ACA: Four Key Facts… and a Silver Lining
In an earlier post entitled Understanding the Affordable Care Act as a Medical Practice and Employee, we sounded the clarion call for all parties to prepare for their respective reporting requirements. If you have not done so already, you should be in dialog with your payroll vendor, your accountant, your legal counsel and your benefits professionals to ensure that you are ready. This post provides a few more tips for medical practices to ensure compliance with federal law.
As the name implies, the Affordable Care Act (ACA) seeks to make essential health coverage available to all citizens and resident aliens at costs within their means. Three pillars of this law – a.k.a. “market reforms” – state that:
- Health plans may not establish dollar limits on benefits for essential services (although limits on non-essential health services are permitted).
- Certain preventative services must be available without cost-sharing (although grandfathered plans are exempt).
- Persons with pre-existing conditions may not be objects of discriminatory treatment.
Practices with group health plans must satisfy these “market reform” provisions. Moreover, they cannot satisfy the “market reforms” by simply reimbursing employees for health insurance premiums. That arrangement is an Employer Payment Plan that’s considered another form of Group Health Plan. If the end result produces employees who do not have essential coverage, they could be hit with penalties that run up to $100 per day per applicable employee.
Although Section 105 regarding non-discrimination rules for fully insured plans has not been released as of this writing, all signs indicate that the law favors plans that provide equal treatment for all covered employees. Examples of differential treatment include unequal employer contributions, unequal benefits, non-uniform waiting periods to receive coverage, unequal COBRA or retiree subsidies, and exclusion of selected employee groups.
While the law establishes minimum acceptable healthcare coverage for employees, it also specifies limits on deductibility of healthcare premiums. In particular, the ACA will impose a 40 percent excise tax on plans with annual premiums exceeding $10,200 for individuals or $27,500 for a family starting in 2018. This penalty is often referred to as the “Cadillac tax.”
Applicable large employers (ALEs) must be especially vigilant about ACA compliance. An ALE is defined as an employer that has at least 50 full-time employees (including full-time equivalent employees) on average during the prior year. If an ALE does not offer insurance with minimum essential coverage to all of its full-time equivalent employees, it will pay the so-called “sledgehammer tax.” This tax equals $2,000 times the number of full-time employees, with the first 30 not counted. The “sledgehammer tax” applies even if one employee secures insurance on the exchange and receives a federal subsidy.
A “tack-hammer tax” applies if the employer offers coverage but it is too expensive or does not meet minimum value, resulting in one or more employees purchasing insurance on the exchange. The tack-hammer tax is $3,000 per year for each employee who purchases insurance and receives a subsidy on the exchange.
A benefit of the ACA is the wellness provisions that allow up to 30 percent of premiums to be applied to health incentives – greater if you include smoking cessation. This provision can help tackle the country’s accelerating rates of obesity and reduce tobacco consumption. The Center for Disease Control reports that many states have 30 percent or more citizens with BMIs of 30 or more. When employees get on board with programs to improve their health, a medical practice could see lower stress levels at work, decreased absenteeism and fewer injuries (work-related and otherwise). And, of course, the organization could enjoy the afterglow of having stimulated positive life changes for their employees.
Adjustments to the ACA seem to be an ongoing part of the enactment of this important legislation. Be sure to stay in touch with your employee benefits expert to ensure that you maintain compliance with all aspects of the law. And, of course, you need to make sure that your accounting staff is prepared to render the appropriate reports. Your CPA can work with them to establish the appropriate protocols.
As a reminder, here are a few key dates for reporting:
- January 31, 2016: Every full-time employee (FTE) must receive the 1095-C.
- February 29, 2016: Mailed 1094-C forms are due.
- March 31, 2016: Electronic 1094-C forms are due. Electronic filing is required for 250+ form submissions.
Contact us with questions or concerns. We’re here to help!