As employers are preparing for 2013, there are several changes in the Patient Protection and Affordable Care Act that will affect them, and they must be ready to guide their employees through the new environment.
Notably, withholding for the Federal Insurance Contributions Act Medicare tax rate increase goes into effect in 2013. Under this provision, employees' hospital insurance tax rate is to increase by 0.9 percent for FICA wages of more than $200,000 or $250,000 for married couples who jointly file. While the tax rate for employers remains the same in 2013, employers are responsible for programming their payroll systems to withhold that 0.9 percent tax from employees' FICA wages.
This tax rate increase might come as a surprise to many people, says Steve Wojcik, vice president of public policy of National Business Group on Health, a nonprofit dedicated to representing large employers' perspective on national health policy issues in New York. When PPACA was first passed, much attention was given to the benefits of the bill, such as the extension of coverage to adult children at age 26 and the removal of lifetime limits, but this provision seemed to pass by quietly.
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"There was a lot of talk in the presidential campaign about taxing the wealthy," Wojcik says. "Well, we already did that in ACA in one aspect by creating this Medicare surtax on incomes, so that will be a big surprise for some people who weren't aware that was part of ACA. This sort-of price tag didn't get that much attention, and now they're kicking in a lot of the things from a plan perspective."
The new $2,500 limit on flexible savings accounts is another high-profile change for 2013, but Wojcik expects it to have little impact on employers. Some employers never allowed elections as great as $2,500, and even among those that did, few employees took advantage of the high limit because they were concerned about not using all of the money by the end of the year.
In 2013, employers are required to provide notice of state insurance exchanges, which must outline the existence of health insurance exchanges, an employee's eligibility for premium tax credits if the employee purchases coverage through a health insurance exchange, and the chance that an employee could lose the employer contribution toward the cost of health coverage. Additionally, the loss of deduction for Medicare Part D Subsidy goes into effect.
While 2013 is still a couple of weeks away, employers should even begin looking ahead to 2014 in the new year, Wojcik says. Now is the time for employers to see how their plans stack up regarding the comprehensiveness that is required by the government as well as the affordability to avoid penalties.
"The bigger changes will come in 2014," Wojcik says. "There needs to be a lot of communication to let employees know of what changes will be made, especially if these changes are on account of the impact of the health care law. Employers need to communicate early and communicate often, explaining why these changes are being made."
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