Now that President Obama has been reelected, it appears the Patient Protection and Affordable Care Act, better known as Obamacare, is here to stay. And as annual open enrollment periods get underway at many companies, both employees and employers face changes in health insurance coverage and requirements over the next two years.
In Massachusetts, implementation of the federal health care law could be more complex and confusing because of the state’s own universal health care law. While the laws are similar — Obamacare is based on the Massachusetts system adopted under former governor Mitt Romney — they have conflicting provisions. How those conflicts might be resolved remains unclear.
“The Massachusetts law and the federal law don’t sync up,” said Ellen Kaplan, who owns Group Health Specialists in Framingham, which helps small companies with their health insurance plans. “And who’s going to trump whom? Nobody knows.”
Many of the requirements that will be put in place through 2014 will primarily affect employers. But workers will also see changes affecting how they choose and pay for health insurance.
Among the changes that employees are starting to see now and into next year: a limit on contributions to flexible spending accounts, a more detailed explanation of health care benefits, and a payroll tax increase of about 1 percent on wages above $200,000 a year ($250,000 for couples filing jointly) to help fund Medicare.
Flexible spending accounts are a way to save for medical expenses without paying taxes on that money. Previously, there was no federal cap on the amount of tax-free money employees could put aside to cover health care costs, although employers could impose a limit.
The new federal law caps tax-free contributions at $2,500 a year in order to generate additional taxes to help pay for universal health care.
This has not been popular with the workers at Limited to Endodontics Inc., a Wellesley-based dental practice specializing in root canals. About one-third of the company’s 49 employees have flexible spending accounts.
“The employees didn’t like [the cap] because [the account] was a tax shelter for them,” said practice administrator Kristan Piselli. “Twenty-five hundred dollars you can do in the blink of an eye.”
Employees are also getting more detailed explanations of copayments, deductibles, and other health plan provisions from employers. Those who work at companies with more than 250 employees will see the value of their health benefits reported on W-2 tax forms that they will receive early next year. (Smaller companies are likely to be required to do the same in 2014.)
These and other requirements of the new law mean additional paperwork and administrative costs for businesses. Limited to Endodontics, for instance, has to purchase a new software system to print insurance costs on W-2 forms.
One of the biggest changes facing employers is a penalty of $2,000 per employee — excluding the first 30 employees — if they don’t offer insurance. They could also face fines of up to $3,000 per infraction if they offer insurance that doesn’t meet federal standards.
The penalties kick in only if an employee receives subsidized coverage through a state or federal exchange, a clearinghouse for private insurance plans. The smallest businesses would be exempt from the penalties; the requirement applies only to firms with 50 or more full-time workers.
In Massachusetts, the penalty for not contributing enough to employees’ health insurance — or not getting enough of them to sign up — is $295 per employee. The employer mandate, however, is broader than in the federal law, affecting companies with the equivalent of 11 or more full-time employees.
Benefits specialists are unsure how the state and federal laws will be reconciled. But if the federal mandate prevails,local companies could be hit with bigger fines if they don’t comply.
Ronn Garry Jr., co-owner of Tropical Foods market in Roxbury, is concerned about the federal law. Garry, who has the equivalent of about 53 full-time employees, offers health insurance to his workers but estimates he has paid more than $50,000 in fines since the state law took effect because his employee enrollment isn’t high enough.
The state requires that he cover at least a quarter of his employees, and he is often just shy of that because some are covered by spouses or qualify for Medicaid.
It would be cheaper for Garry to drop his coverage and pay the $295 per employee penalty, as he has done in the past. But under the federal law, the costs could be prohibitive.
“There’s no way we could afford to pay $2,000 per employee,” he said. “We’re out of business at that point.”
Of the approximately 188,000 employers in Massachusetts, nearly 3,000, or less than 2 percent, have paid penalties for not complying with the state health insurance law.
Another 2014 change: Small businesses with 25 or fewer employees who make less than $50,000 a year will be eligible for larger tax credits (50 percent for for-profits and 35 percent for nonprofits) if they purchase group insurance through an exchange.
Farther down the road, employers with full-time staffs of more than 200 will be required to automatically enroll new workers in health insurance plans.
Several provisions of the federal law have already gone into effect, including requiring coverage of dependents up to age 26 and children under age 19 regardless of preexisting conditions (extended to everyone in 2014). Both were previously in place in Massachusetts.
Also in effect: no lifetime coverage limits on essential health benefits such as emergency services and prescription drugs, and no copayments for annual physicals and other preventive care.
Adding mandates like these can make insurance more expensive, and some carriers have already announced their intent to raise rates by between 1 and 3 percent, brokers say. But providing additional coverage can also keep people healthier, avoiding costly hospitalizations and procedures.
“The hope is in the long run this actually might drive costs down as people seek more preventive care,” said Alden Bianchi, a lawyer at Mintz Levin in Boston who has written several books about health care overhaul.
For now, though, employers are still trying to figure out what the upcoming health care requirements mean for their business.
Ron Stoloff offers health insurance to his 30 full-time employees at Blue Ribbon Barbecue Inc., which has restaurants in Arlington and West Newton. But during the summer, his payroll increases to as many as 80 workers, and he’s not sure if he will face steep federal penalties for not covering seasonal employees.
“We’re sort of anxiously awaiting the rules,” he said. “We do know some storms are brewing on the horizon.”