Professor Lisa Sewell DeMoss is WMU-Cooley’s director of the Master of Laws Program in Insurance Law and an expert on the Affordable Care Act (ACA). Before joining WMU-Cooley Law School, she was senior vice president, general counsel, and corporate compliance officer for Blue Cross Blue Shield of Michigan in Detroit. Below she provides ACA updates and what’s new for employers in 2016.
Employers have confronted a lot of unpredictability under the Affordable Care Act. Between implementation delays and the uncertainty created by continual political wrangling and litigation, running a business and planning for the future has been a big headache for employers subject to the coverage mandate provisions of the Affordable Care Act. About 96 percent of employers in this country are small businesses employing fewer than 50 full-time employees. They are exempt from the employer health care coverage mandate under the 2010 Affordable Care Act. For employers with 50 or more full-time equivalent employees, 2016 marks the beginning of new reporting responsibilities and penalties under the ACA for failing to comply with the employer coverage mandate which went into effect in 2015.
There are two tiers of penalties under the law, one for failing to offer coverage to 95 percent of your Full-Time Equivalent (FTEs) and their dependents, and the other for failing to provide coverage equivalent to statutory minimum values. Each penalty is determined under a statutory formula that is triggered when one or more of the employees receives a premium tax credit or cost sharing subsidy when obtaining their own health coverage through the federal or state insurance exchanges. For larger employers, the penalties may exceed $2,000 per employee for those who are not covered under the group health plan. These penalties apply to 2015 enrollment activity. Also new to 2016 are employee and IRS reporting requirements corresponding to the employer coverage mandate. Employee statements regarding compliant 2015 coverage must be given to employees by February 1st. The penalty for a missed deadline is $100 per return or statement. Employers are also required to file a new form with the IRS by March 1st, reporting 2015 employment data demonstrating compliance with the coverage mandate. The penalty for missing that filing deadline is also $100 per return. For additional information regarding the employer coverage mandate and reporting requirements please refer to the IRS Questions and Answers on Employer Shared Responsibility Provisions web link.
The biggest news for large employers in 2016 is the passage of legislation in December of 2015, extending the effective date for two important and controversial provisions of the ACA. The employer tax on high cost health plans, otherwise known as the Cadillac Tax, has been delayed two years until tax years beginning after December 31, 2019. This is a 40 percent non-deductible excise tax on amounts by which an employer’s monthly cost of applicable employer sponsored coverage exceeds specified statutory dollar limits. That same Consolidated Appropriations Act, which amends the ACA, also imposed a one year moratorium on ACA’s annual fee on health insurance providers and delayed the effective date of a medical device excise tax of 2.3 percent to sales occurring after 2017. Many expect that these extensions will be continued into the future in annual federal appropriations bills.
These amendments will save employers millions of dollars in direct and indirect costs of administration of their group health plans. While employers benefit from these changes, individuals who are not eligible for group health insurance coverage may suffer the consequences of reduced funding of individual premium tax and cost sharing subsidies under the ACA which are dependent in part on these forestalled sources of offsetting revenue. And, the loss of critical funding revenue for the individual mandate may hasten the overall demise of the ACA.
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