While it has been five years since the Affordable Care Act (ACA) became law, facets of it are still rolling out, including several of concern to large employers. The law's intricacies have resulted in considerable confusion for many, but one thing is clear: Large employers need to be aware of several aspects of the law that take effect this year.
While the requirements to offer employees working an average of 30 hours or more per week affordable insurance and to extend dependent coverage to age 26 were implemented earlier, here are some areas of ACA that employers need to be thinking about now.
The ACA "play or pay" provision
Under the shared responsibility section of the ACA, employers face penalties for not offering health insurance coverage or if the coverage they offer is insufficient. It is not enough to merely offer coverage, it has to provide minimum value to plan participants and be "affordable." The latter is critical and the lowest cost plan offered to employees for self-only coverage cannot exceed 9.5 percent of the monthly salary or the federal poverty limit. Some companies have beefed up employer-paid benefits for employees while cutting them for dependents to meet the level.
Just be aware that applicable large employers with 100 or more employees could face penalties under the play or pay provision for 2015, and those with 50 to 99 employees will face potential penalties under the provision next year.
Employer reporting requirements
To help enforce the play or pay provision, and help determine which individuals are eligible for subsidies, the ACA amended the Internal Revenue Code and created employer reporting requirements on health insurance coverage offered under employer-sponsored plans. Such reporting is first required in early 2016 with respect to calendar year 2015.
Employers with 50 or more full-time equivalent employees must issue a Form 1095-C to employees containing the requisite information for their tax purposes. That includes information about the health coverage offered by month, the employee's share of the monthly premium for lowest-cost coverage, and other data.
The "Cadillac tax" waiting in the wings
While not in effect until 2020, employers need to be planning for the forthcoming excise tax on so-called "Cadillac" plans. Generally, under this provision, a 40 percent tax is imposed on employer-sponsored health plans with total values that exceed $10,200 for individual coverage and $27,500 for family plans for any amounts over the threshold. For a single employee whose coverage comes to $12,200, for example, the employer would pay a tax of $800 (40 percent of $2,000) per employee. The numbers will be adjusted annually for inflation, but remember that health care insurance premiums have gone up faster than inflation.
According to Kaiser Family Foundation data, without a change in benefit plans, an estimated 26 percent of employers would trigger the tax at its inception. The Kaiser analysts estimate that 46 percent of firms with more than 200 employees will pay some Cadillac taxes in 2018. Unions that spent years negotiating better health benefits for members as alternatives to wage increases will find employers more likely to cut benefits in the future rather than incur more taxes.
Employers with a lower-paid workforce may find themselves dealing with subsidy appeals in early 2016. It is assumed that many people who received subsidies to help pay for their health insurance may have understated what they earned. However, until the new reporting mechanisms take effect, there was little verification done before granting tax credit subsidies. This means that employers could get hit with notifications about taxes triggered by those errant subsidies that they will need to appeal. (This will hopefully end with the implementation of the Form 1095-C.)
Five years have passed since the ACA went into law, yet there is still confusion as new aspects of it roll out each year. It takes expertise with employee benefits and ACA provisions to ensure a firm is on the right track. For companies such as the Wellspring Insurance Agency, which pride themselves on their knowledge of the health insurance marketplace and regulations governing it, helping clients with areas of the ACA is becoming a bigger part of their advisory relationship. Most companies do not have the in-house expertise to monitor the complex requirements of the ACA and should look for help to ensure they are not hit with unforeseen penalties or taxes.