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ACA Penalties: Insurance Inadequacies Can Cost You

Offering employees health insurance is not enough to avoid the penalties associated with the shared responsibility requirements of the Affordable Care Act (ACA).  While many large employers already provide what they believe to be a good health plan for employees, the ACA has set the standard for what is considered adequate and affordable coverage as well as the penalties for non-compliance.

Health Insurance is considered inadequate if it pays less than 60 percent of covered health care expenses and unaffordable if employees have to pay more than 9.5 percent of their household income for single coverage. Since most employers do not have a way of tracking their employees’ household income, the IRS has provided employers a safe harbor whereby they will be considered as having met the insurance affordability obligation if the employee’s insurance is less than 9.5 percent of the employee’s Form W-2, Box 1 income.

In 2014, employees without adequate and affordable coverage can turn to a Health Insurance Marketplace, also known as an exchange, to find and compare private health insurance options. If even one of your employees elects coverage through the exchange, you could be fined an annual penalty of up to $3,000 per full-time employee, or $2,000 per total number of full-time employees (not counting the first 30 employees), whichever is less. The employee’s eligibility for the exchange is also dependent on the employee’s household income. Generally, those who make between 100 and 400 percent of the poverty level would qualify. For 2012, the poverty level was $23,050 for a family of four.

As you can see, for large employers simply providing insurance may not be enough to keep you ACA compliant. Something else to note is that even if you do provide adequate and affordable health insurance to your employees, the ACA and Fair Labor Standards Act (FLSA) still require you to notify employees of the coverage options for the Health Insurance Marketplace.

Sign up for our webinar – Think Your Business is ACA Compliant? - and read our ACA blog post on “Companies with Employer-Sponsored Health Plans Must Still Notify Employees of Exchanges” to learn more.



Author Bio: Newman Wells is a writer, designer and entrepreneur with over 20 years of corporate marketing experience. Passionate about B2B marketing, Newman Wells specializes in helping businesses define their value propositions by simplifying technical jargon for easier-to-digest messages that drive sales. She has spent the last two decades building successful marketing departments from the ground up and has been Paycom's director of marketing since 2005.

Green highway sign with exit for year 2015

New Year, but Not for ACA’s Non-Calendar-Year Plans

Here we are, kicking off 2015 – the official beginning of the Affordable Care Act’s employer mandate. However, some employers have plan years that don’t begin on Jan. 1 and will not take part in the fun just yet.

Transitional relief provides employers whose plans don’t start on Jan. 1 an opportunity for respite, so long as they meet the requisites below. Employers who fall into this category do not have to comply with ACA requirements until the beginning of their 2015 plan year, as long as their employees are offered affordable, minimum-value coverage from day one of the 2015 plan year.

The following are required in order to qualify for transitional relief.

  1. All plans must have been adopted and legally in effect on or before Dec. 27, 2012. Appropriate documentation, including for the Employee Retirement Income Security Act (ERISA), must have been established by this date.
  2. After Dec. 27, 2012, employers could not have modified the plan-year start dateof non-calendar plans.
  3. The employer must offer coverage to an acceptable percentage of employees, in one of two scenarios:
    1. As of any date in the 12 months ending Feb. 9, 2014, at least 25 percent of employees are covered under the non-calendar-year plan, or
    2. During the non-calendar-year plan during the most recent open-enrollment period ending before Feb. 9, 2014, at least one-third of its employees or 50 percent of its full-time employees were offered coverage.

Provided that each applicable large employer has followed these three requirements, transitional relief is granted. However, all other employers must adhere to the rules and regulations of ACA’s employer mandate, which went into effect Jan 1.

Disclaimer: You should speak to an attorney regarding your specific situation and to determine whether you qualify for this relief.



Author Bio: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attune to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

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ACA Loopholes Closing by a ‘Skinny’ Margin

Employers already are well aware that the health care landscape is changing – and changing drastically. But now employers who thought they were complying with the Affordable Care Act (ACA) are being told otherwise, as the Obama administration works to close loopholes – and fast.

Two major loopholes exist that employers must account for now.

  1. Plans that pass the minimum-value test – but do not offer hospital coverage – no longer will be accepted after 2015.
  2. So-called “skinny plans” were determined to meet the minimum-essential coverage rules of the IRS, but those offering them could still face penalties.

Hospital Coverage Now a Must
According to the U.S. Department of the Treasury, employers offering medical plans that lack hospital coverage and/or physician services will not qualify as meeting the ACA’s minimum-value threshold. This is reflected in IRS Notice 2014-69.

This represents a blow to a large number of employers who were preparing to offer similar plans for 2015 – the first year they will be held to the ACA’s employer mandate, lest face costly penalties.

Despite this news, the administration will allow employers one year to find an alternative, provided they had committed – in writing and before Nov. 4 – to offer one of these plans to their employees. These employers have been granted limited grandfather protection, but will have to add coverage for inpatient services in order to qualify for minimum-value status for the preceding calendar year. Additionally, this protection applies only for those plan years beginning on or before March 1, 2015.

The Treasury also noted that individuals offered these plans still will be able to qualify for subsidies, despite the employer-offered insurance meeting the minimum-value coverage mark under the grandfathered protection.

Employers offering grandfathered plans either must revise their summary of benefits and coverage, or send another form of notice to employees that they still will qualify for subsidies through a health-insurance exchange because of the plan’s limitations.

Large employers failing to offer minimum-value coverage next year could be fined upward of $3,000 per worker in 2015. These penalties will be assessed when employees qualify for subsides through exchanges based on their income.

‘Skinny Plans’
“Skinny plans” are employer-sponsored benefits that offer little more than preventive care. These plans were adopted by employers because they pass the ACA requirement of providing minimum-essential coverage, which is not to be confused with “minimum-value.” These plans are not designed to meet the minimum-value requirement of 60 percent, but allow employers to bypass the first tier of fines under the ACA’s pay-or-play penalty assessment ($2,000 multiplied by each employee for failure to offer coverage).

For employers to be spared the affordability/minimum-value portion of the ACA penalties, they also must offer a comprehensive health plan to all employees and prove that an affordable offer was made to each one. Those choosing the lower-cost alternative (Skinny plans) then would not qualify for subsidies because they were offered a plan that met the ACA’s minimum-value standard.

Penalties for employers offering solely “skinny plans” would be assessed only for employees who opted for the exchange and qualified for subsidies.

As an employer, it is important that you know all of the facts when deciding which plan to choose for your employees … and note that sometimes, being “skinny” isn’t all it’s cracked up to be.



Author Bio: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attune to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

ACA Outlook

An Outlook on ACA: Are You Ready?

If you employ 50 or more full-time or full-time-equivalent employees, you should be ready for the Affordable Care Act’s employer mandate, as we are now T-minus 44 days from the New Year. While you’re planning holiday parties and strategizing for Black Friday, don’t overlook prepping for ACA compliance.

Here’s the good news: 92% of Paycom’s ACA webinar attendees feel their company is in compliance with the ACA. That’s a staggering number considering all of the changes and unknowns that still exist with one of the largest changes to health care our country has ever seen. If you aren’t among that 92%, here’s what you should be asking yourself as you head into the New Year.

ACA New Year 101:

  1. What should I have been tracking in 2014? This was the year for determining whether you will be considered a large employer when the mandate takes effect Jan. 1, 2015. Per ACA’s definition, large employers are companies with 50 or more full-time or full-time-equivalent employees. You would determine your employee count by looking at a time frame of your choosing between three and 12 consecutive calendars months, known as the measurement period. During this period, you also would determine who your full-time employees will be for 2015.
  2. Must I comply in 2015? If you have 100 or more employees on New Year’s Eve, you must begin offering affordable insurance to your employees in 2015 that meets the ACA’s minimum essential value. Those with 50 to 99 employees have been given an extra year – or “transitional relief” – to fully implement coverage; however, they still are required to submit Forms 1094- and 1095-B and C to their employees and the IRS reporting 2015 data in 2016.
  3. What data do I need to have ready for reporting? Employers held to the mandate must determine their measurement, stability, administrative and initial ACA period time frames. Once these are determined, it is vital that the following are tracked for each employee on a month-by-month basis:
    1. hours worked (in order to determine full-time status),
    2. whether an offer of coverage was made and
    3. the employee’s share of the lowest-cost monthly premium for self-only minimum-value coverage.

Employers also must report their total employee count and full-time employee count.

  1. Who will handle my reporting requirements? The IRS Forms 1094 and 1095-B and -C are now in their second draft, meaning they are getting closer and closer to becoming final. Find a human capital management provider that tracks the information above and makes it easy to populate that information on the required forms. Great news: Paycom does both!

With Republicans taking over the Senate majority in the Nov. 4 elections, additional changes to ACA are possible before the end of the year, but the largest portions of the employer mandate are set to take effect New Year’s Day. Are you ready?

 

ACA Blog Image



Author Bio: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attune to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

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