The Affordable Care Act: where are we now?

When it comes to the topic of healthcare, nearly every employer in the nation is working hard to understand the laws and make decisions in regards to the requirements of the Affordable Care Act (ACA). The implementation of the law has been anything but smooth and, with 2015 around the corner, employers are now more than ever faced with additional obligations under the law. In February 2014, final regulations were issued regarding the Employer Shared Responsibility requirements (aka “pay or play”). An understanding of these rules is crucial for all large employers as there has been no official indication that any further implementation delays will be issued. We outline the key upcoming employer provisions below.

Here is an overview of how the final regulations affect employer groups by employee size:

  • Small employers – Employers with fewer than 50 full-time employees (30 or more hours per week) and full-time equivalents are still not subject to the requirements and will not need to comply with any reporting requirements for 2015 or for any other year.
    • Takeaway: This requirement is essentially unchanged for small employers.
  • Midsize employers – Employers with 50–99 full-time employees and full-time equivalents that do not yet provide affordable, valuable coverage to full-time workers will report on their workers and the coverage provided in 2015 but will not be subject to penalties until 2016. These employers will need to provide a certification in 2015 to qualify for this provision. Determination of whether an employer has more than 100 employees can be made based on a six-month measurement sample in 2014. 
    • Takeaway: Midsize employers who certify will essentially receive a delay in compliance requirements until the first day of the plan year in 2016.
  • Large employers – Employers with 100 or more full-time employees and full-time equivalents continue to be subject to the employer shared-responsibility requirements starting in 2015. However, the rules allow a “phase-in” of the requirements. Large employers will now have to offer minimum essential coverage to 70 percent of their full-time population in 2015 and 95 percent in 2016 and beyond in order to avoid a $2,000 penalty on all full-time employees*. 

However, if the employer does offer minimum essential coverage to at least 70 percent (or 95 percent in subsequent years) of full-time employees but fails to offer affordable, valuable coverage to any full-time employee, then the employer risks having to pay a $3,000 penalty on any full-time employee who enrolls in Marketplace coverage and receives a subsidy.  Valuable means the employer offers a plan that covers 60 percent of the cost of benefits (bronze level plan) and affordable means the full-time employee does not pay more than 9.5 percent of his or her wages toward the premium cost.

It is crucial for large employers to identify all of their 30+ hour employees in order to avoid either of these penalties.  The regulations have provided two methods for employers to identify full-time employees:

  1. Look-back measurement method: Employers are required to designate three different time periods in order to identify 30-hour employees
    1. Measurement period: A time period of 3‒12 months during which the employer tracks all employees’ hours
    2. Administrative period (optional): A time period of up to 90 days during which the employer averages the number of hours identified during the measurement period, makes a list of 30+ hour employees, and makes an offer of affordable/valuable coverage by the first day of the plan year or stability period
    3. Stability period: A period of time that must be at least 6 months long and at least as long as the measurement period during which an employee who measured out to be a 30+ hour employee is “locked in” as a 30+ hour employee
  2. Monthly measurement method: Employers determine full-time status by looking at the number of hours in any given month and making offers of affordable/valuable coverage to anyone who averages 30+ hours during that month.

It is also important for large employers with non-calendar plan years to determine whether transitional guidance is met to allow a delay of the requirements until the first day of the plan year in 2015.

  1. Takeaway: Large employers are required to meet the guidelines of the shared responsibility requirements in 2015 by offering minimum essential coverage that is affordable and valuable for all full-time employees in order to avoid penalties. It is important for employers to adopt a method to determine their full-time population.

Large and midsize employers (50+ full-time and full-time equivalents) will also have to report several data elements to the IRS in order to facilitate the imposition of shared responsibility penalties.  The shared responsibility reporting or “6056 reporting” will be required of all employers beginning in 2015.  Employers will be required to capture information on a monthly basis regarding their full-time employees, what coverage is offered to each individual full-time employee, and the amount an individual full-time employee pays for the health coverage.**  The actual report will be due by March 31, 2016, if filed electronically.  Employers will also be required to provide statements to employees including all the information the employer provided to the government on each particular employee.  These statements must be provided to employees by January 31, 2016. 

The implementation of the employer requirements under the ACA has been fraught with many starts and stops.  The rules issued to assist employers with implementation have been complex, confusing, and, at times, frustrating.  But the time is here for employers to prepare for 2015 in order to avoid any adverse consequences in the future.

View our recent webinar on this topic, Healthcare reform: where are we now? An employer’s guide to 2014‒2016 >

If you have questions or would like to discuss how these changes may affect your particular situation, please contact a representative of Baker Tilly or M3.

Karen Breitnauer
M3 Compliance Attorney
karen.breitnauer@m3ins.com
608 288 2754

*The $3,000 penalty for not offering affordable/valuable coverage to the 30 percent or 5 percent, however, would still apply.
** The list of required data elements is not exhaustive.