Anyone who has put off Christmas shopping until Dec. 24 understands that things can get a little hectic at the last minute. Human resources professionals who took a breather when the Patient Protection and Affordable Care Act’s employer mandate was delayed likely feel the same way.
For many companies, time is of the essence. Employers have about two months to update their data collection systems in order to gather information for the 2015 calendar year and be able to report it in 2016 so that they comply with the Employer Mandate.
A number of insurance brokers and HR professionals realize this is not going away. Employers are starting to realize that they are going to have to do something about it.
The Employer Mandate for Businesses, Explained
Beginning on January 1, 2015, employers with 100 or more full-time workers will need to provide affordable health insurance to 70 percent of their employees or owe a $2,000 per worker penalty, under the long-delayed employer mandate provision of the Affordable Care Act (ACA). By imposing a penalty on medium-sized businesses – the smallest businesses are exempt from the health insurance requirement – that do not offer employee health insurance, policymakers hope to encourage more business owners to provide this benefit to workers.
Businesses Have 2 Months to Comply with Employer Mandate
Although employer mandates have always been a part of PPACA, the Obama administration delayed implementation of the employer mandate and associated reporting requirements from 2014 until 2015. Beginning Jan. 1, employers with 100 or more full-time workers must provide affordable health insurance to 70 percent of their employees or pay a penalty of $2,000 per worker. The Internal Revenue Service refers to these penalties as “shared responsibility”:
Under the Employer Shared Responsibility provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents), the employer may be subject to an Employer Shared Responsibility payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges, also called a Health Insurance Marketplace.
What should employers be doing in the next two months to make sure they are in compliance? Grudzien has several suggestions.
Offering coverage is just step No. 1 to Comply with the Employer Mandate
Offering coverage is just step No. 1 of meeting the Affordable Care Act’s mandate for medium to large employers to offer health insurance. It also has to be affordable, or costing the employee no more than 9.5 percent of household income, which can be estimated in three ways under the law. All this gets measured on April 2016 tax returns, but employers need systems in place to collect it as of this coming Jan. 1. The proposed tax forms just were released in October.
Accurately categorize employees to comply with Employer Mandate
“There are three categories — full time, part time and variable hours,” he says. “Make sure employers are in the correct category, which can be difficult for those with variable hours. Any new hires will have to be classified as well.”
One reason why this so important is that the employer mandate for 2015 is based on the number of full-time equivalent employees. Employers with the between 50 and 99 employees will receive a one-year reprieve until 2016.
Analyze insurance coverage options
Insurance plans must be affordable, according to PPACA. Employer coverage is considered affordable if the employee’s share of the annual premium for the lowest-priced self-only plan is no greater than 9.56 percent of annual household income.
The law also requires plans to offer minimum value, which it defines as paying for at least 60 percent of medical expenses on average for a standard population. The Department of Health and Human Services has released a minimum value calculator for employers.
“Even with minimum essential/minimum value coverage in place, a full-time employee for whom the basic single employee bronze level policy is unaffordable can generally go to an exchange and get subsidized coverage, which will be reported to the IRS and result in a bill from the IRS to the employer for the penalty,” Shehata says.
Some Employers are adopting bare-bones health plans
Some companies are offering “skinny” health insurance plans that provide preventive-care benefits, but not hospitalization or other major medical coverage. Because these bare-bones plans do not limit insurance payouts to workers, they meet the letter of the law’s requirements that employers provide “affordable” health care coverage to their workers at a far lower cost than more comprehensive plans.
Form 1095-C and Form 1094-C apply to large employers, and require reports detailing coverage offered to each full-time employee, whether coverage meets the minimum essential coverage, minimum value rules and whether the coverage was offered to almost all full-time employees (employees who work, on average, at least 30 hours per week) and their dependents, she explains.
Self-insured large employers must fill out Parts I, II and III of Form 1095-C for each employee. Employers who purchase health care coverage insurance for employees are also required to provide information, but not as much (their insurers fill out forms reporting the rest of the information). Batches of Forms 1095-C are transmitted with Form 1094-C.
Health care reform is complex, convoluted and confusing. Everyone is nervous about making a mistake and being penalized, which easily can happen. Talk to your broker, accountant attorney and any other professional that you can.