The Patient Protection and Affordable Care Act, also known as health care reform, is now three years old. Employer health plans have had a host of new administrative and coverage requirements to comply with during each of the PPACA's first three years. However, the PPACA requirements that have taken effect to date seem negligible when compared to those that will take effect in 2014 and beyond. The legal landscape of health insurance will fundamentally change in three ways next year:
Eligible individuals will be able to purchase "qualified health plans" using tax credits or subsidies through newly created "health care exchanges."
Individuals who fail to obtain affordable coverage that is available to them will be subject to an "individual mandate" penalty equal to 1 percent of their gross income or $95, whichever is greater (this penalty will be adjusted upward in subsequent years).
"Large employers" (those employing an average of 50 or more employees) will be subject to "shared responsibility" penalties unless they offer 95 percent of their "full-time employees" and dependent children "minimum essential coverage" that is "affordable."
In 2018, the PPACA's final requirement, the "Cadillac tax," will take effect. Under this provision, employer group health plans with annual premiums that exceed statutory benchmarks ($10,200 for self-only coverage; $27,500 for family coverage) will pay a 40 percent tax on the overage. Many generous employer health plans appear likely to incur the Cadillac tax in 2018 unless steps are taken to significantly reduce plan costs in advance.
Identifying cost-effective PPACA compliance strategies is challenging enough; however, unionized employers face the additional challenge of making sure their strategies don't run afoul of a collective bargaining agreement or their statutory duty to bargain under the National Labor Relations Act). CBAs that expire before 2014 or that contain "reopener" provisions will provide unionized employers with the opportunity to address this challenge. Employers whose CBAs do not expire until after 2014 may have a difficult time simultaneously complying with their CBA and the PPACA. This article examines the intersection of the PPACA with a unionized employer's responsibilities under its CBAs and the duty to bargain under the NLRA.
Who Is Offered What Coverage?
The PPACA requires large employers to offer full-time employees (those employed for an average of 30 or more "hours of service" per week) and their dependent children health coverage on an affordable basis. The term "hours of service" is defined in proposed regulations to include "each hour for which an employee is paid, or entitled to payment," including time spent on vacation, holidays and sick leave. This definition is broader than the "hours worked" standard by which many employers have traditionally measured full-time status, and plans will need to be updated to incorporate the PPACA's new regulatory standard.
Most unionized employers already offer health coverage to their full-time employees and many also offer dependent coverage. Importantly, however, the PPACA's "30 hours of service" threshold for full-time status is lower than the threshold many employers have used in the past. A large employer that has traditionally offered coverage only to employees who regularly work 40 hours or more per week has several options under the PPACA:
Expand the eligible class to all employees who average 30 or more hours of service per week.
Reduce work schedules so that no one (or less than 5 percent of the employer's full-time employees) falls between 30 and 40 hours of service.