Keeping Sight of Strategy in Affordability Compliance

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Keeping Sight of Strategy in Affordability Compliance
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Calendar11 May 2016

Having made it through the first year under Employer Shared Responsibility requirements, you may be ready for a break from the subject of ACA compliance. As we discussed in an earlier post, in a recent survey of 644 employers, very few believed they would be liable for penalties for 2015. That’s the good news. But while it’s one thing to achieve compliance, it’s another to consider how best to get there.

 

How you handle the affordability requirement may be one aspect of compliance that evolves over time. The survey found that 38% of all respondents -- but 63% of those with 20,000 or more employees -- used the Federal Poverty Line safe harbor to demonstrate that their plans are affordable. About a fourth of all respondents took action to meet the FPL safe harbor, by adding a new low-cost plan (13%) or lowering contributions in an existing plan (9%).

You might consider the creative use of salary bands for setting contributions. For example, if you set the lowest band at 400% of FPL, you don’t have to worry about demonstrating affordability for employees in salary bands above that. While only 15% of employers in our survey say they are using salary bands, another 13% indicate they are considering.

One in 10 survey respondents had to take action in 2016 because the “offer of coverage” threshold was raised from 70% of full-time employees to 95%. And about a fourth of all respondents have experienced an increase in health plan enrollment because of ACA requirements -- including almost half of hospitality employers and over a third of health care and retail employers. As enrollment grows, so does the importance of getting your contribution strategy right.

 

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