Health Care Reform: Are You Prepared for 2015?

HealthCare.BlogProvisions of the Patient Protection and Affordable Care Act (ACA) are effective over time, requiring employers to plan each year for the new regulations to be enforced. 2015 is no exception. Questions to consider include: What are the changes? How do the changes apply? Are we prepared? What actions should we take to ensure compliance?

Employer Shared Responsibility
The Shared Responsibility for Employers provision (a.k.a. the “employer mandate” or “pay or play”) became effective January 1, 2015. Under this requirement, Applicable Large Employers (ALEs) who employ 100 or more full-time or full-time equivalent employees must offer minimum essential coverage (MEC) that provides minimum value and is affordable to 70 percent of full-time employees or face a potential penalty.

Action Steps – If your company is an ALE with 100 or more employees, decide (1) if your company will not offer health care coverage and, instead, pay any applicable penalty, or (2) offer eligible coverage to at least 70 percent of full-time employees. If you choose to not offer coverage and “pay” a penalty tax, calculate the potential tax on a monthly basis. If you wish to “play” by offering eligible health coverage, ensure the coverage meets all requirements or follow transition relief or safe harbors in 2015. If you have variable-hour employees, ensure that you use a consistent, compliant measurement method to track hours worked to determine if such employees should be categorized as full-time (at least 30 hours worked per week on average).

Section 6055 and 6056 Reporting
The ACA requires insurers and employers to provide annual reports to the Internal Revenue Service (IRS) as well as annual statements to employees covered by health insurance. These reports and statements will help the IRS monitor compliance with both the individual and employer mandates. Reporting begins in early 2016 for coverage provided in 2015.

Action Steps – Section 6055 Reporting: For fully insured plans, your insurance carrier will prepare the 6055 report. For self-insured plans, review the IRS data collection forms and ensure HR system reports are created to collect the information beginning January 1, 2015, or engage your third party administrator to prepare the report.

Action Steps – Section 6056 Reporting: This report must be completed by ALEs. Review the IRS data collection form and ensure data are tracked accurately. ALEs with self-insured plans may file a combined return and statement for all reporting under Sections 6055 and 6056.

Indexed Dollar Values
The ACA includes several dollar values that are indexed each year for inflation. The 2015 values for select regulations are:

  • Employer Shared Responsibility Penalty Tax Expected Values – $2,080 per employee (4980H(a))
    and $3,120 (4980H(b))
  • Affordability for purposes of determining eligibility for a subsidy in the Marketplace – 9.56 percent (Note: the
    percentage for the employer-shared-responsibility safe harbors for determining affordability remains at 9.5
    percent)
  • Patient Centered Outcomes Research Institute (PCORI) fee – $2.08 per covered life
  • Transitional reinsurance fee – $44 per covered life
  • FSA health care account annual maximum salary reduction amount – $2,550

Action Steps – Ensure the new penalty amounts are used when calculating total cost if subject to either the 4980H(a) or 4980H(b) penalty. Fees for a self-insured plan are paid by the employer; therefore, ensure the new fee amounts are used when calculating total cost. Update plan documents to reflect the new limits, if adopted.

Cadillac Tax
For taxable years beginning in 2018, the ACA imposes a nondeductible excise tax of 40 percent of the value of health care coverage that exceeds certain statutorily defined thresholds. The purpose of the tax is to encourage plans to rein-in costs.

Action Steps – Determine projected health care cost trends for your company’s plans between now and 2018 based on potential plan changes, changes in covered population, projected medical inflation, etc. Develop a strategy to manage health plan costs between now and 2018. Monitor expenses each year to ensure costs are aligned with strategy targets and adjust the plans as necessary to keep costs below the 2018 annual dollar limits.

For further information on the ACA provisions listed above or any other ACA provisions, see the MSEC Health Care Reform Learning Zone at MSEC.org or contact MSEC for assistance.