A few months ago (translation: eons ago, in Patient Protection and Affordable Care Act [PPACA] Implementation Time), we teamed up with Aflac Inc. (NYSE:AFL) to organize a webinar on the possible effects of PPACA on our readers.
Webinar attendees submitted 44 questions about topics more substantive than “How do I find a recording of the webinar?” (The answer to that question. Please click here.)
Recently, we started doing our best to find answers to the questions with some meat to them, such as, “Why won’t employers simply send their workers to the small-group exchanges?” and, “What will happen to consumers who decide to go without coverage and pay the uninsured scoundrel penalty, then repent later and decide to buy coverage?”
This week, we take on questions about matters such as how employers can avoid paying the “shared responsibility penalty” (tax on employers who do not provide what the drafters of PPACA have defined to be a minimum level of affordable coverage).
To repeat what we’ve been saying in the other batches of answers: We’re doing this mainly to create a framework readers can use to think about all of this, not because we think these answers are a good substitute for competent professional advice.
If you would think twice about reading a medical textbook and then taking your appendix out, please think twice about reading these answers and assuming that you know all you need to know about PPACA.
1. How is this law going to affect agents offering Medicare Advantage and Medicare supplement products?
The exchange provisions will not directly affect agents who sell Medicare products – except that you might get a lot more questions about how government health programs pay and relate to agents.
Other PPACA provisions could have dramatic effects on Medicare coverage, by, for example, leading to the creation of more “accountable care organization” plans; reducing Medicare provider compensation in ways that end up reducing the number of providers that take Medicare; and killing off Medicare Advantage plans with high claims costs.
2. Are the government’s actuarial value and minimum value calculators — tools for determining whether coverage meets the PPACA “employer shared responsibility” requirements — available for brokers to use? If so, what is the cost?
Links to free versions of the calculators and explanatory materials are posted in the “Plan Management” section on the Regulations and Guidance section of the Center for Consumer Information & Insurance Oversight (CCIIO) website.
If you are not an actuary, you might need help from an actuary to get much out of the calculators.
3. Won’t household income eligibility criteria be based on Form W-2 income?
When an employer is determining whether the coverage it is offering an employee is affordable for that employee, it can base that calculation on the wages it reports on the W-2 for that employee. officials at the Internal Revenue Services (IRS) said in an answer to employer shared responsibility questions.
When an employee is applying for public health programs and the new PPACA “premium assistance tax credit” (PATC), then the employee will use a “modified adjusted gross income” (MAGI).
The MAGI figure will be based partly on income reported on the W-2 and any 1099 forms, along with a variety of other sources of cash, such as alimony, cash from prizes and reimbursements for moving expenses, according to the text of PPACA and analysts at the Congressional Research Service.
4. If the employee’s share of the premium for “affordable” coverage cannot exceed 9.5 percent of the employee’s W-2 wages from the employer in question, why does an employer need to know the employee’s household income?
Our understanding, based on IRS guidance, is that an employer simply needs to know what the employer has put on an employee’s W-2. The employer does not need to know anything about the employee’s total household income.
5. Won’t employers in some types of businesses start making everyone 1099, rather than W-2, to avoid the effects of PPACA coverage requires for full-time workers?
Probably. Another related question would be how PPACA might (or might not) affect the propensity of fake independent contractors to rat their employers out. The real answer here is, “Time will tell.”
6. What kinds of employers might choose to continue to pay for health benefits, and which might prefer to drop benefits and simply pay the penalties imposed on employers that fail to pay a minimum amount of affordable coverage?
PPACA seems to require employers to provide skimpier health plans than the kinds of plans employers that now provide “good health benefits” typically offer. If that’s the case, the employers that already offer decent health benefits might keep their plans, and small groups that get subsidies might add plans.