We’ve heard from our customers a lot of concern and confusion over what the new Affordable Care Act rules will mean for them and we want to provide as much information as possible as the deadline, January 1st, 2016, is quickly approaching.
We understand how hard it can be to comply with government regulations when you already spend every hour of your day running your business, so we’ve compiled a list of commonly asked questions and their answers in one handy post. We tried to make it as comprehensive as possible, so prepare yourself for a long read – you may even want to bookmark it in case you have questions down the line.
Here are some of the key things to know about ACA compliance:
Who needs to provide healthcare options to their workers under these new rules?
Any company with 50 or more full-time equivalent employees will need to provide healthcare coverage for at least 95% of their full-time employees.
Who counts as a full-time employee?
The law defines full-time employees as those who work on average per month 30 hours or more per week, or 130 hours or more per month, for more than 120 days in a year.
What happens if I don’t provide insurance?
You’ll have to pay a fine of $2,000 per full-time employee counted after your 30th employee.
What if I already provide insurance? How do I know I’m in compliance?
If you already provide healthcare for your employees, you may already be in compliance.
If you don’t already provide employee healthcare plans, you need to provide coverage to at least 95% of your full-time employees and their dependents, up to age 26, and cover on average 60% of covered medical services with a maximum out-of-pocket limit of $6,600 for an individual plan and $13,200 for a family plan before marketplace subsidies. Your plan also needs to meet affordability and minimum benefit rules. A service that allows employees to sign-up for plans online can help ensure compliance with those rules and make managing your paperwork easier.
What are my options for providing health insurance?
- If you don’t already provide coverage, you may be able to take advantage of the Small Business Health Options Program (SHOP) Marketplace, available to small businesses with 50 or fewer full-time equivalent employees. Not only are SHOP plans affordable, but depending on the size of your company and the average wages of your employees you may also be eligible for tax breaks as high as 50% of your employee premium costs.
- You can also save money by using reimbursement or flex accounts to help your employees pay for healthcare costs. Flex accounts are employer funded savings accounts which employees can use to help cover certain medical expenses. Using these plans can mean tax breaks for you and your full-time employees who are covered by your group plan.
- Finally, you have a choice between private insurance marketplaces or exchanges run by states or the federal government. This allows for the very best fit for your company, managing costs while providing compliant healthcare plans for your eligible employees.
For groups with 50 or fewer full-time equivalent employees, there may be a negative impact on those employers that have yet to move onto ACA compliant health plans (bronze, silver, gold or platinum). The rates of the ACA compliant plans reportedly have been higher than similar pre-ACA plans.
Upcoming Changes In Employer Benefits Requirements Due to ACA Rules
Employer Shared Responsibility Expansion
(Currently in effect – impacts employers with 50 or more full-time equivalent employees on 1/1/2016)
The Employer Shared Responsibility Provision requires employers to offer both Minimum Essential Coverage and Affordable Coverage or face steep financial penalties.
- This provision of the ACA is already in effect for employer groups with 100 or more full-time equivalent employees.
- It will impact groups with 50 or more full-time equivalent employees as of 1/1/2016.
I heard that I need to report something to the IRS. What’s that all about?
If there are two new requirements of the ACA that will catch many businesses off-guard, they are the 6055/6056 reporting requirements and the 1094/1095 forms. Internal Revenue Service Code Section 6055 applies to providers of minimum essential health coverage, including insurance carriers and self-funded plans. Section 6056 applies to applicable large employers that offer fully insured medical plans and which are subject to the ACA’s employer shared responsibility rules. Section 6056 requires monthly tracking of whether: (1) the applicable large employer offered full-time employees and their dependents minimum essential coverage that meets the minimum value requirements and is affordable; and (2) the employees enrolled in the self-insured minimum essential coverage offered. The requisite information is reported using Forms 1094-B and 1095-B (under Section 6055), and Forms 1094-C and 1095-C (under Section 6056).
How do you anticipate small business owners effectively preparing their organizations? Are there going to be unanticipated consequences aside from the financial impact?
Small business owners with 50 full-time equivalent employees may be unaware of the necessity to prepare their organizations. Those that are aware will be relying on their HR staff, payroll personnel, accountants, and insurance brokers for advice and tools to complete the tasks.
There will likely be unanticipated consequences.
One example is in the case of the requirement of an employer to provide an affordable plan. An employer may offer a plan that meets the affordability definition for the employee, but may be unaffordable (by any standard) once the employee’s dependents’ costs are factored in.
Unfortunately, employees and their dependents that are offered this “affordable” coverage are excluded from receiving subsidies on their state or federal health insurance exchange. This is a known issue, but has yet to be fixed in the legislation.