While the NCAA gears up for March Madness, many companies are finding that the Affordable Care Act (ACA) is creating a little madness of its own. Dealing with the ACA is comparable to what many of us who don’t follow college basketball do in March - we look to the “experts” to help us fill out our brackets, pay to play and then just hope we did it right.
If you are mystified by the ACA and what that means to you as an employer, don’t feel bad – you are not alone. Unfortunately, unlike a $10 basketball pool, the dangers of not complying with the ACA, when it finally is enforced, are very real and could be costly for some companies. You can’t afford to just hope you did it right. And while the government recently released its final employer mandate, there are still questions.
While we can’t help much with your March Madness brackets (you’re on your own there), we can help you better understand the ACA terminology and its impact.
Companies need to be aware of the impact of the ACA on their employees to avoid penalties. The ACA requires that employers offer Minimum Essential Coverage (MEC) to all fulltime employees and their dependent children.
First, let’s decode the foreign language that the ACA uses:
- Fulltime employees: those working an average of 30 hours or more per week. Seasonal employees are typically not considered fulltime.
- MEC – Minimal Essential Coverage: Medical care health plan that pays for diagnosis, cure, mitigation, treatment or prevention of disease
- Minimum Value: Medical plan share of cost for coverage is at least 60% paid by employer and covers minimally physician, hospital, emergency, pharmacy, labs and imaging
- Affordable: Employees share of cost
What do you mean affordable?
The key factor is that plans must be deemed “affordable” to the employee. That means the employee’s share of the premium cost is less than 9.5% of their adjusted gross annual household income per year. If the plan is deemed unaffordable to the employee based on their wages the employee can enroll in the public exchange and receive a premium tax credit. In this case the employer will pay an annual penalty billed monthly for that employee.
ACA Individual MandateIndividual minimum coverage must be maintained as described below:
- Coverage under govt. sponsored plans
- Employee sponsored plan
- Plans in the individual marketplace or exchanges
- Grandfathered plans
- Other coverage as recognized by HHS secretary
Individuals who choose not to purchase coverage will be penalized with fees that are raised year over year along with the employer. Penalties begin in 2015.
So, are we at risk or not? Maybe.
Below is a brief Q&A to help you along:
Q1. Does the employer have more than 100 fulltime equivalent employees?
- If no, penalties do not apply
- If an employer has 25 or less employees they may be eligible for a health insurance tax credit
- If no, the employer will pay a penalty for not offering coverage
Q3. Is the coverage affordable as defined?
- If not, the employer will pay a penalty
Q4. Do any employees have to pay more than the 9.5% of household income?
- If so, the employer will pay a penalty
Q5. Did at least one employee receive a tax credit or subsidy in an Exchange?
- If yes, the employer will pay a penalty that increases annually for each employee that substantially increases year over year
Some companies may have the flexibility within their organization to design part-time positions for certain workers. However, this must be a company policy that is initiated well in advance. This cannot be implemented mid-or late in the year to circumvent ACA policy.
Also be wary that some payroll vendors act more as ‘payer vendors’ not really employer of record. What that means is the onus of tracking, communicating and paying into the ACA can be placed on their customers in order to stay compliant.
Is this the last word on it? No.
Staffing Industry Analysts reports that notwithstanding the use of the descriptor “final” in the title of a recent regulatory release, it is expected that there will be continued refinement or revision of the rules through the implementation of the employer mandate on January 1st, 2015 and beyond.
Hopefully this helps you get started. Always consult your HR professionals and legal department within your own organization if you have any questions or concerns. They probably can’t help you fill out your March Madness brackets, but they might keep you from climbing a bracket you don’t want to be on - one of the government’s ACA penalty brackets. Good luck!
Catherine Congleton is a vice president and leading enterprise solutions sales consultant for Yoh in the western United States. She helps clients find innovative solutions for their workforce, including a variety of managed services. Monica Lucero, a strategic account director for Yoh specializing in media and entertainment, also contributed to this article.