A complicated variety of new company rules and regulations have been added by the Affordable Care Act (ACA). One of these regulations, the ACA employer mandate, calls for “applicable large employers” (ALEs) to provide employees with health coverage that complies with certain requirements or pay a fine.
These fines are intended to deter companies from refusing to provide healthcare to their workers and to persuade such companies to accept the government’s offer of subsidized insurance through the exchange.
Coverage Requirements
The affordable care act employer mandate requires large employers to offer health coverage that meets certain specifications. Coverage must be “affordable” and provide “minimum value.” The ACA defines minimum essential coverage as a plan that provides basic benefits such as hospitalization, physician office visits, prescription drug coverage, laboratory services, preventive care and mental health treatment, and dental and vision care. It also must meet actuarial requirements for cost-sharing limits and deductibles. The ACA defines affordable coverage as costing at most 9.5% of an employee’s household income.
Employees must be offered health coverage through an eligible employer-sponsored group plan, which includes most plans offered by private companies and government-sponsored programs. The employer must provide coverage to all full-time employees and their children up to age 26, regardless of whether the employee is eligible for other coverage through the individual or group marketplaces.
Some economists believe the ACA’s employer requirements will distort hiring decisions, encouraging firms to reduce the number of low-income workers who might be eligible for subsidized marketplace coverage. This could lead to fewer job opportunities for workers and less economic growth.
Plan Design
The ACA introduces many new rules for group health plans. Many of these changes have been in effect for some time, but others were recently imposed. For example, the ACA imposes restrictions on annual dollar limits and requires coverage of dependent children up to age 26.
The ACA also imposes fees and taxes on employers, impacting how much they pay for group health coverage. For example, the ACA imposes a 40 percent excise tax on plans that exceed certain cost thresholds. Employers need to evaluate any benefit demands from unions against one or more state benchmark plans to help them identify requests that may exceed a norm and use them as leverage to bargain for concessions in other areas.
The employer requirement is a second significant alteration to the plan’s architecture. The Affordable Care Act (ACA) requires businesses to offer “substantially all” of their full-time employees, which is defined as including the first 30 employees employed, affordable, minimum-value coverage. A penalty is imposed if an employer fails to do so or any employee enrolls in exchange coverage and receives an insurance subsidy.
Reporting Requirements
Generally, small businesses have more flexibility than large employers when offering employees health insurance coverage. But that doesn’t mean they’re exempt from the reporting requirements under the ACA. Employers that sponsor self-insured plans must report to the IRS on the minimum essential coverage they provide each tax year by submitting Forms 1094-B and 1095-C.
In addition, applicable big businesses are subject to fines under IRC Section 4980H depending on the number of full-time workers and the related hours worked by those full-time employees unless they provide their full-time employees and dependents with affordable health care. It can take time for bigger businesses to understand ACA laws and requirements.
But these employers must understand the impact of non-compliance. If you’re an applicable large employer, you should consult with an ACA expert to understand your compliance requirements. They can help you ensure you’re offering affordable health care to your employees and meeting the necessary ACA reporting obligations. And they can also help you avoid costly penalties that dig into your bottom line.
Reporting Options
Affective major firms must provide their full-time workers with affordable health coverage that satisfies minimal value criteria under the ACA’s Employer Shared Responsibility provisions. Additionally, ALEs must annually disclose this coverage to the IRS.
The ACA reporting requirements for ALEs are complex. This is especially true for the aggregation of data from multiple companies that are affiliated or commonly controlled. Understanding these requirements and being prepared to comply with them each year is important.
Depending on the size of an ALE, the complexities of these reports can be daunting.
Penalties
The ACA Employer Mandate has penalties for businesses that do not meet its requirements. These penalties, also known as the employer shared responsibility provisions, affect large employers that do not offer health coverage or do not offer health coverage that meets minimum value and affordability requirements.
For the calendar year 2023, applicable large employers could face a penalty of $2,880 per full-time employee (minus the first 30) if they don’t offer coverage or the coverage doesn’t provide minimum value and isn’t affordable. In addition, applicable large employers could face a penalty if any of their employees receive premium tax credits from the marketplace and can purchase subsidized coverage.
While ACA reporting isn’t at the forefront of many employers’ minds, it’s important to know that the IRS will continue to assess fines for non-compliance with the ACA. Staying compliant can be a challenge for ALEs who need help navigating the complexities of the ACA. Partnering with a knowledgeable and experienced financial professional will help ensure compliance.
