SHOP Questions
Q: Please advise clarification as to whether or not foreign workers (H2A, H2B, J1 employees) who are lawfully present in the US are to be included in the Total monthly employee count to determine if an employer is a Larger group (greater than 51 employees) or small group employer under Health Care Reform and subject to the Pay or Play penalties? We were also questioning if Large Group employers under Health Care Reform would be required to offer these foreign workers Affordable Health Coverage under Health Care Reform like all of an employer’s other Full Time Employees working over 30 hours per week.
A: Here’s the answer to this question. There are a couple other questions I need to send you to send out to the whole group since I promised I’d get back to them. Those aren’t quite ready yet but this one can go out to all Albany attendees
Q. Are foreign workers lawfully in the United States included in determining if the employer is an applicable large employer for ACA purposes?
A. The IRS Draft Proposal issued on 12/28/2012 doesn’t address the issue of foreign workers directly but addresses them in terms of what hours of service are taken into account when determining full time equivalents. The rule states that hours of service generally do not include hours of service worked outside the United States. The rule applies without regard to the residency or citizenship of the individual. Therefore, employees working overseas generally will not have hours of service, and will not qualify as full-time employees either for purposes of determining an employer’s status as an applicable large employer or for purposes of determining and calculating any potential liability under section 4980H (Employer Shared Responsibility payments). However, all hours of service for which an individual receives U.S. source income are hours of service for purposes of section 4980H. Essentially any employee who falls under the common law definition of an employee who works and is paid in the United States will have their hours counted towards determining if the employer is a large or small employer.
Q: An employer that is either Small or Large cannot send their employees to the Exchange for 2014, have the employees determine the amount of their tax credit and then with their out-of-pocket cost each month come back to the employer and have the employer reimburse the employee from an HRA or through some other format. Is the HRA not allowed to be used in this manner? Is there a rule that prevents an employer from taking a tax deduction for the premium paid for an employee who purchases their insurance on the Exchange?
A: Basically, because of the prohibition on annual dollar limits, an employer-sponsored, stand-alone HRA cannot be used to fund the purchase of individual market coverage, or an employer plan that provides coverage through individually purchased policies, including those that might be purchased on a government-run exchange.
Q: May an HRA used to purchase coverage on the individual market be considered integrated with that individual market coverage and therefore satisfy the requirements of PHS Act section 2711?
A: No. The Departments intend to issue guidance providing that for purposes of PHS Act section 2711, an employer-sponsored HRA cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies and therefore will violate PHS Act section 2711.
Q: If an employee is offered coverage that satisfies PHS Act section 2711 but does not enroll in that coverage, may an HRA provided to that employee be considered integrated with the coverage and therefore satisfy the requirements of PHS Act section 2711?
A: No. The Departments intend to issue guidance under PHS Act section 2711 providing that an employer-sponsored HRA may be treated as integrated with other coverage only if the employee receiving the HRA is actually enrolled in that coverage. Any HRA that credits additional amounts to an individual when the individual is not enrolled in primary coverage meeting the requirements of PHS Act section 2711 provided by the employer will fail to comply with PHS Act section 2711.
Q: If an employee earns 150% of the poverty level and his employer contributes nothing towards healthcare, but offers coverage through SHOP, when he applies, will he be eligible for tax credits due to his income, or does he decline his employer coverage and enroll individually? It was not clear to me in the seminar and i thought I heard that he would be eligible for tax credits based on the income reported by the employer but I could be wrong.
A: Any employee can waive employer coverage and enroll in the Individual Exchange. However, if an employer’s coverage is considered affordable for the employee, then that employee will not be eligible for any tax credits through the Individual Exchange, regardless of their income level. In the example cited, I would assume the employer’s coverage would be unaffordable given that the employee has to pay the entire premium and has a relatively low income. if that’s the case, the employee can waive employer coverage and enroll in the Individual Exchange and would be eligible for advance premium tax credit (APTC). The APTC is not available to employees enrolling through SHOP.