The Patient Protection and Affordable Care Act (aka ACA) isn’t known for how easy it is to read or understand. Thankfully, as an HR professional, you don’t have to read the law (you’d have no time for anything else!) and ace a bunch of multiple-choice questions, but you do need to follow the law’s guidelines regarding reporting, documentation and data management.
If you’re in need of a refresher on the essential stipulations and best practices for ACA compliance – especially with open enrollment around the corner – we’ve got you covered.
Basic ACA tenets – cause we all need a refresher
All U.S. businesses with 50 or more full-time or full-time-equivalent (FTE) employees must offer essential health benefits to at least 95% of its staff during any given month.
The health benefits that are offered must meet the Minimum Essential Coverage threshold established by the ACA: paying at least 60% of workers’ total medical costs, including “substantial coverage of physician and inpatient hospital services.”
They must also qualify as “affordable” based on standards agreed upon by the IRS and the Department of Health and Human Services. For the 2019 plan year, employers had to offer at least one plan that costs workers no more than 9.86% of their monthly household income. For 2020 plans that employees will start enrolling in this November, the affordability standard is slightly less – 9.78%. You can also use safe-harbor standards such as W-2 wage, hourly wage multiplied by 130 hours/month (as of the plan year’s first day) or the individual federal poverty level six months prior to that first day.
ACA non-compliance can be costly
Breaking any of the rules outlined above for a particular month can result in a penalty equal to the number of full-time employees on payroll during that month times the applicable payment amount (1/12 of $2,000 or about $166).
If you offer coverage to 95% of your workforce for a month but at least one employee received a tax credit to pay for coverage through an ACA health insurance marketplace during the same period (perhaps because the individual was not offered coverage or received an offer below minimum-value standards), the applicable payment amount is 1/12 of $3,000 ($250), leading to a steeper penalty.
Properly managing ACA requirements to avoid hefty penalties
While ACA compliance is typically assessed on a yearly basis when your business submits Forms 1095-B and 1095-C for all employees, the penalties are based on your company falling below the coverage thresholds for particular months. By they way, don’t forget the electronic filing deadline for your 1095s is March 31, 2020 if you have 250 or more 1095-Cs.
Given the way penalties are assessed, it makes sense to implement a monthly system to help oversee your company’s adherence to ACA guidelines, according to First Capitol Consulting. That organization recommends going through all employee files every 30 days or so to make sure the appropriate paperwork is there – and that it’s completely and accurately filled out for the current reporting year. Key documents include:
- Summaries of benefits
- Coverage offers (and acknowledgment that workers received them)
- Rate contribution sheets
- Enrollment and waiver forms
- Medical invoices
If the IRS believes your company violated an ACA requirement but isn’t certain, the agency conducts an assessment of those documents. In addition to penalties triggered by failing to provide coverage, there are also fines for missing or undelivered 1095-Bs, -Cs and other required forms. While those penalties ($250/missing or inaccurate form) are not as big as those for nonexistent benefits, repeat failures can add up. A monthly internal audit of your ACA-related paperwork can do your company a world of good, finding discrepancies so you can address them before the IRS hits you with a bill.
You can mitigate risk of such fines by using HR software that captures all essential ACA data and forms so you can easily conduct monthly audits, generate the necessary forms and produce audit reports, if needed.
Preparing for potential changes
There’s been a lot of talk about revamping health care in the U.S. but attempts to “repeal and replace” the ACA have fallen short. The ACA remains but the controversy continues.
Throughout 2019, as various candidates campaign for the opportunity to run against President Donald Trump in the 2020 election, health care proposals have been among the biggest parts of their platforms:
- Some presidential hopefuls, like former Vice President Joe Biden, favor approaches that would largely mirror the ACA while more strictly regulating controversial provider and insurer practices.
- By contrast, Senators Bernie Sanders and Elizabeth Warren tout different versions of “Medicare for all“ – universal coverage for every American that takes health care almost entirely out of private institutions’ hands.
- If President Trump is re-elected and the Republican Party retakes the House and establishes more control of the Senate, there could be ACA reform more amenable to the insurance industry and the overall private sector.
Regardless of who earns a seat at the White House, change to the ACA is inevitable. As an HR leader, do your best to stay on top of new developments and how potential changes might affect your organization. We can’t predict the future, but we can be prepared. ”