One of the areas of chief concern for the year ahead in HR compliance is adhering to the various requirements and regulations put into place by the Affordable Care Act (ACA). That’s largely because the intricacies of ACA taxation are still being altered and some are still yet to be implemented, with the most recent change coming in the form of the Protecting Americans from Tax Hikes (PATH) Act, which came into effect in the middle of December 2015.
Anne Marie Singleton and Beth Bailey of McGohan Brabender gave us a wealth of insight into the recent and forthcoming changes to ACA benefits in our first session of the 2016 Paycor HR and Compliance Web Summit.
PATH and the “Cadillac Tax”
PATH—the Protection Americans from Tax Hikes Act—made three big changes to specific ACA-based taxes. These adjustments are in reaction to the fact that the ACA was meant to be a revenue generator, but it presumably hasn’t lived up to the promise. Now actions are being taking to make it at least “revenue neutral.”
- The medical device tax, which initially applied a 2.3% tax to devices sold after the end of 2012, is now under a two-year moratorium. The tax is now slated to take effect on devices sold on or after January 1, 2018, but will be under further analysis and review during this suspension period.
The Health Insurance Industry Tax is also under such scrutiny. This permanent, annual fee on insurers has frequently been passed along to employers since 2014 by way of incremental increases in plan cost. A one-year moratorium has been put in place, in attempt to slow rising plan costs.
The Cadillac Tax has been controversial since it was announced. PATH has tried to lessen the burden of the tax, originally not set to go into effect until 2018, by making the tax deductible as a business expense and delaying implementation until 2020. The penalties on the tax are still stiff, to the tune of 40% on high-cost coverage with no exceptions for grandfathered plans.
This tax is calculated on a monthly and per-person basis, where any plan above $850 per month for single coverage and $2,292 per month for family coverage is subject to it. At this rate, we’re looking at the possibility of three-quarters of employee health plans being subject to the tax by 2029.
ACA Reporting and Coverage
Fortunately, the government has extended reporting deadlines this year.
- Employers had until March 31 to provide 1095-B and 1095-C forms to their employees
- Employers filing on paper with fewer than 250 employees have until May 31 to provide 1095-B and 1095-C forms and 1094 forms to the IRS
- Employers filing electronically have until June 30 to provide 1095-B and 1095-C forms and 1094 forms to the IRS
In this first year only, the IRS will waive penalties for smaller employers that make a good faith effort to file on time, but that’s not to say those that miss the filing deadline all together will be offered this lenience. Penalties get heftier the larger a company is, maxing out at $250 per employee and $3 million total for a year.
On a more pleasant note, the auto-enrollment provision of the ACA—wherein companies with over 200 full-time workers would have to automatically enroll them in one of the employer’s plans—has been permanently repealed.
To combat some of the ACA employer mandates for small, fully funded employers, those employers are trying to become self-funded. Carriers are reacting with level-funded products (funded in nature, but also taking some of the risk out of the process). We’re seeing new movements in companies or trades coming together to be compliant and become self-funded. Healthcare captives are also growing in popularity.
Another big shift is that of employers’ focus moving to claims over administration costs. Per “healthcare dollar,” 87% of cost is now going towards covering claims. This, in turn, is requiring employers to mine big data so as to predict when claims may come based off of group employer wellness and trends.
As such, companies are giving even more attention to health and wellness programs so as to manage imminent claims and those farther down the road. Incentivizing good health practices is proving to be one of the best ACA cost-cutting measures.
This content came from a March 10 Paycor webinar. Missed Paycor’s Web Summit or want to hear this webinar as it happened live? Click over to our webinar recordings page. And, contact us if you’re ready to make sure your company is covered for 2016 and beyond when it comes to the Affordable Care Act.
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