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Uncategorized

ACA Employer Mandate Penalties on the Rise

The penalties for not offering health insurance to your employees if you have 50 or more full-time or full-time equivalent employees in violation of the Affordable Care Act are set to rise again next year.

The IRS has increased the fines for employers that fail to provide health insurance for their workers under the ACA’s employer mandate, as well as for failing to provide coverage that is affordable or coverage that provides “minimum value.” The penalties will apply to plans that start on or after Jan. 1, 2024.

The way most employers find out that they may have violated the employer mandate is if they get a 226-J letter from the IRS, which would be prompted by one of your employees receiving premium subsidies after purchasing coverage on a government-run exchange.

Under the mandate, employers with 50 or more full-time or full-time equivalent workers are required to offer 95% of them affordable health coverage. There are two different penalties for violations:

The A penalty

This is levied on an applicable large employer (ALE) for failing to offer minimum essential coverage to 95% of full-time employees and their dependents and if just one of those employees receives a subsidy when they buy insurance on a government-run ACA marketplace.

New penalty amount:$2,970 per employee, up $90 from 2023.

This penalty can be especially damaging. While it is not assessed for the first 30 employees if triggered, it applies to all of the employer’s full-time employees, meaning costs can quickly add up.

The B penalty

This fine is levied if an applicable large employer fails to offer coverage that is affordable and/or fails to provide minimum value, and just one full-time employee receives subsidized coverage through the marketplace.

Coverage is deemed unaffordable if an employer fails to offer at least one self-only health plan where any employee’s share of the premium does not exceed 9.12 % (the 2023 threshold) of their household income. The affordability threshold has not yet been announced for 2024.

In order to provide minimum value, an employer-sponsored plan must cover at least 60% of average costs and provide substantial coverage for inpatient and physician services.

New penalty amount: The annual penalty for a type B infraction rises to $4,460 per employee in 2024, up $140 from this year. Typically, this penalty is broken down into monthly increments depending on how long an employee receives subsidized coverage on an exchange.

The takeaway

While you no doubt already offer coverage to your employees if you’re an ALE, it’s important to pay attention to next year’s affordability threshold.

Any downward change means you have to recheck to ensure that at least one of your plans offers coverage deemed affordable to your lowest-paid employee.

Also, be especially mindful during the new-employee onboarding process to ensure they are properly identified and offered coverage.

If the IRS suspects you are out of compliance, it will send you a 226-J letter. You’ll be glad you have all your paperwork in order if you receive one of these letters.

The 226-J letters are also sent to employers if they make mistakes on their Form 1095-C.

If you receive one of these letters, contact us for assistance.

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Uncategorized

Insurers Promise to Keep Covering Preventative Services

Most health insurers plan to continue offering free preventative care services despite a federal judge having imposed a nationwide injunction on an Affordable Care Act requirement that these services are covered with no out-of-pocket costs on the part of patients, according to a letter by industry trade groups.

With concern growing that this important part of the ACA would suddenly be revoked, some of the nation’s largest insurers and industry trade associations penned a letter to lawmakers, stating that: “The overwhelming majority do not anticipate making changes to no-cost-share preventive services and do not expect disruptions in coverage of preventive care while the case proceeds through the courts.

“Our associations have long supported preventive care and continue to do so. By responding together, we wish to make clear our strong support for continued access to preventive health care for millions of Americans who rely on it. “

Signatories to the letter include the Blue Cross Blue Shield Association, the American Benefits Council and America’s Health Insurance Plans.

The letter was written in response to Democrats on health committees in the U.S. Senate and House or Representatives asking for information from 12 of the nation’s largest health insurers on how they plan to respond to the decision by the U.S. District Court for the Northern District of Texas in Braidwood Management Inc. vs. Becerra.

That decision struck down the ACA requirement that most health plans and issuers cover without cost-sharing the more than 100 preventative services recommended by the U.S. Preventive Services Task Force (USPSTF).

The judge in the case reasoned that the ACA requirement to cover with no cost-sharing medications for HIV prevention violates the rights of the plaintiffs who have religious objections to these medicines. The order immediately blocked the requirement nationwide to cover not only the HIV-prevention medicines, but all preventative services recommended by the USPSTF.

The U.S. Department of Health and Human Services has appealed the decision to the U.S. Fifth District Circuit Court and the Justice Department has asked that the decision be paused as the appeal process plays out.

The lawmakers also asked if the insurance carriers would honor the ACA’s rules until all appeals are exhausted, including all the way to the U.S. Supreme Court.

Fallout from the ruling

The federal court’s decision has caused panic and concern among patients’ rights advocates that insurers would immediately stop covering these services, which have become an essential part of health care in the last decade.

If the ruling stands and survives appeals, insurers could impose deductibles and copays for potentially lifesaving screening tests.

The lawmakers on April 13 wrote in their letter to the insurance industry: “We are very concerned that the decision will unnecessarily cause confusion, force consumers to pay out-of-pocket, and result in patients foregoing preventive services screenings and treatment altogether. There is evidence that even modest cost-sharing deters patients from accessing care and exposure to cost-sharing reduces the use of preventive care.”

The trade associations that responded to the lawmakers’ request to continue honoring the ACA rules said that preventative care is popular and effective, and that the decision from the federal judge likely is just the start of a lengthy legal process.

If the decision were to stand, there are still some preventative screenings that are not covered by the ACA, and it would not affect all states. There are 15 states with laws requiring insurers to cover with no patient cost-sharing the same preventative services that the federal law requires.

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Uncategorized

Small-Group Market Remains Stable under the ACA

A new report has concluded that the Affordable Care Act, which took full effect in 2013, did not result in a significant change in the number of employers offering health insurance, although the rate at which small employers offered coverage declined slightly by 2.6 percentage points between 2013 and 2020.

The study by the Urban Institute found that the small-group health insurance market remained relatively stable during those seven years, a period marked by employers continuing to shift more of the premium burden to their employees.

As of 2020, about half of small employers (companies with fewer than 50 employees) offered health insurance to their staff, while 99% of large companies offered health plans.

Employers with fewer than 50 workers are not subject to the ACA’s employer mandate, which requires firms with 50 or more employees to provide affordable health insurance that covers a slate of benefits mandated by the landmark law.

The study found that smaller employers are still less likely to offer health coverage than their larger peers. The share of employers of workers with group health coverage in 2020 was:

  • 81% for companies with 25-99 employees.
  • 56% for companies with 10-24 employees.
  • 30% for companies with fewer than 10 employees.

The study authors wrote that whether small firms offer health insurance coverage varies substantially. “Though many small firms such as restaurants and retail stores primarily employ low-wage and part-time workers, other small firms, such as professional services firms, primarily employ full-time and high-wage workers. Thus, average trends for all small firms may hide differences among them,” they said.

The pandemic effect

Notably, the COVID-19 pandemic had an effect on the number of small employers that offer group health insurance to their staff. Group health plan enrollment among workers in small firms dropped to 7.9 million in 2020, compared to an average of 9.2 million in the prior seven years.

The study authors say the drop was likely due to decreases in employment in small companies at the start of the pandemic.

Meanwhile, the average annual inflation rate for group health premiums remained steady between 2013 and 2020, with average increases of 3.2% in the small-group market and 3.7% in the medium- and large-group markets.

Despite that, most employers continued shifting the premium costs to their employees:

  • Workers in firms with 1,000 or more employees contributed on average 26% in 2013 for family plans, and the same in 2020.
  • Workers in firms with between 100 and 999 employees contributed on average 30.5% in 2014 and 32% in 2020.
  • Workers in companies with fewer than 50 employees paid 29% of premium costs in 2013 for family plans, a rate that had risen to 35% in 2020.
  • Employees working in firms with fewer than 10 employees have maintained the lowest contribution rates across all firm sizes for both single and family premiums over the past two decades (the report made this assertion, but provided no data).

The present

Despite early concerns that the ACA would result in many small employers dumping coverage for their workers, the changes were muted at best.

In fact, offer rates among small employers has remained steady in recent years, except for the blip in 2020. And during the 10 years prior to the enactment of the ACA, the number of small employers offering coverage had been dwindling rapidly.

Small employers have had to continue offering health benefits to remain competitive in the job market, and that shows no signs of abating now.

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Uncategorized

Large Employers Must File ACA Forms, Not the Insurers

One mistake more and more employers are making is failing to file the required Affordable Care Act tax-related forms with the IRS.

If you are what’s considered an “applicable large employer” (ALE) under the ACA, you are required to file with the IRS forms 1094 and 1095, often separately and before your annual tax returns are due.

Under the ACA, employers with 50 or more full-time and “full-time equivalent” workers are considered an ALE and are required to provide affordable health insurance to their staff that also covers 10 essential benefits as prescribed by the law. This is what’s known as “the employer mandate.”

Filing these documents is not the responsibility of your health insurer as it’s you that’s arranging the employer-sponsored health insurance for your staff. Be aware that you can face penalties if you:

  • Don’t file the forms in a timely manner,
  • Make mistakes when filing the forms, or
  • Fail to file the forms altogether.

The IRS requires these forms to ensure that ALEs are providing health coverage to their employees and that the employer is complying with the employer mandate portion of the ACA.

The forms

  • Form 1095-C — This is basically the W-2 reporting form for health insurance. The form tells the IRS which employers are providing coverage and which employees are getting coverage through their employers.
  • Form 1094-C — This form provides information about health insurance coverage that the employer provides.

Here are the deadlines you need to be aware of:

  • Jan. 31, 2022 — Individual statements (Form 1094 C) for 2021 must be furnished to employees by this date.
  • Feb. 28, 2022 — If filing paper returns, Forms 1094 C and 1095 C must be filed by this date.
  • March 31, 2022 — If filing electronically, Forms 1094 C and 1095 C must be filed by this date.

Penalties

The general potential late/incorrect ACA reporting penalties are $280 for the late/incorrect Forms 1095-C furnished to employees, and $280 for the late/incorrect Forms 1094-C and copies of the Forms 1095-C filed with the IRS.

That comes to a total potential general ACA reporting penalty of $560 per employee when factoring in both the late/incorrect Form 1095-C furnished to the employee and the late/incorrect copy of that Form 1095-C filed with the IRS.

The maximum penalty for a calendar year will not exceed $3,392,000 for late/incorrect furnishing or filing.

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Finance, Healthcare

Proposed Rules Include New Ways to Satisfy Employer Mandates

The IRS has proposed new regulations that could let employers avoid Affordable Care Act employer mandate-related penalties by allowing them to reimburse employees for insurance they purchase on health insurance exchanges or the open market.

The regulations are not yet finalized, but the IRS has issued a notice explaining how applicable large employers, instead of purchasing health coverage for their workers, would be able to fund health reimbursement accounts (HRAs) to employees who purchase their own plans.