I don’t know about you, but we in the Payroll/HR software industry have been thinking a lot about the Affordable Care Act lately. Most employers with 50 or more full-time equivalent (FTE) employees will soon be frantically trying to file their Forms 1094 and 1095 on time, and will likely find themselves coming across question after question about what they’re doing. Even if they reported last year, they will quickly realize things have changed since then. Well never fear, Dominion Systems is here to make sure you’re prepared to tackle ACA reporting head on.
Put plain and simple, the idea behind ACA is to increase the quality, accessibility, and affordability of health insurance. In order to make this possible, most people who could afford it were required to obtain health coverage by 2014 or pay a per-month fee. While that might initially seem counterproductive, there are a number of major problems that ACA has resolved:
- Insurance companies cannot deny coverage or increase costs for pre-existing conditions, or drop someone if they get sick.
- Protection against gender discrimination has been implemented.
- Free preventative services and health benefits have been expanded, as well as Medicaid and CHIP.
- Medicare coverage is improved.
- Full-time employees are now offered health care by larger employers.
- A marketplace is created for subsidized insurance, which offers tens of millions of individuals, families and small businesses with free or low-cost health insurance.
- Healthcare spending and the deficit are both decreased.
What has changed?
Between 2015 and 2016 there have been a few changes to the reporting process. The biggest of these changes include:
- The deadline for employees to receive a copy of Form 1095-C has moved to March 2, 2017, and needs to be filed with the IRS by March 31, 2017, for all electronic files, and February 28th, 2017, for all paper files. Note that as of November 21st, 2016, the IRS has extended the good faith compliance standard, which means that incomplete or inaccurate forms will not be subject to a penalty, so long as they were filed on time and the filer was operating in good faith.
- All organizations with 50 or more full-time equivalent (FTE) employees must insure 95% of their full-time employees or else be subject to possible penalties. In 2015, this number was 75%, and there was a transition relief which stated that employers with 50-99 employees were not required to offer health insurance or receive a penalty for not doing so.
- Starting in 2016, the Marketplace began sending out subsidy notices to employers who should have offered coverage due to full-time status. This notice states the lack of coverage offered and the corresponding penalty. If coverage was offered but denied by the employee, there will need to be documented proof in order to claim a dispute.
- The affordability of certain plans has been increased. For plan years beginning in 2016, affordability is based on 9.66% of household income, which is an increase from 9.56%. This figure affects how much an employer can charge an employee for single coverage.
So what does this mean for 2016 reporting? Well, if your company has applicable large employer (ALE) status, you will have to offer qualified medical coverage to 95% of your full-time employees. There are a few key components for medical coverage to be considered qualified. It must provide minimum essential coverage and minimum value to the full-time employees and self-only coverage must be equal to or less than 9.5% of the federal poverty line. Additionally, it must provide minimum essential coverage to spouses and dependents.
This is just a preview into what has changed for ACA. For more information on what you can do to prepare, and some resources for your convenience, check out our ACA Resources page!