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Health Reform Regulations – Many are Here, More are Coming

With the tidal wave of information on the new health care reform law (the Patient Protection and Affordable Care Act (PPACA)), many employers are struggling to stay afloat and up to date.  One of the difficulties in understanding the PPACA is that many of its provisions call for federal agencies to issue interpretive regulations (which have the same force as federal statutes passed by Congress).  Below is a summary of several key provisions affecting employers and the status of such regulations.

Employer-Sponsored Health Insurance Now Covers More Young Adults

On May 6, 2010, regulations  issued jointly by the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services explained that employer-sponsored, tax-free health insurance may now cover employees’ children up to age 26 even if they do not qualify as “dependents” under the Internal Revenue Code.  Previously, such health insurance only covered children up to age 19 or until graduating from high school or college.  Under those regulations, insurance companies have to provide this extended coverage for plan years beginning on or after September 23, 2010.  However, many insurance companies have voluntarily extended coverage to qualifying young adults.  Also, until 2014, plans in existence as of March 23, 2010 do not have to cover employees’ children under 27 if they have an offer to purchase employer provided health insurance through their own jobs. 

New Tax Credit for Small Employers

Small employers (no more than 25 full-time equivalent (FTE) employees) who pay at least 50 percent of the health insurance premiums may be eligible to receive a tax credit worth up to 35 percent of their portion of health insurance premiums (subject to a maximum amount).  In order to qualify, employees must receive average annual wages of $50,000 or less. To determine the number of FTEs, employers simply divide the total number of annual hours worked (up to a maximum of 2,080 per employee) by 2,080.  For example, an employer with 20 employees, each working 1,040 hours per year, has ten FTEs (20 x 1040 ÷ 2080 = 10). 

Regulations issued on May 3, 2010, define the maximum value of the credit.  This is based on the average premium for the small group in a given state.  In New York, for example, the average premium for single coverage is $5,442.  Thus, if an employer qualifies for the maximum credit percentage (35 percent), the maximum credit for single coverage would be $1,905, even if the employer pays 100 percent of the premium for more expensive single coverage.

Powerful Whistleblower Protections Await Further Definition

Employees who report employer violations of the PPACA are offered significant protections from retaliation.  Aggrieved employees must first file a claim with the Occupational Safety and Health Administration (OSHA).  However, if OSHA fails to resolve the claim (as often happens with employees who file charges with the Equal Employment Opportunity Commission), the employee can obtain a jury trial in federal court.  Available remedies include reinstatement, back pay, “special damages” (which might include pain and suffering and mental anguish), attorney’s fees, and litigation costs.  The full extent of these protections and when and how they will apply remain unknown until the Department of Labor issues interpretive regulations.  

Part-Time Staff May Not Shield “Large” Employers from Penalties

Beginning 2014, the PPACA will impose a “play-or-pay” penalty on “large” employers, those with 50 or more full time employees, who fail to provide minimum health insurance coverage.  Since full-time is generally defined as working an average of 30 hours per week under the PPACA, some employers near the 50 employee threshold are considering implementing a strategy that relies on more part-time employees in order to avoid being subject to the penalty.  However, the PPACA has an alternative method of determining coverage which might still encompass such employers. 

Specifically, if an employer does not have 50 employees each working 30 or more hours per week, the PPACA calls for a coverage test similar to the FTE test discussed above.  Under this test, the total number of hours worked by part-time employees in a month (defined as 4 weeks) is divided by 120.  For example, ten employees working 25 hours per week equal 8 full-time employees (25 hour per week x 10 employees  x 4 weeks ÷ 120 = 8.3).  Thus, an employer with 45 full-time employees and 10 part-time employees working 25 hours per week has a total 53 full-time employees and is therefore covered.  We are still awaiting regulations by the Secretary of Labor and Secretary of Treasury on this issue.


Although the PPACA’s most drastic changes will not come into effect until 2014, some changes are already in effect, and others are on their way.  We will continue to update you as further regulations are issued. 

Brody and Associates regularly advises management on complying and remaining current with state and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.