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ACA Penalties: Insurance Inadequacies Can Cost You

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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.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.

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.


ACA-Related Costs and Premiums Predicted to Increase in 2017

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With the 2017 open enrollment for the Affordable Care Act (ACA) or “Obamacare” just around the corner, states are beginning to approve insurer rate requests. Based on the results so far, people who buy health insurance on their own via the marketplace can expect some steep premium surges. Employers, also, can expect hikes in ACA-related costs and health insurance premiums.

Cost impacts of the ACA

Costs for the lowest and second-lowest ACA silver plans are soaring faster in 2017 than in previous years, according to the Kaiser Family Foundation. For example, the cost of the second-lowest silver plan in certain major cities analyzed in the Foundation’s report is predicted to increase by a weighted average of nine percent in 2017 – a sharp jump from two percent in 2016.

Some states have already begun approving insurer rate plans, and the numbers depict some extensive premium hikes for individuals who purchase health insurance through the marketplace. Mississippi has endorsed increases of approximately 43 percent. In Tennessee, an average increase of 62 percent has been approved for one of the state’s largest marketplace plans; and California has announced an average increase of 13.2 percent.

According to Kaiser Health News, large employers expect their healthcare costs to rise by around six percent in 2017, and most employees of large businesses can expect a five-percent increase in their premiums. Based on a 2016 survey, employers are also anticipating a spike in their general administrative ACA expenses for 2017 – with reporting, disclosure and notification requirements being the primary cost drivers. There’s also the delayed 40-percent Cadillac tax on high-cost, employer-sponsored plans, which is forecast to be a significant ACA cost driver beyond 2017.

ACA penalties expected to rise

ACA penalties are expected to climb in 2017. For example, the penalty for not offering minimum essential coverage is expected to increase to $2,260 per full-time worker in 2017, compared to $2,160 in 2016. According to the Congressional Budget Office, the effect of employer penalty payments on the government’s revenue will mostly escalate in 2017 and beyond – with the biggest change being from $9 billion in 2017 to $16 billion in 2018.

Cost control measures

According to the International Foundation of Employee Benefit Plans, to contain ACA-related costs employers are increasing:

  • Out-of-pocket limits
  • In-network deductibles
  • Employees’ portion of premium costs
  • Copayment and coinsurance rates for primary care
  • Employees’ share of prescription drug expenses
  • Employees’ share of dependent coverage costs

Other cost-cutting strategies include:

  • Adopting high-deductible health plans
  • Expanding employee wellness programs
  • Dropping, or attaching a surcharge to spousal coverage
  • Modifying prescription drug benefits

Tax incentive for SHOP employers

Small employers who buy health insurance through the Small Business Health Options (SHOP) may qualify for the SHOP tax credit, which can help offset the cost of providing health insurance to workers. To qualify for the credit, employers must have fewer than 25 full-time equivalent employees who each earn an average salary of around $50,000 or less per year, pay at least 50 percent of their full-time employees’ premium and offer coverage to full-time employees via the SHOP marketplace. The smaller the company, the bigger the credit, which is capped at 50 percent of the employer’s contribution toward employees’ premium costs.

Businesses with fewer than 50 full-time and full-time equivalent employees are not subject to the ACA’s Employer Shared Responsibility provisions and can therefore simply choose not to offer health insurance. But, an analysis published by the New England Journal of Medicine concluded that employers competing for top talent will continue to provide health benefits and will not shift employees to an insurance marketplace – though this could change if the Cadillac tax is implemented.

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.

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 attuned 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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New PBJ Reporting Requirements for Long-Term Care Facilities

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The latest in the Affordable Care Act (Section 6106) compliance is payroll-based journal (PBJ) reporting, affecting nursing homes and other long-term care facilities.

What is it?

PBJ reporting will require staffing information to be collected on a more consistent basis than is currently, and also will be auditable to ensure accuracy. The Centers for Medicare and Medicaid has been voluntarily collecting this data since October, but beginning in July it will be mandatory.

The requirements place more burden on the employer for detail on daily staff hours by position, by shift and by location, as well as monthly patient census. Census data includes the facility’s patient head count on the last day of each of the three months in a quarter.

This data can then be used to report on the level of staff in each nursing facility, but also to report on turnover and tenure, which can impact the quality of care delivered.

How will it be collected?

Every quarter, data will be collected. Submissions are due by the end of the 45th calendar day after the last day in each fiscal quarter to be considered timely starting July 1, 2016. Late submissions will be accepted, but are subject to enforcement actions by the Centers for Medicare and Medicaid Services (CMS) and may not be used to calculate a facility’s staffing measures.

Submission methods

Hosted by CMS, the PBJ system will accept two primary submission methods:

  1. manual entry or
  2. an XML file upload of data from an automated payroll or time and attendance system.

Manual data entry will require individuals to key information into the PBJ user system. However, for those currently using an automated payroll and time and attendance system, information already is readily available, but must be uploaded following specific guidelines outlined here.

Stay tuned for more information and resources about the PBJ reporting requirements right here on the Paycom Blog.



by Brie Hobbs

Author Bio: For more than eight years, Brie has been writing to both job seekers and business leaders about human resources and the challenges facing today’s workforce. Her articles have appeared on award-winning career and HR blogs, as well as on the International Franchise Association’s SmartBrief and other notable publications. With a background in franchising, Brie focuses on helping franchise organizations understand how Paycom’s human capital management technology can benefit their business.

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Choosing the Right HCM Software Provider Is Essential to ACA Compliance

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The complex nature of the Affordable Care Act (ACA) is well documented, and for good reason. The criteria for applicable large employers (ALEs) contain a sea of intricacies, which are tough to keep up with. It’s no wonder, then, that so many employers rely on payroll providers to assist them with their ACA duties.

But not all human capital management (HCM) providers are equipped to handle ACA challenges, and it’s no consolation that the ACA does not hold third parties accountable for mistakes.

So what’s an employer to do?

Consider choosing an HCM provider that offers the educational, monitoring, evaluation and reporting tools needed for compliance.

Teach You the Ropes

As an ALE, you’re subject to the ACA’s employer shared responsibility (ESR) provisions. Your HCM provider should help you understand your responsibilities, which include:

  • identifying all full-time employees, including full-time equivalents, as defined by federal law;
  • providing the IRS with detailed information on full-time employees;
  • determining the type of coverage offered to full-time workers;
  • monitoring employment changes that may cause you to have 50 or more full-time employees, which would subject you to the ESR; and
  • evaluating your group coverage to ensure it meets ACA standards.

Your provider should explain key aspects of the ACA in plain language and provide you with ongoing legislative updates.

Alert You of Critical Occurrences

Chances are, you’ve got a full schedule, which makes monitoring the issues affecting compliance a burden. Still, it’s a necessary task, which can be simplified by an ACA dashboard that:

  • tells you when you’re reaching ALE status;
  • alerts you when full-time and part-time employees are nearing full-time status; and
  • notifies you when employees’ look-back measurement periods are ending.

Above all, alerts and notifications give you timely information and the ability to better manage hours of service for your employees.

Assess Historical and Current Data

At the heart of ACA noncompliance, you’ll likely find errors that could have been avoided through careful data analysis.

For example, employees must be properly categorized as full-time, part-time or seasonal. In addition, accuracy of hours worked is important to determining ALE status, which employees are full-time, and the end-of-year reporting process. Mistakes in these areas can be caught and corrected beforehand through periodic data reviews.

An enhanced evaluation tool lets you access audit trails of historical data, plus review current ACA information. These reports are crucial to regulatory compliance and can help you fulfill your reporting requirements. Evaluation also gives you actionable insights into your responsibilities as an employer.

Reporting That Satisfies IRS Criteria

ALEs must report the total annual cost of their employer-sponsored group health coverage on employees’ W-2, provide employees with a statement of coverage, and report to the IRS through Forms 1094/1095 –B or –C.

The information provided on these forms needs to be correct because the IRS uses it to determine whether:

  • an employee qualifies for premium tax credits;
  • you’re complying with the “pay or play” mandate; and
  • individuals have the minimum essential coverage.

Considering the extensive scope of ACA reporting, a payroll system that facilitates the following is of paramount importance:

  • employment status changes,
  • coverage affordability and other qualifying factors,
  • trends in employee hours and ALE status, and
  • minimum value and “pay or play” calculations.

In the end, the right payroll provider has a simple goal: to relieve you of your worries by mitigating compliance risks, including those associated with the ACA.

Author Bio: Barclay has over 20 years of experience working as a consultant. He has worked in the consulting practices of accounting firms Ernst & Young and Causey Demgen & Moore. Barclay joined Paycom in 2011 and is currently a Tax Research Analyst. Robbie is a graduate of Rhodes College in Memphis, Tenn.

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