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ACA delay pushes headache back for resort employers

(July 12, 2013) Much like finding out that a homework assignment you didn’t finish is due later than you thought, a number of resort employers are breathing a sigh of relief after the federal government pushed back the key enactment date of the Affordable Care Act from 2014 to 2015.

But employees themselves will still be subject to individual penalties next year, creating a potential gap in coverage and a heavy burden on Maryland’s public health exchange system.

“It’s a relief in the sense that this no longer affects them today…but I don’t think it’s going to change what people are going to do ultimately,” said Chris Keen of local insurance agency Keen Insurance. “It’s just giving them more time to digest and implement it.”

Through the Greater Ocean City Chamber of Commerce, Keen and his colleague Chris Carroll of Atlantic/Smith, Cropper & Deeley have staged a number of seminars to help local businesses navigate the federal Affordable Care Act, popularly referred to as “Obamacare.”

The law will require employers with more than 50 employees to provide health insurance to any worker who is considered to be full-time and non-seasonal, or else pay a penalty. The enactment date was scheduled, until this week, to be January of 2014, but this has now been pushed back a full year due to difficulty in figuring out how the penalties will be assessed and collected.

However, the part of the ACA that levies an individual penalty to any person who does not have health insurance will still go into effect for 2014.

“The employees themselves have to make sure they have their own insurance in place or pay the penalty,” Keen said. “I can’t imagine that part being delayed because it’s pretty easy to keep track of and it wouldn’t have to be filed until your 2014 tax return…so they’ve still got another year and a half to figure that part out.”

The ACA specifies businesses are required to provide insurance if it has 51 or more full-time employees, or the equivalent in part-time employees. A full-time employee is someone who is either salaried or a waged worker clocking 130 hours or more in a given month, according to the law.

In the case of part-time employees, the law requires that all their hours in a month be added up and divided by 120 (i.e., a minimum full-time monthly schedule of 30 hours a week for 4 weeks) to determine the number of full-time equivalent employees the business has in a given month.

However, although every employee counts for the purpose of calculating penalties to “large employers,” every employee does not have to be insured if said employer provides a health plan. In that case, penalties will only be levied for full-time employees who are not insured.

The IRS has advised employers that any employee who works a total of 1,560 hours or more in 2013 – i.e., 30 hours for 52 weeks – will have a “reasonable expectation” of a full-time schedule and of getting insurance for 2014.

However, with enactment pushed back to 2015, it is likely that 2014, not 2013, will be the crucial year for calculating who is a large employer and which employees must get health benefits.

“I would assume that they would now use 2014 as the calculation year, as the original intent of the law was to use the prior year as the one that determined what categories you fall into,” Keen said.

Given their multitudes of part-time seasonal employees, many resort employers have found themselves having to offer insurance that they did not have to offer before, but only to a small number of high-hour or year-round employees.

Of immediate concern is how the delay will affect the health exchange system, which is mandated by the ACA to provide coverage – subsidized depending on income – to those who do not have employers offering insurance. The exchanges are organized by the state, although some states have opted out of creating their own systems and have defaulted to federal administration.

If employers do not have any financial incentives to offer insurance for 2014, but their employees have an incentive to get it, it could cause a rush on the group exchange rates, which are already projected to raise premiums.

“That’s one of the big concerns that is kicking around Washington right now, especially for the states that decided to leave the exchange to the federal government,” Keen said. “The federal government is behind on getting those established.”

Maryland, however, has dedicated considerable resources to building its own exchange system, which will open in October for 2014 enrollment.

“In Maryland, what they’re saying right now is they should be in good shape to handle all the enrollments,” Keen said.

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