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Refreshing Insights

Will the Affordable Care Act (ACA) stay? Will it go? Or will there just be a new version with new rules and requirements to figure out? Many are saying, “I still feel in the dark about the original ACA mandates, let alone any potential changes!”

The uncertainty surrounding the ACA has left employers frustrated and scratching their heads as they assess the potential impact of pending changes on their organizations. Small and mid-sized businesses (SMBs) often struggle the most to understand and comply with the regulations because they lack the necessary time or resources to hire legal counsel.

Confusion over mandated reporting for some companies became glaringly apparent when the IRS issued letters in late 2017 to inform thousands of employers that they were required to pay stiff penalties for failing to offer their workers qualifying health insurance. It’s imperative for businesses to know where they stand.

We’ll take a look at a brief history of the ACA, where it stands now, where it might be headed and, most importantly, what SMBs need to know to ensure compliance.

The Affordable Care Act — Then and Now

Signed into law by President Obama in 2010, the ACA’s intent was to ensure that all Americans would have some basic security when it came to their healthcare. It was the most significant change to federal healthcare laws since 1965, when Medicare and Medicaid programs were first introduced. As a result of the ACA, an estimated 20 million Americans became insured who had previously gone without coverage.

Since its inception, the ACA has evolved and it’s had bumps along the road. Most will recall the now infamous fiasco in 2013 involving the rollout of healthcare.gov, the federal government’s open enrollment website. Some of the greatest implications of the ACA, however, involve penalties for employers — especially those with 50 or more employees.

These employers are required to offer health coverage to their employees, and there are specific requirements about affordability and value. The challenge for many businesses stems from some of the misinformation in the media about which organizations are impacted, what those affordability requirements mean and when they took effect.

Efforts to Fix the ACA

The ACA’s original intent was to make healthcare available and affordable, but efforts to reform healthcare and reduce costs raised them significantly instead. Many employers especially feel the impact. Not only do they end up paying more to provide employees with quality coverage, they also have the added burden of spending more time, resources and legal expenses dealing with ambiguous reporting and compliance requirements.

Some place the fault of rising costs on insurance companies; however, the root cause lies in the cost of medical services and medications that those policies cover. Prior to the ACA, many with chronic illnesses lacked coverage because of pre-existing condition clauses. The ACA abolished those provisions and ensured coverage for these individuals. That’s generally a good thing, right? However, chronic illnesses such as diabetes and heart disease are expensive to treat and account for 85% of healthcare costs, resulting in the sickest 5% of the population consuming 50% of total healthcare costs.

Unfortunately, some employers are compensating for higher insurance costs by providing plans with lower premiums that offer sub-par coverage. Doing so allows employers to “check the box” saying they’re following the rules, but employees end up getting the short end of the stick.

The Future of the ACA and What it Means for an SMB

Where does the ACA stand today? The adverse side effect of exorbitant costs has some legislators aggressively lobbying to repeal and replace the ACA, while others are calling for everything from minor adjustments to a complete overhaul.

After months of going back and forth over the law, there’s some indication that reform may come during the first quarter of 2018 but, as is often the case with legislative matters and partisan divisiveness, nothing is a sure thing.

Republicans are pushing to roll back the employer mandate, but employers will likely be disappointed in regards to reporting and compliance. In the face of pending changes, SMBs still need to be diligent and fulfill their obligations.

Until there’s final word from Congress, here’s where things stand now and what employers need to know.

  • Employers with more than 50 employees are required to provide the IRS with a report on each FTE (full-time employee), indicating whether they have offered coverage.
  • If you have fewer than 50 employees, you’re not required to provide health insurance or report to the IRS, but those that don’t will struggle to find and keep qualified workers.
  • Does your organization’s owner also own other companies? If so, the cumulative employee count may bump the employer into a large company market segment that requires reporting.
  • Make sure you measure healthcare costs and remain in compliance with affordability measures required by law, or face penalties.
  • Many small businesses aren’t sure what rules apply to them and are confused by the ACA’s ebbs and flows. Has your company grown? If it previously had fewer than 50 employees and now has more, you must comply with reporting mandates.
  • There are dozens of additional nuances, requirements and considerations within the law that can vary depending on your company’s structure, employee count and more. Make sure you completely understand the implications, or risk being penalized.

How SMBs Can Ensure ACA Compliance

Employers need to remain alert regarding potential changes to the ACA and adapt as new rollouts occur, and stay informed about which rules may still apply. Truth is, however, that many employers are still struggling to comply with laws already on the books, and are alarmed when an IRS letter arrives notifying them of noncompliance and pending penalties.

Staying on top of ACA regulations in addition to other responsibilities is nearly impossible for the average business owner or HR professional. It’s important to work with a reputable advisor to make sure you stay ahead of the curve. An HR services provider will constantly monitor changes, get law alerts and be backed by a team of legal experts to sift through the complexities of ACA rules, and remove the burden of compliance so company leaders and HR can focus on strategic functions that grow their operations.

If you’d like to learn more about compliance requirements, be sure to download our guide, “Workplace Compliance Requirements — A Visual Cheat Sheet.”  Simply click the link below to access it.

Or maybe you’d like an assessment of your current HR practices and compliance needs. We’re happy to talk and explore whether your company could save time, money and a lot of headaches by partnering together to serve you and your employees. Reach out to us today for a no cost needs assessment. 

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A collection of articles from the McClone team with the helpful knowledge and insights to ensure your organization is well protected.