Update on the Affordable Care Act - a must-read

By Jim Annis

Got an extra $3 million in the bank? If not, pay attention. Even if you do have $3 million, pay attention. This is huge.

The biggest news: In 2015, most companies with less than 100 full-time employees or full-time equivalents did not have to make a decision regarding the “pay or play” portion of the Affordable Care Act. Those companies did not have to decide if they wanted to “play” (provide health benefits for employees working at least 30 hours per week) or “pay” (incur a penalty for not doing so). In 2016, the ACA lowers that threshold from 100 to 50 full-time employees or full-time equivalents. So, in 2016, if a company has more than 50 full-time employees or full-time equivalents, that company needs to decide to “pay or play.”

Insurance plans, programs, and cost increases: Conversely, in the health insurance world, the definition of "small group" is in Nevada is moving from 50 full time employees or full time equivalents to 100 full time employees or full time equivalents.  This is important because it is the “small groups” who need to deal with “community rating”. HeathCare.gov defines community rating as “a rule that prevents health insurers from varying premiums within a geographic area based on age, gender, health status or other factors”.

UPDATE: President Obama signed the PACE Act (Protecting Affordable Care for Employees Act) into law on Oct. 7, 2015 – which now keeps “small group” at 50 full-time employees or full-time equivalents. So why is the above paragraph crossed out? We wrote it on Oct. 6, a day before the PACE Act was brought into law. The ACA is constantly changing, and must be kept up with in order to stay compliant.

Realizing the aggregate financial impact: In 2016, employers with more than 50 full-time employees or full-time equivalents have to decide to face a $2,000 penalty per full-time employee if not offering minimum essential coverage to 95 percent of full-time employees; or $3,000 per full-time employee if the coverage offered by the company is not affordable and does not meet minimum value standards and if the employee gets a subsidy from the State Health Exchange. It is a crapshoot trying to figure out the company’s actual financial exposure.

Also, there is a new “army” to enforce these penalties. The ACA is managed by three government agencies: the Department of Health and Human Services, the Internal Revenue Service and the Department of Labor. The IRS alone is hiring thousands of new agents to administer the law. The IRS has also just recently released unofficial updated penalties for both 2015 and 2016. That $2,000 for 2015 could now be $2,080 per employee and in 2016 could be $2,160 per employee. Under Section 4980H (b) the $3,000 (or $250 per month) could now be increased to $3,120 for 2015, and in 2016 could be $3,240. Under the ACA there will be inflationary adjustments. This is assuming the recommendations are accepted. The point is, those penalty amounts are not static and will only go up.

Compliance, penalties, fines and reporting requirements: Finally, you never saw this coming. It's going to hit you between the eyes if you don't follow it closely. Reporting penalties are here. IRS now has the forms ready. Kicking the can down the road is over. Now, if you have more than 50 100 full-time employees or full-time equivalents, if you do not comply one way or another and do not properly file, it will cost you. The penalty for failing to file required information returns with the IRS is $250, plus an additional $250 for not providing the information to impacted full-time employees as well. Depending on the size of your company, this particular penalty alone could reach up to $3,000,000.

The bottom line is if you want to keep your $3 million – whether you have it or not – see your ACA trio (your CPA, your insurance broker or PEO and your attorney) to help you navigate this minefield. Premiums and fines are going up, and so it the administrative burden. If you have not paid attention to ACA yet, it may whack you on the side of the head sooner than you expect.

Jim Annis is president and CEO of The Applied Companies, which provide HR solutions for today’s workplace. Celeste Johnson, Applied's COO, contributed to this article.

Read article in the RGJ here.