North Bay employers learn new language of Affordable Care Act compliance

Phased implementation of the Affordable Care act requirements has kept employers consistently busy throughout the end of 2015 and into the first half of 2016, as they have continued to focus on their shared responsibility provisions of the mandate, tackling new reporting requirements.

Beginning in 2015, employers with 100 or more full-time or equivalent employees (when adding together part-time employees’ hours) were subject to the employer shared responsibility provisions.

Beginning in 2016, employers with 50 – 99 full-time or equivalent employees need to report their employee’s health care status to the federal government.

In December, many employers hit a bump in the road when many of their health care plans expired, and they had to choose a new plan and switch carriers, which resulted in higher deductibles and out-of-pocket with decreased benefits.

“The reporting has been a bear for those with more than 50 employees. It’s like learning a new language and a new system,” said Victor McKnight, principal at EPIC Insurance in Petaluma. “Many small employers made significant changes to their plans in late 2015 or January 2016, so the employees are working through the changes.”

The good news is that most employers are managing to file. Also, the deadline for filing Forms 1095 and 1094 has been extended from Feb. 29 to May 31 2016 if filing via paper. If filing electronically, the deadline has been extended from March 31 to June 30. There are a few stragglers, however.

“We are still getting new clients, people we should have been talking to about this a couple of months ago,” said Andrew McNeil, principal, Arrow Benefits.

McNeil’s advice to employers is to track employees on a monthly basis. “Then their records will be in better shape,” he said.

Penalties for non-compliance with the mandate are $2,000 per employee. As long as employers make a good faith effort to file, however, the IRS has said they would be lenient and not issue a fine.

The other good news is, as part of an Omnibus Spending Bill in December, Congress voted to delay the “Cadillac tax,” a 40 percent excise tax on high-premium health insurance plans, until 2020. This will give employers some breathing room to work on reducing health premiums within their benefits programs.

There still are, however, some nitty gritty issues and complications employers are experiencing with coming into compliance.

One area that remains challenging is for those who own multiple businesses, or a percentage of a business. Say someone owns two restaurants each with 30 employees. The mandate applies not to each restaurant, but to that owner’s collective amount of employees.

Also, many organizations provide employees the opportunity to waive their right to the offered medical coverage and receive taxable reimbursement in return. Such arrangements in place prior to December 17, 2015 need not do any reporting of this option. Arrangements after that date, do need to be reported on the newly required 1095C form.

As a solution, some employers have outsourced the reporting, but they still need to gather significant payroll information. Others have experienced administrative problems with outsourcing, by not receiving timely information or living up to their promises.

The employers who have fared the best are those with an integrated payroll and online enrollment.

“There are a lot of different codes for different things and a lot of raised questions for those who did it themselves,” McKnight said.

There are also software programs designed for employers to enter data, and the program will kick out the forms.

The ACA is a document that is 1,990 pages and includes every benefit, tax, protection, and reform in specific detail. While most of the reform has already taken place, one of the challenges is keeping up with ever-changing requirements. The ACA already has provisions set to roll out in 2016, 2017, and 2020 that small business need to prepare for.

One change coming the next time employers with 50 – 99 employees renew their policies will be the move from a composite rate structure, which includes a set rate for every employee age, to a rate structure that is all aged based.

“This will be a shock for some,” McNeil said.

While the ACA has brought increased health care costs to many employers, the majority of organizations believe the largest cost increases are yet to come, according to a survey by the International Foundation of Employee Benefit Plans. Concerns for employers continue to be the rising cost of premiums, rising deductibles, and rising out of pocket maximum.

Despite current anxiety around the requirements of the mandate, employers can take stock that things should be more familiar the next time around.

“It’s beginning to come together for people. This is the first year they are doing it, going forward next year they will be more comfortable with the process, and have a better understanding of what to expect,” McNeil said.