October 1st is not just the date Vermont’s health exchange, called Vermont Health Connect (VHC), opens for business.  It is also the deadline for employers to provide their employees with information about VHC.  Although the notice is important to focus employers and employees on the logistics of buying health insurance on VHC and understanding coverage options, there is no $100-per-day penalty for failing to provide this notice. (See the section below for an explanation.)

The requirement affects all employers who are subject to the Fair Labor Standards Act (FLSA), which is essentially all employers, except the self-employed, or businesses that earn less than $500,000 per year.  Most employers already know if they are subject to the FLSA, but if there are questions, the VHC website, listed below, has a link that helps employers determine whether or not they are covered.

The October 1st notice explains basic information about the employer’s current coverage (or lack of coverage).  Its purpose is to help employees understand:

•    Any health insurance their employer offers,
•    What VHC is and how to get help in evaluating coverage options,
•    The potential for tax credits to help employees pay for insurance, and
•    The implications if employees choose to buy health insurance individually through Vermont Health Connect if their employer offers insurance.

A template for the notice to employees and an explanation of the details is up on the Vermont Health Connect website here: http://healthconnect.vermont.gov/notices.  The federal model notice is also available on The Department of Labor’s site.

No $100-per-day penalty for noncompliance

Regarding the alleged fine, the U.S. Department of Labor website has posted the following “FAQ on Notice of Coverage Options:”

Q: Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?

A: No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

The information provided in this blog is generic and based on the general definitions and provisions of the Affordable Care Act and Vermont law.  This blog post and the information it contains should not be interpreted as legal advice for any specific situation.  Individuals with specific questions about their business are encouraged to consult an attorney.

photo by Adrian Clark

As we reported previously, the IRS has delayed the Affordable Care Act’s reporting requirements and so-called “play or pay” assessments until 2015.  Individuals and small businesses may wonder why they are still required to comply with the ACA in 2014 when large employers appear to be given a break.

One of the purposes of the ACA is to create conditions that help previously uninsured individuals get insurance.  In 2011, over 47 million Americans were uninsured.  That same year, the average non-group premium (i.e. amount paid by individuals who did not get health coverage through their employers) was over $400 per month in Vermont.  Nationally, 57% of small businesses (50 or fewer employees) offered health coverage to their employees that year, whereas 92% of businesses with 51-100 employees offered health coverage, and 97% of businesses with over 100 employees offered health coverage, according to the Kaiser Family Foundation.  While the IRS has delayed the “large employer assessments” that would serve to motivate larger employers to provide health coverage to their employees, in reality, only a relatively small number of large employers do not offer coverage.  The employees of small businesses, on the other hand, are less likely to receive health coverage as a benefit.

Does this mean that small businesses are penalized under the ACA?  Most small businesses are exempt from the ACA employer assessments, which may apply starting in 2015 only when the total number of FTEs exceeds 50, as we described in a previous post.  Vermont law assesses employers who do not provide health coverage for their employees, but this assessment—sometimes called the “Catamount assessment”–predates the Affordable Care Act.  And the Affordable Care Act provides some tax incentives to some small employers who elect to provide coverage.

Where does this leave individuals?  Individuals in Vermont who cannot get health coverage from their employers (or from Medicaid) will buy health insurance through Vermont Health Connect, or choose not to be insured.  Under the Affordable Care Act, individuals who choose not to be insured will pay federal taxes: $95 in 2014.  However, individuals who qualify because their income is up to 400% of the federal poverty level, yet do not qualify for other public coverage such as Medicaid, may receive health premium credits and subsidies to offset the cost of insurance.  According to Vermont Health Connect’s subsidy calculator, an individual with no children, earning $35,000 per year, may be eligible for $164 in subsidies per month.

The availability of a variety of plans across a range of prices, combined with premium credits and subsidies for qualified individuals, should dramatically increase the number of insured Americans, including Vermonters, in 2014.  Since having more people in the insurance market to bring down rates for all people is the goal of the implementation of the Affordable Care Act, keeping the “individual mandate” under the ACA makes sense.  Delaying the large employer mandate, on the other hand, will have little effect.  Most of the employers affected already offer insurance to their employees and there will be little overall change in the number of people insured as a result of the delay.

The sighs of relief generated by the delay, even by those businesses who would be unaffected by the employer mandate, highlight the level of anxiety and concern among businesses over the coming changes.  Our current system of health insurance is known (although not necessarily understandable), even if it is expensive and unfair to many and unsustainable for all of us.  Hopefully, the time bought by the Obama administration in delaying the employer mandate will be put to good use by educating businesses and individuals about the ACA’s impacts so that the fear of the unknown and new will not swamp the good that will come of having affordable health insurance coverage available for all people.

The information provided in this blog is generic and based on the general definitions and provisions of the Affordable Care Act and Vermont law.  This blog post and the information it contains should not be interpreted as legal advice for any specific situation.  Individuals with specific questions about their business are encouraged to consult an attorney.

photo by Adrian Clark

As we approach the implementation of Vermont Health Connect, a milestone in the realization of the Affordable Care Act in Vermont, opponents of the health insurance exchange have been voicing their objections to the transition in our health care system.  According to news sources last week, Mark Larson, commissioner of the Department of Vermont Health Access, received a letter from the republican-led House Committee on Oversight and Government Reform,  indicating that the Committee was investigating Vermont’s “small business mandate.” According to the letter, “the State of Vermont imposed a requirement that forces all individuals and small businesses to purchase coverage through its Exchange,” which results in “reduced consumer choice and higher costs for many businesses and individuals.” The letter further asserts that Vermont’s “requirement conflicts with the text” of the Affordable Care Act.

The letter appears to misstate a Vermont law and presumes that greater choice would be available without the law.  The letter also misreads the Affordable Care Act as restricting a state law from regulating health insurance offerings.

While the letter states that Vermont’s law “forces all individuals and small businesses to purchase coverage through its Exchange,” the Vermont law does not compel any person or business to purchase insurance.  Under 33 V.S.A. § 1811(b) and (c), no insurance carrier may sell a health insurance plan to an individual or small business except through the exchange, and no carrier may sell health insurance unless it is registered with the state.  States are expressly permitted to regulate the business of insurance, and this has been settled law since the 1940s when Congress enacted the McCarran-Ferguson Act.

It is inaccurate to suggest that the Vermont law “forces” all individuals and small businesses to purchase insurance through the exchange.  In fact, many individuals in Vermont—those working for larger businesses, for example—will continue to have insurance plans that are not on the exchange.  And because small businesses may elect not to provide insurance at all, it cannot be said that they are “forced” to purchase through the exchange.

The letter from the House Oversight Committee further assumes incorrectly that Vermont is limiting consumers’ choices of health care plans in a manner that will lead to increased costs.  Vermont’s Title 8 has already restricted the choice of health insurance plans to those offered by “registered carriers” for decades. There are only a small number of carriers who operate within Vermont, both because many carriers choose not to do business in our small state, and because the state protects consumers by requiring insurers to meet certain standards.

The major carriers that currently offer plans in Vermont, Blue Cross Blue Shield of Vermont and MVP, will remain available, and they will offer a spectrum of plans through the exchange.  And despite what the letter presumes about increased costs, there is evidence to suggest that costs will actually decrease for many individuals and businesses under Vermont Health Connect.  In fact, on July 8, Vermont lowered the proposed premium rates for insurance sold on the Exchange.  Already proposed to be at or below current premiums, the Green Mountain Care Board recommended further reductions so a silver-level plan for an individual is to cost $388 or $410 per month, without considering available state or federal subsidies.

This raises the question: why would businesses want to purchase a more expensive plan from the same carrier outside of the exchange?

The House Oversight Committee’s letter also misreads the Affordable Care Act when it claims that the exchange violates the ACA.  The letter cites a section of the ACA that states that the ACA does not limit individuals and businesses from choosing plans outside of the exchanges, nor does it prohibit an insurer from offering plans outside of the exchanges.  This section of the ACA is not an “express preemption” clause that is intended to restrict state laws.  Indeed, the House Oversight Committee letter fails to cite the following provision of the ACA, which reads: “Nothing in this title shall be construed to terminate, abridge, or limit the operation of any requirement under State law with respect to any policy or plan that is offered outside of an Exchange to offer benefits.” (42 USC § 18032(d)(2)).  In other words, the ACA does not preempt the state’s authority to regulate health insurance generally.  It remains within the State’s purview to decide that health insurers may not offer insurance to small businesses outside the Exchange.

Moreover, the three republicans who signed the letter to Mark Larson seem to be  intent on depicting Vermont as having overstepped its mandate under the ACA to set up a health insurance exchange. However, the ACA specifies that a state may elect to merge its individual and small group exchanges (see 42 USC § 18032(c)(3)), which is exactly what Vermont’s implementation does by merging the individual and small business exchanges.  Vermont Health Connect is consistent with the ACA.

Although it is an important part of our legal heritage to question the basis for our laws, this inquiry comes at the eleventh hour as the Exchange will open less than 100 days from now.  It is a shame that the Department of Vermont Health Access must now expend valuable resources to provide documents and submit to questioning by committee leadership whose questions seem to be driven by partisanship and incorrect interpretations of the plain language of Vermont and federal law.

The information provided in this blog is generic and based on the general definitions and provisions of the Affordable Care Act and Vermont law.  This blog post and the information it contains should not be interpreted as legal advice for any specific situation.  Individuals with specific questions about their business are encouraged to consult an attorney.

photo by Alexander C. Wimmer

On July, 2, 2013, the U.S. Department of the Treasury announced that after hearing concerns from businesses about the reporting requirements under the Affordable Care Act, the new requirements will not take effect in 2014.  Employers may voluntarily participate in the reporting for 2014, but the new provisions will not require reporting until the 2015 tax year.  Because of this delay in reporting requirements, the employer shared responsibility payments—the large employer assessments that we have mentioned in previous posts—will also not apply for 2014.

See the U.S. Department of the Treasury’s announcement here.

The delayed reporting requirements and assessments will not affect the opening this fall of Vermont Health Connect, Vermont’s health exchange for individuals and businesses with 50 employees or fewer.  Robin Lunge, Vermont’s director of health care reform, told the Burlington Free Press that implementation of the state health care exchange will continue as planned.

Small businesses should also be aware that while they may not have to be concerned with the federal shared responsibility assessments for 2014, they still may be responsible for Vermont’s employer contribution assessment, which applies when businesses have “uncovered” full-time employees. “Uncovered” employees are those who are 1. not offered health insurance through their employer, 2. not eligible for their employer’s health insurance, or 3. do not accept health insurance through their employer and have no other coverage.

The information provided in this blog is generic and based on the general definitions and provisions in the new legislation (Affordable Care Act, Act 48, and Act 171).  This blog post and the information it contains should not be interpreted as legal advice for any specific situation.  Individuals with specific questions about their business are encouraged to consult an attorney.

This fall, qualified small businesses in Vermont will need to decide whether to offer their employees a choice of health insurance plans on Vermont Health Connect.  When making this decision, employers should be aware of potential federal tax liabilities that may arise if they elect not to offer insurance, or if they offer insurance that is unaffordable to their employees.

As we wrote about previously, businesses will first need to determine whether they qualify to buy health insurance on Vermont Health Connect.  Businesses with at least one and no more than 50 full-time employees during at least 50% of the calendar days of 2013 will qualify to offer insurance plans to employees through the Vermont Health Exchange. For purposes of this calculation, only full-time employees, defined as employees who worked at least 30 hours per week are counted. Vermont Health Connect has published a worksheet to help businesses calculate the number of employees.  Part time employees are not included in this calculation.

Federal law under the Affordable Care Act, however, counts employees differently to determine whether a business is an “applicable large employer” for purposes of assessing a tax for employers who either do not provide health insurance at all, or offer plans that do not meet certain standards, like affordability and essential coverage.  Businesses that meet the large employer standard may be liable for the assessments under IRS section 4980H (the portion of the Affordable Care Act that allocates “shared responsibility for employers regarding health coverage”), whereas small employers are exempt.   

An “applicable large employer” under federal law has a total of 50 or more full-time employees and full-time equivalents (FTEs).  FTEs for a calendar month are calculated by totaling up all the hours of employees who did not work an average of at least 30 hours per week in a given month, then dividing this total by 120.  Add the total monthly FTEs for the calendar year; then divide by 12.

What is most important for a Vermont employer to note is that a small business, which qualifies under Vermont law to offer insurance to its employees through Vermont Health Exchange because it has fewer than 50 full-time employees, could possibly be considered a large employer under federal law.  Typically, this would occur when a business has fewer than 50 full-time employees, in addition to a number of part-time employees whose hours add up to a sufficient number of FTEs to bring the federal calculation of employees to 50 or more.  

Example: A business employs 31 full-time employees (more than 30 hours/week) and 60 employees for an average of 20 hours/week.  With fewer than 50 full-time employees, the business is eligible to offer health coverage via Vermont Health Connect in 2014.  Because the total number of full-time employees and FTEs (from the part-time employees) is greater than 50, the business is also an applicable large employer and may be liable for federal assessments under section 4980H.

In a future post, we will discuss some situations in which the method of calculation is tricky , such as when businesses employ seasonal workers or employees who have fluctuating schedules so they sometimes work more or less than 30 hours per week.

One of the primary purposes of the ACA is to make sure all Americans have health insurance, because the more people who  are in the insurance pool, the lower the rate.  So, it is no surprise that employers with 50 or more FTEs, which tend to be the bulk of the employers in the U.S., will be assessed if they do not offer insurance.  Fortunately, for these employers and their employees alike, 96% of U.S. employers with over 50 employees already provide insurance to their employees. 

Nonetheless, it is confusing that employers are required to count their employees in two different ways – one way to determine if they are required to use Vermont Health Connect if they are purchasing health insurance for their employees, and one way to determine if they are responsible for an employer assessment.

In our next post, we will give greater detail about the circumstances under which a small business in Vermont may be liable for federal assessments under section 4980H.  Also note that businesses that are not “applicable large employers” under federal law may still be liable for assessments under Vermont law if they do not provide health coverage for their employees.

The information provided in this blog is generic and based on the general definitions and provisions in the new legislation (Affordable Care Act, Act 48, and Act 171).  This blog post and the information it contains should not be interpreted as legal advice for any specific situation.  Individuals with specific questions about their business are encouraged to consult an attorney.