While the IRS has not yet published official 2017 dollar amounts for ACA “play or pay” assessments, Mercer has projected them, using the medical premium inflation factor in the HHS regulations. The following table shows the annual amounts, though employers incur assessments on a monthly basis.
|ACA pay-or-play assessments (Section 4980H)||Projected 2017||2016||2015|
|Not offering coverage (4980H(a))||$2,260||$2,160||$2,080|
|Offering coverage lacking minimum value or affordability (4980H(b))||3,390||3,240||3,120|
From the earliest days of the Affordable Care Act, our survey found that large employers overwhelmingly remained committed to providing health coverage. This was not the case with small employers. Concerned about coverage mandates and increasing costs, many small employers thought it was likely that they would drop their plans within five years. But over the past few years there has been a dramatic decrease in the numbers of small employers (those with 50-499 employees) threatening to eliminate coverage and send employees to the public exchanges – from 21% in 2013, to 15% last year, to just 7% today. In his recent Forbes article covering the latest results of Mercer’s National Survey of Employer-Sponsored Health Plans, Bruce Japsen asked me to weigh in on this trend and small employers’ motivations for continuing to offer health benefits – which of course I was happy to do.
The IRS released draft forms for the employer ACA reporting requirements late yesterday. I know those of you hoping for another delay of the employer shared responsibility requirements beyond 2015 aren’t happy to see the forms because it makes another delay less of a reality. Now that we have the draft forms, there are two big issues for employers (1) the instructions — hopefully to be released sometime in August — are a critical missing piece of the puzzle, and (2) data tracking needs to begin in January 2015 for reporting in early 2016. The challenge for many is that the data must be aggregated from multiple systems and this creates a huge strain on IT resources that typically have limited short-term capacity.
While some provisions of the Affordable Care Act (ACA) went into effect in 2014, other significant changes are yet to come. Mercer’s latest Health Care Reform Survey — the seventh conducted since 2008 — shows that US employers are actively planning for the employer shared responsibility provisions that take effect in 2015. The survey includes responses from 767 US employers.
“While many employers are in compliance with the shared responsibility requirements of the Affordable Care Act, a substantial portion chose to wait until 2015 to expand eligibility,” said Beth Umland, Director of Employer Research for Health and Benefits at Mercer. “Not surprisingly, many of those waiting to extend coverage to employees who work 30 or more hours per week are organizations that will be the most affected. But there are ways to mitigate the impact, and organizations still have time to make changes for 2015 that could make a big difference in the cost of compliance.”
Learn about the issues US employers are facing as reform measures take effect, and how they are responding.
Even if you think you understand ACA requirements and are providing the necessary access to health care to avoid the $2,000 per-employee assessment, if your company can’t unequivocally sign off on its offer of coverage to “substantially all” full-time employees (relaxed to 70% for 2015, but climbing to 95% by 2016), and isn’t able to properly track and report detailed, employee-specific data about its offer, you — and many other employers — may have a great deal more to do than you realize.
Here are four areas where we see employers getting tripped up on the dizzying criteria and complex technical requirements that are part and parcel of compliance with the employer mandate.
Meeting the minimum
To avoid the employer mandate assessments, employers with 50 or more full-time equivalent employees (100 in 2015) — now defined as anyone who works 30 or more hours per week — must offer the opportunity to enroll in an employer-sponsored plan that provides “minimum essential coverage” and also satisfies the following two key criteria.
- Minimum plan value = A plan must pay at least 60% of the cost of covered services.
- Affordability = Employee contributions for employee-only coverage must not exceed 9.5% of an employer affordability safe harbor or the employee’s household income.
Accounting for controlled group rules
The IRS may subject smaller employers to the assessments based on their relationship to a controlled group (two or more entities connected through common ownership). Where the combined total of full-time employees in a controlled group is at least 50, each employer is subject to the employer mandate, regardless of the number in its individual employee population.
Determining whom you have to count and how to count them
The more liberal definition of full time has employers sorting through the nuanced implications for different types of employees and situations, and scratching their heads. How should employees with jury duty or disability leave be counted? What about an adjunct professor or per-diem nurse, who are variable-hour employees but for whom hours are not tracked? Calculations are far more complicated than merely counting the days someone works, and different methods can be applied. Avoiding assessments means investing the time to develop a clear understanding of these often-complex formulas.
Understanding the specifics of tracking and reporting
When it comes to reporting, there are two primary IRS requirements: 1) employers must report all full-time employees and data about health coverage offers made to those employees on a month-by-month basis; and 2) health plans, including employers sponsoring self-funded plans, must report who was covered, including dependents, again on a month-by-month basis. Employers and health plans must report this information on individual statements to employees and consolidated reports to the IRS.
Keep in mind that the government won’t try to impose employer mandate taxes until after the year has closed out. And while employers who offer coverage to 98% of employees will be eligible for reporting relief when reports are first due in 2016, this is tracking and reporting they must do for the 2015 calendar year. It would behoove employers to figure out right away if they have the information they need, given the long queues most face when requesting special programming for their HR information systems.
Delays and relaxation in some of the mandate’s requirements may be encouraging a bit of languor among employers. However, compliance depends on a high degree of organization — first to simply understand the many complex technicalities, and then to make sure all requirements are met. Employers would do well to get their ducks in a row now so they won’t have to scramble to avoid assessments later.
Since this site was inspired by health care reform, it seems only fitting that we spent Monday — the day it actually launched! — inside the Beltway. First, Beth Umland, Mercer’s Director of Health & Benefits Research (and a contributor to this site), and I gave a briefing on Capitol Hill for congressional staffers, where we shared Mercer’s latest survey findings on trends in employer-sponsored coverage and employers’ response to health care reform. That afternoon, we invited some of the top health policy experts from Washington, DC, think tanks to sit around a table, flip through Mercer’s survey results, and talk about what might happen in the future as we continue down the ACA implementation path. It’s always interesting for us to see which survey results our Washington audiences find the most significant — or the most surprising. And it’s useful to hear what questions they wished we’d asked. Here are some highlights from our discussions.
Wellness incentives. The ACA increased the amount available for outcomes-based incentives from 20% of plan cost to 30% (50% for non-tobacco use). According to our most recent survey conducted in January 2014, only 2% of employers are using the maximum amount available for tobacco and/or wellness, although 9% increased incentives for 2014 and 37% are considering it.
In both of the meetings, we were asked: Why aren’t more employers using the maximum incentive? To begin with, only 20% of employers currently offer outcomes-based incentives, and the median annual value of the incentive is currently $200 across all employers. Larger employers use bigger incentives — the median incentive value is $475 for employers with 10,000 or more employees — but even that is less than 3% of total plan cost (assuming $15,000 for family coverage).
So there is still a lot of room to increase incentives for those who have the budget before they approach the maximum. Employers that aspire to outcomes-based incentives typically introduce them gradually, beginning with an educational phase in which employees are given incentives to complete a health assessment and biometric screenings. This way, employees will have greater awareness of any health risks before being offered incentives to improve them.
Exit strategy. In the years since the health reform debate began, there have been conflicting predictions about how many employers will decide to drop employer-sponsored health care coverage and send employees to the public marketplace. When we presented Mercer survey data indicating that only 6% of employers with 500 or more employees believe it is likely they will drop coverage in the next five years, someone pointed out that other reports suggest a much higher percentage of employers will move in that direction.
Why the variation? We think it is a matter of who you ask, how you ask the question, and the size and composition of your sample. Mercer’s data is based on responses from benefits professionals at almost 3,000 US employers, and we use a stratified random sample that allows us to examine differences in responses based on size. While smaller employers are more likely to believe they will get out of the game within the next five years, even among employers with fewer than 50 employees, that number only reaches 34%. Check out my post Why Employers Are Choosing to Stay in Health Care for more on this provocative question.
Spousal coverage. There was considerable interest in trends in providing coverage to spouses — or not. Currently, 20% of employers have special provisions for spouses who have access to medical benefits through their own employer: 12% impose a surcharge and 8% exclude them entirely. Another 27% are considering one of these approaches for 2015. We were asked if any employers are considering excluding all spouses — whether or not they have other coverage available — since under the ACA, employers are only required to make the offer of coverage to all full-time employees and dependents not including spouses. We haven’t asked that question in one of our surveys (yet), but we discussed that it might be a more viable approach for employers making a first-time offering of medical benefits — and maybe even a last-resort option for employers that are determined to avoid paying the excise tax in 2018.
Employer mandate. We ended the day with a discussion of the Urban Institute’s recent study that suggests the “gain” from the employer mandate in terms of reducing the number of the uninsured might not be worth the pain of enforcing it, and talked about a subsequent blog post in Health Affairs proposing a different approach to the employer mandate that was considered earlier on in the drafting of the ACA.
Regardless, the general consensus was that repeal — in the short-term, anyway — is unlikely and that change will be more challenging as employers make their way further down the implementation path. This June 10 article in The Washington Post lays out both sides of the argument.
As we reflected back over the past four years, we all agreed on one thing — the ACA has provided the impetus for employers to take on some bold strategies. They have focused on:
- Managing cost and cost increases through plan design changes.
- Providing incentives to drive healthy behaviors.
- Providing access to tools to help plan members be better consumers.
- Forging provider partnerships that reward high-quality care and the best outcomes.
- Leveraging technology and new delivery alternatives.
These are strategies employers had embraced prior to the ACA, and they remain the “right thing to do,” with or without health care reform. The fact that we are seeing the lowest health care trends in years is a testament to that.
This article dives into questions regarding federal subsidies for health insurance in the public marketplace that may have been set incorrectly. Why should employers be interested? For anyone receiving advanced premium tax credits in the public marketplace, the public exchange is required to send a notice to their employer. The notice will identify all employees who have qualified and received approval for premium tax credits. While employers are not at risk for shared responsibility penalties for 2014, there are several reasons employers should pay attention to the notices.
First, if an employee has obtained premium tax credits from a public marketplace and they really are not eligible for a subsidy because they have access to employer-sponsored coverage that meets the minimum coverage and affordability requirements, the government will seek reimbursement from the individual for the subsidy provided. If you are aware of that circumstance, you might want to let your employee know they could be asked to reimburse the government for the subsidy. Even if someone is legitimately eligible for premium tax credits, if the government set the subsidy too high, the credits will get reconciled when the employee's 2014 taxes are filed.
The second reason to pay attention to who obtained subsidized coverage is if you delayed offering coverage in 2014 but plan to offer coverage in 2015, you may want to communicate with those affected before open enrollment for the 2015 plan year. So far, we have seen at least one state, Connecticut, send notices to employers via USPS. Other public exchanges should start to send employer notices soon, now that open enrollment has closed for 2014.
The question of whether to discourage or prohibit employees' spouses who have other coverage available from enrolling is worth considering, and it's certainly getting a lot of attention. It's important to note, however, that while many employers are thinking about it, relatively few have acted. This article cites a survey finding that 45% of about 600 employers surveyed were "planning" to exclude spouses in 2014. But a Mercer survey taken this January found that fewer than half that number had actually done so — and they were more likely to require a surcharge than to exclude spouses entirely (learn more). This article, which quotes our own Tracy Watts, looks at pros and cons and presents an interesting take on what would happen if all employers excluded working spouses: "For every spouse you lose, and employee you gain, you end up losing more because you subsidize employee coverage more than you subsidize spousal coverage,” says Paul Fronstin, EBRI’s director of health research and author of a report discussed in this article.
When we asked employers in a recent survey about their response to the ACA's shared responsibility requirements, about one in ten told us they would have fewer employees working 30 or more hours per week by 2015. The authors of this article - both involved in litigation law - caution that "to achieve the dual goals of managing health-care costs and avoiding ERISA liability, a company must enact any changes in its workforce management in thoughtful and measured steps." They provide helpful advice for employers considering this strategy.
Hospitality organizations like restaurants and hotels, which typically rely on part-time, low-wage employees, have been the hardest hit by ACA rules requiring a minimum plan value and affordable contributions. Extending coverage to all employees working 30+ hours will be especially challenging. Some have chosen to "go Dutch" with their customers.
The Obama Administration released final rules that will either delay or relax the provisions of the ACA employer mandate in 2015. Employers with 50-99 full-time equivalent employees will have another year to comply. Those with 100 or more full-time equivalent employees will be able to avoid the $2,000 (indexed) non-offering payment if they provide coverage to at least 70% of their full-time employees. However, some employers have already taken steps to comply in 2015 and the relief has come too late.