ACA Compliance / Health Care Reform: 2015 End of Year Checklist
Despite what you may think, the Affordable Care Act (ACA) impacts large employers in more than just the health benefits area. Employers must make firm-wide decisions comparing penalty costs to compliance costs, restructuring total compensation packages, designing IT infrastructure to collect and save data, designing report protocols to the federal government, and determining the firm’s best strategies to comply with ACA. Several departments will share responsibility for compliance including HR, tax, legal, payroll and IT just to name a few. Departments will need to share data used in ACA compliance and must retain records for a minimum of 7 years. It’s a daunting prospect. We offer the following checklist to assist you in taking steps to meet your firm’s ACA compliance / health care reform responsibilities.
- Will your firm employ more than 50 full-time employees in 2016? If the answer is yes, then your employee health benefit package must offer minimum essential coverage to at least 95% of your full-time employees and their dependents. “Minimum essential coverage” means coverage with an actuarial value of 60% or more and 10 essential benefits as outlined in the ACA. Note: The threshold for 2015 was 70% of full-time employees but it increases to 95% for 2016. You will not comply with the 2016 rules if you only cover 70% of your full-time employees.
- Does your health benefit management system document each employee’s eligibility date? Your administrative management system must document the date and method of delivery that your firm used to give the employee notice of his eligibility for coverage and his subsequent election.
- Does your health plan provide at least 60% of minimum value? If the answer is no and any employee buys coverage from the ACA market place, the federal government will assess a penalty based on the number of employees minus 30 times $2,000 annually.
- Will any employee pay more than 9.5% of compensation during the year for the lowest cost employee-only coverage? If the answer is yes, your employees can choose instead to buy coverage from the ACA market place and may apply to receive a subsidy. The ACA provides a penalty for not providing low-cost coverage based on the number of employees receiving subsidies times $3,000 annually up to a maximum penalty. The maximum penalty uses the total number of employees (minus 30) times $2,000 annually.
- Have you conducted an excise tax liability study? You should. Beginning in 2018 if the cost of health care coverage (including the employer’s and the employees’ share) exceeds $10,200 for single employees ($20,500 for family coverage), the federal government will assess a penalty on the employer/plan administrator in the case of self-funded plans in the amount of 40% of the amount over the limit. For insured plans, the penalty goes against the insurance company but most likely the insurance company will pass along the cost to the employer. Don’t make the mistake of thinking these limits are too high to matter. Recent studies indicate that about 60% of all employer plans will breach the limits by 2018 unless employers redesign their plans. The non-deductible penalty for breaching the limits can reach substantial amounts. For example, a company with 500 employees each with $200 subject to excise tax for individual coverage and 1,000 employees each with an excess of $500 for family coverage will pay an excise tax penalty of 40% of the excess amount, or $240,000 for both groups combined.
- What can you do? One plan redesign generating benefits buzz appeared in the Employee Benefit Research Institute (EBRI) December 2012 issue brief: the consumer driven high deductible plan (CDHP). The current thinking is that CDHP will lower health care costs significantly by putting design-making responsibility into the hands of the individual employee. Employees in such plans seem more likely to take information from many sources into account with respect to their doctors’ costs and quality of care. They also seem to take advantage of wellness programs and screenings, both factors that drive down costs.
If you would like to discuss ACA, or anything else, please contact us.