Employers are already awash in labor law requirements and agency regulations. Among these are the ever-changing ACA requirements.
To be in compliance with the ACA, and avoid any penalties, the health plans of applicable large employers (ALEs) must pass three tests.
Those tests are:
- The minimum essential coverage test, which means services are covered in at least 10 “essential” health categories
- The minimum value test requiring that at least 60% of the cost of essential care is covered
- The affordability test
What Constitutes "Affordable?"
Currently, in order to be deemed “affordable,” a plan’s individual-only coverage cost to an employee cannot exceed 9.66% of the employee’s household income in 2016 or 9.69% of the employee’s household income in 2017.
The IRS Proposed Rule for Calculation Change
The IRS recently issued a proposed rule that may change the way a plan’s affordability is calculated by employers who offer opt-out payments to employees in exchange for them declining coverage under the company’s health plan.
Under the ACA, employers are permitted to provide a post-tax, opt-out payment to workers for waiving receipt of company-sponsored health coverage.
Unconditional Versus Conditional Payments
If a business offers these types of opt-out payments, they must determine whether those payments are “unconditional” or “conditional” according to the IRS.
Under the new proposed rule, if a payment is “unconditional” — meaning the only requirement for an employee to receive the payment is that he or she waive the company-sponsored healthcare coverage — the employer must count it as a required employee contribution when calculating the health plan’s affordability.
The logic behind this is that the IRS considers the payment to be compensation that employees must forgo in order to participate in the health plan.
“Conditional” payments, that is, those payments contingent upon an employee waiving coverage and proving that he or she has alternative coverage, may be left out of the “affordability” calculation.
The rule, if it is made final, would apply to plan years beginning on or after January 1, 2017. Currently, the proposal is going through the comment stage, after which it may be amended before being published as a final rule.
ACA Penalty Triggers
The DOL has said that by the end of 2018, it plans to audit every employer covered by the ACA for compliance with the healthcare reform law. While some observers are skeptical of the feasibility of such a plan, the implication is clear: employers have been put on notice regarding compliance in their ACA practices.
Common trouble spots
Most employers and HR personnel are aware of and in compliance with the major ACA issues such as failing to extend coverage to dependent children up to age 26 or putting dollar limits on health benefits. However, there are other requirements that are likely to be overlooked by employers that can result in expensive non-compliance penalties.
Because so many employers are focused on other major ACA provisions such as the reporting requirements and Cadillac Tax, he pointed out that it’s easy for some smaller ACA requirements to “fall through the cracks.”
Here are three of the more commonly missed ACA rules that can trigger penalties:
Plans must provide coverage for approved clinical trials.Clinical trials are broken down into Stages 1, 2, 3 and 4. Some plans were structured to cover only Stage 3 and 4 trials. These plans are subject to $50 per-participant ACA penalties, however.
Plans must provide written notice of a coverage rescission.Rescissions, or retroactive cancellations of coverage, are generally not allowed under the ACA except in cases of fraud or material misrepresentations. But if an employer, however, rescinds coverage and fails to give the affected employee notice about the rescission, the rescission is lifted.
Plans must provide a notice of patient protections.
An example might be the right to select a primary care physician, or women’s right to direct OB/GYN access. Often this step is overlooked because employers assume their insurer is providing the notice, and the insurer assumes the company is. If the notices don’t go out, however, ACA penalties of $100 per participant per day can apply, up to a $500K penalty cap.
COBRA Notices Must be Updated
Many employers are unaware that the DOL has also changed their model COBRA notices to include information about the public health insurance exchanges — a.k.a., the “Marketplace.”
Employers should be using the new “Marketplace” language included in the revised notices to ensure good faith compliance with the ACA and COBRA.
Employers and HR Professionals Have Help for Navigating the ACA Requirements
An updated and streamlined reporting strategy will help your organization meet its obligations, while providing accuracy and timeliness. So take time to understand the law and prioritize accurate record keeping. In this way, you will make compliance a sure thing.
Another key step in maintaining HR compliance and increasing your company's cost-effectiveness is to consider outsourcing. A professional agency such a Accuchex can provide much-needed help with Human Resources needs and questions. Accuchex is a full spectrum Payroll Management Services provider offering expertise in Time Management, Insurance and Retirement issues, as well.