What Employers Need To Do To Prepare For The PPACA Mandate

When the Patient Protection and Affordable Care Act’s (PPACA) employer mandate was delayed, human resources professionals took a breather. Now those HR professionals understand this is not going away and employers are starting to realize they have to do something about it.

Time is of the essence for some companies. To be able to report in 2016, employers have about two months to update their data collection systems in order to gather information for the 2015 calendar year.

The day of reckoning

Implementation of the employer mandate and associated reporting requirements were delayed from 2014 to 2015, although the employer mandates have always been a part of PPACA. Employers with 100 or more full-time workers must provide affordable health insurance to 70 percent of their employees or pay a penalty of $2,000 per worker, beginning January 1^st. These penalties are referred to as “shared responsibility” by the Internal Revenue Service.

Under the Employer Shared Responsibility provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents), the employer may be subject to an Employer Shared Responsibility payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges, also called a Health Insurance Marketplace.

What employers should be doing in the upcoming weeks to make sure they are in compliance:

Categorize employees accurately. The employer mandate for 2015 is based on the number of full-time equivalent employees.  Employers will receive a one-year reprieve until 2016 if they have between 50 and 99 employees.

Employers will have to determine the correct category that their employees fall into, which can be difficult for those with variable hours. New hires will have to be classified as well.

The three categories that employees can fall into are:

1. Full time
2. Part time
3. Variable

Analyze insurance coverage. According to the PPACA mandate, insurance plans must be affordable. Coverage is considered affordable if the employee’s share of the annual premium for the lowest-priced self-only plan is no greater than 9.56 percent of annual household income.

Plans also have to offer minimum value, which the law defines as paying for at least 60 percent of medical expenses on average for a standard population. A minimum value calculator for employers is offered by the Department of Health and Human Services.

Determine if any transition rules apply. Several transition rules have been enacted.  Businesses with fewer than 100 employees have the mandate postponed until 2016. Larger companies will not be subject to penalties until the beginning of their plan year if they offer coverage on a non-calendar year basis. They must, nevertheless, maintain records for the entire 2015 calendar year.

Reliable recordkeeping systems should be set up. This is an area where businesses can quickly run into problems so this may be the most important step.

All fully-insured and self-funded “applicable large employers” (ALE) are still required to keep records for 2015 even though businesses with between 50 and 99 employees are exempt from the employer mandate for another year. In January 2016 any employee who was full-time for any month during the calendar year will receive form 1095 or an alternative statement.

The employee alternative statement must include:

• Employer name, address, EIN, and contact information; and
• A statement that for all 12 months the employee received a qualifying offer and therefore is not eligible for a premium tax credit when purchasing individual health insurance through a public exchange.
• Employer 1094 Reporting Details

Now is the time to make sure systems are in place.

HR needs to commit the time needed to understand the data requirements, communicate these requirements to IT and work with the benefits administrator to collect and store the appropriate data.

Human Resources and IT teams should be discussing the new form requirements and begin putting systems in place to collect and report all the necessary information mandated by the IRS. The reporting should be done on a monthly basis and include Social Security numbers, cost, affordability and value to whom coverage is being offered.

Form 1095-C and Form 1094-C apply to large employers, and require reports detailing coverage offered to each full-time employee, whether coverage meets the minimum essential coverage, minimum value rules and whether the coverage was offered to almost all full-time employees (employees who work on average at least 30 hours per week) and their dependents.

Self-insured large employers must fill out Parts I, II and III of Form 1095-C for each employee. Employers who purchase health care coverage insurance for employees are also required to provide information, but not as much (their insurers fill out forms reporting the rest of the information). Batches of Forms 1095-C are submitted with Form 1094-C.

If the information is not reported accurately or retained properly, it can translate into wasted resources and expense, even if the plan is compliant.

Health care reform is complex and confusing, everyone is anxious about making mistakes and being penalized. As the deadline quickly approaches, the best advice for employers is to seek professional expertise.

If you are a current Paypro Client, your dedicated Benefits Specialist is available to answer your questions and guide you. To learn how Paypro can ensure your organization is meeting the compliance requirements and to help you stay on top of these additional requirements please contact us.

On Friday, December 12, 2014 join Paypro for a complimentary informational webinar discussing “What All Employers Should Know About The ACA Employer Mandate”. For more information or to sign up click here.