January 1, 2014, saw the Patient Protection and Affordable Care Act (ACA) kick into full swing. Since its proposition – and to the present day – it has been one of the most controversial laws in recent memory. According to the White House, its impact has been significant. Eight million people signed up for private insurance in the health insurance marketplace. Three million young adults gained coverage by being able to stay on their parents’ plan.
For employers, there continue to be new developments. While healthcare cost increases have slowed, affordability remains an issue for many organizations. In addition, different aspects of the ACA are still being phased in. This means that for the foreseeable future, each year delivers new challenges and 2016 is no different. As the year begins, organizations need to make short- and long-term plans.
The Employer Mandate: Changing Landscape
The employer mandate states that certain employers must offer health insurance that is affordable and provides a certain minimum value. This applies to full-time employees and their children up to 26 years of age. Failure to do so results in penalties: there is one penalty for failing to offer coverage and another penalty for failing to provide minimum value and affordable coverage.
The ACA defines full-time employees as those working 30 or more hours per week. The employer mandate is being phased in and 2016 brings more regulations for employers. The chart below compares plan years 2015 and 2016. January 1, 2016, brought more employers into the fold of ACA requirement, including those with 50-99 full-time and FTE employees.
Besides capturing more employers, the penalties are now more severe. The penalty for plan year 2016 is still $2,000 per full-time employee for employers required to offer coverage that fail to do so. This applies if just one full-time employee receives a premium subsidy for marketplace coverage. The difference is that in 2015, employers could subtract their first 80 employees. In plan year 2016, only the first 30 employees can be subtracted when calculating the penalty. The result of this is the potential for larger penalties even if an employer’s workforce hasn’t increased.
Similar changes occurred with the minimum value standard and coverage affordability standards. Those penalties are the lesser of $3,000 per full-time employee receiving a subsidy or $2,000 per full-time employee. Like the coverage penalty, the number of employees that can be subtracted in calculating these penalties was reduced for 2016 from 80 to 30.
Reporting: The Devil is in the Details
For many, the employer mandate is not a hindrance. A lot of employers that fall into the 50-99 employees category have offered coverage. What may be difficult for some employers to get used to is the annual reporting required by the ACA in 2016.
Employers will be reporting for calendar year 2015. It is a way to administer the individualmandate and employer shared responsibility mandate.
Large employers (>50 FTE) must provide each employee and the IRS with IRS Form 1095-C. This form shows the offer of coverage an employer extended and the months the employee and his or her dependents had coverage.
Small employers (<50 FTE) are using IRS Form 1095-B. Small employers are not liable for the shared responsibility penalty. The 1095-B still assists the IRS in tracking the individual mandate.
What is different for many employers is tracking and reporting this information. Well-trained HR staff has never been more important. Working with benefits, payroll or an ACA reporting vendor will be key for most organizations. Smaller employers may be able to complete these tasks with minimal automation. For those with more than a handful of employees, automatically tracking this information is important. In late December 2015, the IRS extended the deadline for ACA reporting. This gave employers more time to distribute the forms to employees and file them with the IRS.
Consider the Big Picture
There are different ways to approach rising health-insurance costs. Moving to high-deductible and consumer-driven health plans are popular alternatives. Another approach is to create more wellness and behavior-changing incentives.
Many speculated that ACA penalties could incentivize some employers to stop offering health insurance. The thought was that the penalties are less than the cost of the benefit. However, surveys by consulting companies and industry groups have found employers are not abandoning this benefit. In the ACA’s early days, some employers reportedly cut back employees’ hours to less than 30 per week. Other employers like Whole Foods and Starbucks have gone in the opposite direction. They create a competitive advantage by offering coverage options to more part-time employees.
While employers grapple with health insurance costs, employees struggle as well. Families paying higher premiums and out-of- pocket costs can have indirect impacts on the workplace. Caring for family members becomes costlier. Some stop seeking medical care or taking prescriptions because co-pays and deductibles are unaffordable. Finding the balance in offering an effective benefit will become even important.
Does your company meet ACA requirements?
Organizations will have to continue to ensure they are meeting ACA requirements. It appears that companies are willing to adapt to the times rather than abandon health insurance altogether. After all, employers are not just in a position to create a competitive advantage with good benefits. They have the opportunity to make positive changes in employees’ lives. Though the controversy shows no sign of slowing down, with the right adaptations, meeting ACA requirements will become much less of a hassle.
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