New Year Means New ACA Reporting Requirements

The start of a new year means businesses must meet benefit requirements and tax reporting obligations tied to the Affordable Care Act.

Some of the biggest changes that affect businesses depend on the number of employees that the businesses have. The ACA has requirements for employers regarding health care coverage. However, requirements are tied to those classified as small employers – those with fewer than 50 employees – and applicable large employers – those with more than 50 employees unless they meet a different requirement as dictated by their state insurance department.

In Iowa, the majority of employers fit the “small employer” category. The same is true across the United States.

One of the biggest changes business owners need to pay heed to in 2016 is mandatory reporting of information to the Internal Revenue Service for both small and large businesses. This was previously optional in 2014 but is now mandatory for the 2015 tax year. Large employers that are required to offer insurance to their workers must also cover dependents in 2016.

“Employers have to spend a great deal of time and effort to make sure they comply with what the ACA is requiring of them,” said David Lind, owner of Clive-based David P. Lind Benchmark, an independent, nonpartisan organization that provides companies with research-based knowledge about employee benefits. “This is a great form of frustration for the employer community. Ultimately, they want to concentrate on their core business.”

Employers have felt the effects across the board from the ACA, from increased fees, taxes and penalties to who is eligible for employer-sponsored benefits. They have also, in some cases, had to reduce the waiting period for employer benefits, increase the coverage for preventive care and women’s and children’s health services, and face regulation of wellness program offerings.

“The ACA has affected most every employer in the U.S. in some way, and all companies have likely needed to make adjustments to their health insurance coverage for employees,” said Megan Ruble, Iowa group sales team leader at Wellmark Blue Cross and Blue Shield.

Since the ACA was enacted in 2010, employers have received delays or transitional periods, and even questioned if some of the law’s provisions would ultimately be dissolved. Lind said it’s become apparent they will not, so employers are preparing to do what they are required to do to meet the various mandates.

“Now, it’s rolling up their sleeves and getting into compliance issues,” Lind said.

IRS reporting requirements are new for employers, can result in noncompliance penalties

One of the biggest questions employers have about the ACA concerns the 2016 requirements for reporting health insurance offerings to the Internal Revenue Service. Small and large employers have different reporting mandates, which are detailed on the IRS website, irs.gov.

Under the ACA, employers with 50 or more full-time employees, including full-time equivalent employees, must file returns with the IRS that prove that full-time employees were offered health coverage or that the company didn’t offer coverage.

Even if a company isn’t required to offer its employees insurance and the employees are enrolled in their own plans, the company still needs to track this information because they could still be required to file returns with the IRS, according to the IRS website.

“Those (requirements) are now effective, and also it’s a bit confusing,” said Alice Helle, an attorney with BrownWinick Law Firm. Employers can obtain more information through the IRS website, where they can also find Publication 5196, which gives an overview of the requirements and explains which employer

Groups are subject to reporting.
Some of the reporting requirements can be confusing when

Large employer status is considered. Employers need to be aware that related companies may be treated as a single employer, Helle said. That means that if they are owned by the same group or company, they’re considered part of that same employer. The same can apply for nonprofit groups.

“The tricky area I’ve seen lately is related to nonprofits,” Helle said “It applies to them also, and there’s no ownership with a nonprofit.”

If companies fail to meet their reporting requirements, they can receive financial penalties from the IRS, though both Helle and Cindy Lande, another BrownWinick attorney, said there are some good-faith transitional periods for companies that make honest mistakes in their reporting.

Lande said another issue for employers is reimbursements for health care payments. Some employers had reimbursed employees for their own health insurance, which is no longer allowed. In certain circumstances, employers can address this law change by increasing the employee’s wages without tying the increase to health insurance.

Transition for health care plan offerings ends in 2016; employers must make changes

Employers initially received a transitional period once the ACA went into effect to keep the health care plans they offered to their employees as long as no changes were made to the plans, such as changes in deductible or co-insurance. That time will expire at some point in 2016, and employers and employees will now be required to have one of the “metal plans” (bronze, silver, gold and platinum) now offered through the ACA. Some companies may try to extend this by changing their renewal policy dates to a date in 2017.

“That transitional relief is set to end, which means that at some point in time, the plan the employers currently enjoy cannot be extended,” said Mike Teachout with Focus OneSource, a company that assists employers in benefits and human resources compliance.

Teachout said the biggest change for employers with the end of this transitional period is that they will now receive insurance program options for their employees based on a community rating model. This means that the demographics of the entire area and the ZIP code of where the employer is located will play into which insurance plans and premium rates it is offered. Employers previously received a rate based on the health of their workers – the sicker or more at risk their employees, the higher their rates; the healthier the employee, the lower the rate.

Employers have several options once their transitional period ends, Teachout said:

• They can keep what their carrier offered.
• They can shop the ACA marketplace for a cheaper plan.
• They can self-fund their business, meaning they could select an 
independent insurance carrier and accept the rate that is offered based on the group health of their employees. Employers would assume part of the risk with this option.
• They could join a preferred provider organization, or PPO, which works with a group of doctors, hospitals and other health care providers to offer medical services at a reduced rate to the insurer or the insurer’s clients. Teachout works in this business.

If the company meets the smaller employer guidelines with fewer than 50 employees, Teachout said it could also choose to no longer offer insurance because there are no penalties for smaller companies. If this were the case, the company’s employees could shop for their own plan through the marketplace and utilize credits given based on income.
“If you’re on the marketplace, there are a plethora of plans you can buy,” he said, adding that each family member could have a different plan based on their health conditions.

Employers look for ways to reduce health care costs in response to insurance requirements

Employers, both big and small, are trying to understand what type of health insurance they are required to offer their employees under the ACA.

Regardless of the requirements, employers want to keep their costs as affordable as possible to their employees and to themselves so they can continue to offer the best coverage, said Lind, who previously worked in the employee benefits consulting field, where he helped employers navigate through the requirements of the ACA. Now, his focus is on researching employee benefits and finding ways health care could be delivered more efficiently.

He said more can be done by the ACA to keep insurance plans affordable. Until then, it’s up to businesses.

Lind said: “Employers really do need to take the initiative and now ask more questions of the health care provider community and the insurance industry: ‘How can we get the best value with our premium and what our employees are paying out of their pockets?’ ”

Lind said employers need to discuss with health care providers the true costs of medical services and what employers can do to reduce those through employee wellness programs and other ways to keep their workers healthy and productive on the job.

Even though employers with fewer than 50 workers are not required to offer insurance to their employees, most do, Lind said, according to a recent survey his company conducted.

“They still look at offering health coverage as a key distinction in drawing employees,” he said.

Employers continue to look at ways to keep premiums as low as possible for their workers. Most times, this means that deductibles increase, and employees pay more out of pocket at the time of service as a result. Lind said he anticipates that these trends will continue.

Employee wellness programs are one way employers look to reduce costs.

“Since employees spend most of their day at work, it’s one of the best places to reinforce the path to wellness,” Ruble with Wellmark said. “Numerous studies have shown that wellness programs that promote healthy changes can decrease absenteeism and can help with managing rising health care costs.”

Even though many companies have workout facilities for employees, wellness programs need to extend beyond that, she said. Screenings and assessments can identify employees’ health risks, and health coaching can help workers receive the resources and support they need to make life- style changes toward better health.

Health care costs are driven by the cost of care, the type of care received and the number of services received, Ruble said. Companies can work to reduce these costs through education programs, creating benefit plans that incent employees for changing their behaviors, incenting employees for using alternative treatment options and setting employer premium contributions in a way that steers members to choose cost-saving plans.

Learn more about ACA compliance at ABI's upcoming 2016 Critical Business Updates in Sioux City and Dubuque.