The Affordable Care Act (ACA) has been a nightmare for some and a blessing for others. For businesses, especially the human resources departments, understanding all of the new changes and compliance regulations can be quite a challenge. Failure to comply will mean large fines for companies—even if a company doesn’t realize it isn’t complying accurately.
“There’s nothing like getting a little experience under your belt, especially when it comes to complying with the Affordable Care Act (ACA). But experience in this area is hard to come by,” said Natalie Burg of Forbes, in ‘What Small And Large Organizations Alike Can Learn From The First Year Of Annual ACA’.
The ACA is not only a landmarked health reform, it’s also unchartered territory for businesses when it comes to legal compliance and all that is involved.
Brief background
According to the Society for Human Resource Management (SHRM), “The landmark health reform legislation enacted in March 2010 is designed to expand the availability of health insurance, reform the regulation of health coverage and restructure its delivery.”
ACA calls for expansion in health care coverages such as:
- Medicaid expansion
- Employers that employ 50 or more employees are required to offer affordable and essential health care coverage to their full-time employees (employees that work 30 hours a week or more)
- Provisions for insurance premium subsidies for certain low- and middle-income households (SHRM)
- A mandate that individuals without health insurance through an employer or other source, such as Medicare, purchase it on their own or pay a penalty for not doing so (SHRM)
- Establishment of state-based insurance exchanges—marketplaces where individuals can shop for and purchase health insurance (SHRM)
“The law also prohibits lifetime limits on coverage and arbitrary cancellations of coverage, and it requires that nondependent children up to age 26 be permitted to stay on a parent’s health policy,” said SHRM.
It took many companies and business owners by surprise when the ACA was challenged, yet found constitutional by the courts. “For most human resources and employee benefits professionals across all sized companies, the constitutional validation of the ACA by the Supreme Court was unexpected,” said ADA Research Institute. No more than 10 percent of professionals surveyed were expecting the Supreme Court to uphold the entire law. Consequently, companies may be behind in their ACA preparations.”
Challenges faced by companies
“It’s never been more important for employers to have clearly defined worker classifications. Incorrectly defining employees, contract workers and temporary workers has big consequences under ACA — especially this year,” Burg from Forbes said.
Employee classification may be one of the largest areas of confusion. If a company employs 50 or more employees, it is mandated to provide medical health insurance to its full-time employees. However, this can get tricky as HR reviews the employee list and may discount contract employees or others that may have worked more than 30 hours in a week.
SHRM offers this advice:
Calculating whether an organization is subject to the employer mandate should be done monthly, and a record of such calculations should be maintained. Here are the steps:
- First, calculate the number of full-time employees—those who are regularly scheduled to work an average of 30 or more hours per week.
- Next, calculate the total number of hours worked during the month by employees who are not full time, and divide the total by 120. The result (rounded down) is the number of FTEs represented by the hours worked by the organization’s non-full-time employees.
- Last, add the number of full-time employees and the number of FTE employees represented by non-full-time employees. The result is the organization’s total FTE employees.
Collecting and maintaining the correct data is another challenge area. ACA requires specific tax forms and other data to be turned in on a regular basis. The system is new and there are bound to be mistakes; however, it could take up to – and even beyond – 18 months after filing taxes for a company to be notified of a mistake.
“Simply put, don’t trust that your methods were perfect the first time around,” Burg said. The fact that you haven’t heard anything to the contrary yet doesn’t mean anything.”
It is recommended to check and recheck the data yearly for any mistakes or discrepancies. It is also a good idea for periodic checks and updates because of employee turnovers and changes of status.
“That shows good-faith effort to be compliant,” said John Haslinger, vice president of strategic advisory services for ADP. “Otherwise, you’ll probably do the same thing wrong for 2016, 2017 and into 2018. You could be looking at a multi-year penalty.”
HR departments’ duties
- Notifications to employees. The HR department will be responsible for letting employees (current and new) know about health care options, as well as marketplace insurance and how to obtain it.
- Summary of costs. While most companies provide a basic (or even detailed) booklet on costs for the different health care plans offered, with ACA there are even more plans and costs for employees to choose from, making it more time consuming and even confusing for both employees and employers.
- IRS filing. ACA requires more data and tax forms to be filed, which means more work for HR departments. It may also require specialized training to make sure everything is done correctly to avoid costly fines.
“The ACA is a work in progress, and it’s going to keep changing,” said Burg. “To stay compliant, employers should be as “To stay compliant, employers should be as To stay compliant, employers should be as vigilant about watching for forthcoming changes as they are about tracking their important employee data.”
