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Sunday, 04 January 2015 21:00

Two major ACA requirements take effect in 2015

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The new year rings in two major requirements for employers to follow under the federal Affordable Care Act.

Penalties for not offering health benefits that comply with the ACA begin to kick in for some employers in 2015 and for even more companies in 2016.

In general terms, the law requires employers with 100 or more full-time equivalent employees — those that average more than 30 hours per week — to offer ACA-compliant health benefits to at least 70 percent of their workers and their dependents under 26 years old beginning with any health plan renewed after Jan. 1, 2015.

If they don’t, they could face a penalty of $2,000 per full-time equivalent (FTE) employee, excluding the first 80 employees in 2015. The amount could go to $3,000 if an employer offers coverage that fails to meet the law’s affordability and minimum essential coverage mandates, and if an employee then goes to the public health exchange at healthcare.gov to buy coverage on their own and qualifies for a federal subsidy.

The employer mandate in the law expands in 2016 to require employers with 50 or more FTEs to offer ACA-compliant health benefits to at least 95 percent of employees and their dependents under 26 years old. The exclusion from the penalty also changes in 2016 to the first 30 employees. The federal government put the penalty on hold for one year for companies with 50 to 99 FTEs, provided they meet certain conditions.

The penalty does not apply to employers with 49 or fewer employees.

Marti Lolli, the director of health care reform at Priority Health, expects that employers that have been following the ACA and adjusting their health benefits accordingly shouldn’t have any issue with the penalty.

“By and large, most employers that we offer coverage to did not have to make drastic changes to their benefits or to whom they offer it to comply with this piece of the law,” Lolli said.

Where employers will surely feel an administrative burden from the ACA in 2015 is in its reporting requirement.

Under the federal health reform law, employers in 2016 must begin reporting information to the Internal Revenue Service that includes which employees were enrolled in health benefits each month, which were not, and the costs of the plan. Employers must use data from the preceding year, meaning they need to start tracking it in 2015.

“This year, employers need to understand what information they need to track and collect and to adjust their systems and processes to begin collecting that so in 2016 they’re ready to go,” Lolli said.

Benefits consultants expect that the reporting requirement could become a big headache for employers.

“There’s a whole new cottage industry with the payroll companies and others popping up now to try and help employers with the problem and how they’re going to submit the data,” said Bob Hughes, president of Advantage Benefits Group Inc. in Grand Rapids. “It’s ridiculous what HR people are going to have to do now going forward.”

In fact, Lolli said she’s talked to many clients whose systems “just don’t even handle or accommodate the level of information the IRS is requesting. So there are some process and system upgrades that will need to be made.”

The IRS will use data from the reporting to check compliance with the ACA, to see if employers meet coverage and affordability mandates, and to determine if they are subject to penalties.

Jim Kenyon, a client executive at Hylant Group in Grand Rapids, doubts that many employers are even aware of the reporting requirement. He suspects they may have overlooked it.

“I’ve been asking my customers, ‘Who’s your payroll service? Ask them this question: Are you going to be prepared to help me with reporting?’” Kenyon said.

The ACA has added a whole new layer of complexity for employers in managing their employee health benefits, said Kirk Roy, vice president of national health reform at Blue Cross Blue Shield of Michigan. Prior to the ACA, employers primarily only had to worry about what type of health plan to offer each year, their deductible and copay levels, and how much of the premium they paid versus how much the employees have to pay.

Now they need to worry about those decisions and how they square with the requirements of the law, Roy said.

“There always will be, forever more, this new dimension to figure out: ‘What does what I am doing mean in terms of all of those penalties, reporting and other stuff?’” he said. “That’s just new and big and it’s burdensome administratively and it also makes the decision-making much more complicated.”

Despite the complications and the increased administrative burden of complying with the law, few employers have so far chosen to drop employee health benefits altogether.

“We haven’t seen a real inflection point still. Some employers are saying, ‘I’m done,’ but there’s not a big domino effect or a rush to get out of the business,” Roy said. “We haven’t seen them just throw in the towel yet.”

That could change, however, in another year when the penalty toughens and employers need to offer ACA-compliant coverage to 95 percent of FTEs, said benefits attorney John Arendshorst of the Grand Rapids office of Varnum LLP.

“We’re going to see a lot of employers consider this again going into 2016,” Arendshorst said. “It’s going to be a different question of whether to provide benefits.”

When considering that question, whether now or in the future, employers need to consider how dropping health benefits may affect their ability to retain and recruit employees. If they look at it simply from the financial question, “for some employers that might be the best option, to not offer coverage and pay the penalties,” Arendshorst said. “That might be less than what they have to shell out for coverage.”

Another change the ACA brings in 2015 is an increase in the penalty for people who do not have health coverage, in violation of the law’s individual mandate. The penalty is $325 or 2.0 percent of family income, whichever is greater. That’s up from $95 per adult and $162.50 per child currently.

Employers with 25 or fewer employees can use the online SHOP exchange (Small Business Health Options Program) to purchase health benefits and seek federal tax credits that have been available since 2010. Roy said he’s seen “almost no” interest in the SHOP exchange among small employers.

Read 3915 times Last modified on Sunday, 04 January 2015 21:37

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