As you finalize medical plan designs for 2016, make sure you consider these five compliance elements of the Affordable Care Act (ACA).
1. Embed individual out-of-pocket (OOP) limits. The ACA’s annual in-network OOP statutory limit for self-only coverage ($6,850) applies to all individuals, whether enrolled in self-only coverage or another tier (e.g., family). Be sure to confirm your medical carrier’s capabilities to adjudicate this benefit design feature. The penalty for non-compliance is $100 per day per individual.
2. Offer MEC to 95% of full-time employees. Under the ACA employer mandate, large employers must offer minimum essential coverage (MEC) to “substantially all” full-time employees and their dependent children (not spouses/domestic partners). In 2016, the “substantially all” percentage increases from 70% to 95%. Employers could be subject to assessments if at least one full-time employee receives tax-subsidized public exchange coverage. The assessment is an annual payment of $2,160 for each full-time employee minus the first 30 full-time employees.
3. Update FPL affordability safe harbor (generally $93 per month). The IRS established three affordability safe harbors employers may use to show coverage is affordable — Federal Poverty Level (FPL), W-2 wages, and rate-of-pay. For plan years beginning on or after July 22, 2015, the FPL safe harbor is $93 per month based on the 2015 FPL of $11,770 (higher in Alaska and Hawaii). The potential assessment for non-compliance is the lesser annual payment of:
- $3,240 for each full-time employee receiving tax-subsidized public exchange coverage
- $2,160 for each full-time employee minus the first 30 full-time employees
4. Consider treatment of opt-out credits in affordability calculations. A recent IRS FAQ regarding HIPAA’s health status nondiscrimination rules states that the required contribution of any employee eligible for a cashable opt-out (in this case, targeted “unhealthy” employees) would be the premium contribution plus the opt-out amount — raising the required employee contribution by the amount of the cashable opt-out. It’s unclear if this same analysis applies when calculating the affordability of coverage under the ACA’s play-or-pay requirements, individual mandate, and eligibility standards for public exchange subsidies. Employers with opt-out designs should review their plan’s affordability with their legal advisors. The potential assessment is same as for #3 above.
5. Prepare for play-or-pay and MEC reporting. The IRS will use the information from Forms 1094 and 1095 filings to confirm subsidy entitlement and assess payments under the individual coverage mandate and the employer shared-responsibility provisions. The first year for which the reporting is required is 2015, due in early 2016. Rules allow for a 30-day deadline extension for both furnishing the individual statements and filing the IRS transmittal, but each requires timely employer action. Employers filing late or inaccurate Forms 1094 and 1095 are subject to penalties of $250 per return, up to a $3 million maximum.