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The Patient Protection and Affordable Care Act (2010), known as the ACA, continues to evolve and 2016 has seen numerous changes, including shifting definitions, mandates, and penalties. Some components have been delayed or deferred, while others are now coming online.
Jennifer McCurry, Vice President and Agency Manager at United Insurance, believes it is important for business owners to understand what the Affordable Care Act and its mercurial legislation means for their businesses. McCurry says, “The ACA has completely changed the health insurance industry and it will continue to change the market. Business owners should realize that the upcoming changes are not the end and the industry will continue to evolve with the ACA.”
The two biggest areas of change are the mandatory reporting that businesses must now perform and the penalties they incur for not complying with the various stipulations of the ACA. Changes in the law make it more difficult for business owners to make sure they are in total compliance with every aspect of the ACA. To help you avoid incurring any penalties this year and next, here is a run-down of all the upcoming changes to the ACA.
The language of the ACA can be challenging to decipher, but there’s no need to go it alone. Give ACA specialist Jenn McCurry a call and she’ll help you understand how the changes will affect your business.
Changes in 2016
Definition Changes to “Affordability”
Back in 2015, the ACA defined a plan as “affordable” if it stayed under 9.5% of an employee’s total household income. But as of this year, that percentage has been raised to 9.66%. The ACA recognizes three metrics to determine affordability: an employee’s W-2 form, an employee’s rate of pay, and the Federal Poverty Line.
Even if an employer offers insurance, there is still the possibility of penalties being incurred. These penalties are generally a result of an employee having a plan that does not meet the affordability test or does not provide the “minimum essential coverage.” For example, an employer can be penalized if a full-time employee obtains a premium tax credit in an exchange plan. This would suggest that the employer-sponsored plan does not cover the minimum essential benefits required. If an employee contributes to their plan and that contribution exceeds the specified percentage (see above), or if an employer covers less than 60% of 3204the benefits, the employer is vulnerable to penalties.
The nature of this penalty (known as the 4980H(a)) has changed as well. The fines are stiffer and apply to a much wider range of businesses. As of 2016, the penalty is $2,160 multiplied by the number of full-time employees (in excess of 30 employees). There’s also the 4980H(b), which aims to protect employees against plans that do not meet the minimum ACA standards of coverage.
There have also been changes to reporting requirements. Businesses and insurers must report to the IRS on the health care plans offered to employees. This also includes reporting delays granted between 2014 to 2015. Large employers can face penalties for reporting failures. These can run up to $100 per report, with a cap of $1,500,000 per calendar year.
Employers should also be made aware of changes to the Small Business Health Options Program (SHOP). There have been significant changes to SHOP, including the size of applicable businesses, benefits options, and state-by-state Minimum Participation Requirements (MPR).
The so-called “Cadillac Tax” on high-premium health care plans has been delayed until 2020, while restaurant Menu-labelling requirements were also pushed back.
Full Implementation of Employer Mandate
The Employer Mandate has expanded to include smaller companies. In 2015 companies with 100 or more employees were compelled to offer insurance to 70% of their full-time staff. That rule now states that companies with 50 or more employees must offer insurance to 95% of full-time staff. As a result, a greater number of businesses must provide insurance or face sizeable penalties.
Changes in 2017
Transitional / Grandmothered Health Plans
Businesses that have opted to continue with health plans that were ineffective prior to the ACA can renew their transitional or grandmothered plan until October 2017. Coverage must not extend beyond December 31st. Upon renewal, many carriers are “mapping” groups to the ACA compliant plan that is closest in deductible and coverage.
The Transitional Reinsurance Program
The Transitional Reinsurance Program was developed to help bring stability to the non-group/individual health insurance market. This program will end in 2017.
Employer Mandates and Reporting Requirements
The reporting requirements of the ACA will be due earlier in 2017. Copies of forms 1095B or 1095C will need to be provided to employees and individuals by January 31, 2017. Reporting to the IRS will be due by February 28, 2017 if filing manually, and March 31, 2017 if filing electronically.
Applicable Large Employer Mandates will also be adjusted for inflation. While the IRS has not confirmed these amounts, they are expected to increase to $2,260 per full-time employee if the employer fails to provide affordable and minimum essential coverage to 95% of employees. If the employer fails to provide affordable and minimum essential coverage to 95% of their employees and an employee receives a premium tax credit through the exchange or does not provide affordable coverage, the penalty is increasing to $3,390 per full-time employee.
These are the major changes occurring in 2017, but there are others such as the Health Insurer tax being suspended for 2017 (this tax is approximately 2.3% of premiums). This tax on health insurance companies will only be suspended in 2017. In addition, the Medicare Part D “donut hole” will also continue to shrink for those who are on Medicare.
Last, a new president will take office in January 2017. Regardless of who that person is, they are expected to propose changes to the ACA and the health industry in general. United Insurance will continue to guide our clients through the ACA requirements and assist with any changes that may occur in the future.
The ever changing waters of the ACA can be difficult to navigate and, as a business owner, incurring a penalty is the last thing you need. If you have any questions about the ACA and the 2016 and 2017 changes, please call Jennifer McCurry at 207-215-3204. She will help answer all of your ACA questions.