaid (Sec. 5000A(f)(1)(A)) and eligible employer-sponsored plans (Sec. 5000A(f)(1)(B)). An eligible employer-sponsored plan is a group health plan or group health insurance coverage offered to an employee by his or her employer that is (1) a government plan within the meaning of Section 2791(d)(8) of the Public Health Service Act (PHSA) (42 U.S.C. [section]300gg-91(d)(8)); or (2) any other plan offered in a state small or large group market (Sees. 5000A(f)(2)(A)-(B)). Sec. 5000A(f)(2) does not define "group health plan" and "group health insurance," but Sec. 5000A(f)(5) provides that any term used in that section that is also used in the PPACA assumes the meaning provided by the PPACA.
The PPACA provides that the term "group health plan" has the same meaning as in Section 2791(a) of the PHSA (42 U.S.C. [section]301 gg-91 (a)(1)). According to Section 2791(a), a group health plan is an employee benefit welfare plan as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974 (ERISA) to the extent the plan provides medical care (as defined in Section 2791(a)(2) of the PHSA) to employees and their dependents. ERISA states that an employee welfare benefit plan is any plan, fund, or program established or maintained by an employer or by an employee organization, or both, to the extent it is established or maintained for the purpose of providing various medical benefits for its participants or their beneficiaries (29 U.S.C. $1002(1)).
The Affordability Requirement
Three safe-harbor rules are provided in proposed regulations issued in January (on which employers can rely) for determining affordability for minimum essential coverage: the W-2 safe harbor, the...