Affordable Care Act – Setnor Byer Insurance & Risk

Affordable Care Act: Will Your Group Health Plan be Affordable in 2021?

The Affordable Care Act’s affordability threshold for employer-sponsored group health plans will increase to 9.83 percent in 2021. The affordability threshold is currently 9.78 percent. The impending increase primarily affects employers with 50 or more full-time or full-time equivalent employees. The ACA generally requires these Applicable Large Employers (ALEs) to offer full-time employees “affordable” minimum essential health care coverage; otherwise, they may have to pay the ACA’s employer shared responsibility (pay-or-play) penalty.

Affordability is calculated as a percentage of household income. In 2021, the amount an employee must pay (required contribution) for the lowest-cost, self-only coverage option offered by their ALE cannot be more than 9.83 percent of the employee’s household income. If it is, the employee’s offer of health coverage is not considered affordable and the ALE may be assessed a penalty under the ACA.

ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold. For example, if Sam earned $12 per hour in 2021 and worked 40 hours per week for 52 weeks, Sam’s monthly required contribution for coverage under the ALE’s 2021 calendar year group health plan cannot exceed:

— $204.46 per month, if using the W-2 Safe Harbor Method;
— $153.35 per month, if using the Rate of Pay Safe Harbor Method; or
— $104.53 per month, if using the Federal Poverty Line Safe Harbor Method.

Even though the affordability threshold for group health plans beginning in 2021 is only .05 percent higher than the year before, the difference can be consequential. To ensure compliance with the ACA’s affordability requirement in 2021, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about ACA-compliant group health plan options for 2021.

Affordable Care Act: IRS Extends 2019 Reporting and Filing Deadline

It’s that time of year again. Large employers must turn their attention to the Affordable Care Act’s annual information-reporting requirements. The good news is that the Internal Revenue Service extended the deadline for large employers to furnish 2019 information statements to employees. However, the deadline to file information returns with the IRS has NOT been extended.

Applicable Large Employers, which are generally those with 50 or more full-time or full-time equivalent employees in the previous year, must do the following to comply with the ACA’s 2019 annual reporting requirements.

Furnish Information Statements to Full-Time Employees. The IRS extended the deadline to provide Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to full-time employees from January 31, 2020 to March 2, 2020. This is the fifth consecutive year that the IRS has extended this deadline.

File Information Returns and Transmittals with the IRS. Every Form 1095-C along with Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) must be filed with the IRS on or before February 28, 2020 (March 31, 2020, if filed electronically). The IRS did NOT extend this filing deadline. However, employers may request an automatic 30-day extension by filing Form 8809 before the ACA filing deadline.

For 2019, the IRS also extended the good-faith relief from penalties that may be levied against employers for failing to properly file or furnish these forms, which can be $270 per form. The maximum penalty can be $3,339,000. To be eligible for this relief, employers must make a good-faith effort to comply.

According to the IRS, this relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement. Employers that fail to file an information return with the IRS or furnish a statement to an employee by the extended deadline are not eligible for the extended the good-faith relief from ACA penalties.

Please contact us if you would like to learn more about ACA-compliant group health plans.

Affordable Care Act Update: IRS Announces Affordability Threshold for 2020

The Internal Revenue Service announced that the Affordable Care Act’s affordability threshold will be 9.78 percent in 2020. This is important because employers with 50 or more full-time or full-time equivalent employees in the preceding calendar year (Applicable Large Employers or ALEs) must offer their full-time employees minimum essential health care coverage that is affordable. Otherwise, they may have to pay the ACA’s employer shared responsibility (employer mandate) penalty.

Affordability under the ACA is calculated as a percentage of household income. So, to satisfy the ACA’s affordability requirement in 2020, the lowest-cost, self-only coverage option offered by Applicable Large Employers may not exceed 9.78 percent of an employee’s household income. The affordability threshold is adjusted annually. In 2019, it was 9.86 percent.

ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold. For example, if Pat earned $10 per hour in 2020 and worked 40 hours per week for 52 weeks, Pat’s monthly payment cannot exceed:

W-2 Safe Harbor: $169.52 ($170.91 in 2019);
Rate of Pay Safe Harbor: $127.14 ($128.18 in 2019); or
Federal Poverty Line Safe Harbor: $101.79 ($99.75 in 2019).

Despite being small, these changes can still be significant. To ensure compliance with the ACA’s affordability requirement in 2020, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about ACA-compliant group health plans.

Affordable Care Act: Annual Reporting and Filing Deadlines Are on the Horizon

The deadlines for large employers to comply with the Affordable Care Act’s annual information reporting requirements are almost here. Employers have been given an extension of time to furnish 2018 information statements to employees, but the deadline to file information returns with the Internal Revenue Service has NOT been extended.

Furnish Information Statements to Full-Time Employees. The IRS extended the deadline to provide Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to full-time employees from January 31, 2019 to March 4, 2019. This is the third consecutive year that the IRS has extended this deadline.

File Information Returns and Transmittals with the IRS. Every Form 1095-C along with Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) must be filed with the IRS on or before February 28, 2019 (April 1, 2019, if filed electronically). The IRS did NOT extend this filing deadline. However, employers may request an automatic 30-day extension by filing Form 8809 before the ACA filing deadline.

For 2018, the IRS also extended the good-faith relief from penalties that may be levied against employers for failing to properly file or furnish these forms, which can be $270 per form. The maximum penalty can be $3,275,500.

This relief only applies to employers that make a good-faith effort to comply. It does not apply to those that fail to file or furnish forms by the due dates. This means that incomplete or incorrect forms may be better than no forms at all.

Please contact us if you would like to learn more about ACA-compliant group health plans.

Affordable Care Act: Will Your Group Health Plan be Affordable in 2019?

Unlike the Individual Mandate, the Affordable Care Act’s Employer Mandate isn’t going anywhere in 2019. Employers with 50 or more full-time and full-time equivalent employees will still have to offer “affordable” health coverage to avoid ACA penalties. But, there is a sliver of good news. Next year, employers will be able to increase the required employee contribution for coverage under their group health plans.

To satisfy the ACA’s initial affordability requirement, an employee’s required contribution for the lowest cost, self-only coverage could not be more than 9.5 percent of the employee’s household income. However, the initial affordability percentage is adjusted annually by the Internal Revenue Service. In 2019, the affordability percentage will be 9.86 percent.

When compared to prior years, the 2019 affordability adjustment represents the largest percentage increase under the ACA.

2014 9.5

2015 9.56

2016 9.66

2017 9.69

2018 9.56

2019 9.86

We can use the ACA’s affordability safe harbors to translate this percentage increase into dollars and cents. These safe harbors provide various methods for calculating the most an employer can charge employees for the lowest cost, self-only health coverage option without exceeding the ACA’s affordability threshold.

W-2 Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) who works 40 hours per week for 52 weeks in 2019 will be $123.91 (+ $3.77).
Rate of Pay Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) in 2019 will be $92.93 (+ $2.83).
Federal Poverty Line Safe Harbor. Based on the 2018 single individual FPL of $12,140, the maximum monthly contribution in 2019 will be $99.75 (+ $3.03).

These increases may be modest, but they can add up quickly for very large employers. They can also provide some much-needed wiggle room for employers teetering on the edge of unaffordability. The ultimate impact of the 2019 affordability percentage increase can be inconsequential or substantial. Employers will need to reevaluate their cost-sharing structure to find out.

Please contact us if you would like to learn more about ACA-compliant group health plans.

The Affordable Care Act: What Does President Trump’s Executive Order Mean for Employers?

It wasn’t long before campaign promises to repeal Obamacare became official White House policy. On his first day in office, President Trump issued an Executive Order stating that “it is the policy of my Administration to seek the prompt repeal of the Patient Protection and Affordable Care Act.” This clearly marks the beginning of a long period of uncertainty about the future of Obamacare. What isn’t so clear is how the President’s Executive Order will affect employers.

Let’s start by clarifying that the Executive Order did not amend or repeal the Affordable Care Act (ACA). Only an act of Congress can do that. Instead, President Trump essentially issued marching orders to the heads of executive agencies about how their ACA-related authorities and responsibilities must be exercised under his administration. As head of the Executive Branch, this is within the President’s authority.

Specifically, the President directed these executive agencies to exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any ACA provision or requirement that would impose costs, fees, taxes, penalties or regulatory burdens. Can a directive as simple as this really change the ACA?

No, it can’t change the law itself. What it can do is change how the ACA is interpreted and enforced. This is because Congress sometimes uses broad strokes to enact a law. It then empowers one or more federal agencies to fill in the details. When it comes to the ACA, Congress did this quite a bit.

For example, Congress gave various federal agencies, including the Department of Health and Human Services(HHS) and the Internal Revenue Service (IRS), the general authority to promulgate any rules and regulations that may be necessary or appropriate to carry out a number of ACA provisions. Congress also gave these agencies some very specific and significant authority.

Hardship Exemptions. Congress included a hardship exemption in the ACA so deserving individuals can avoid the penalty for failing to have health insurance. Congress authorized HHS to define and determine whether someone qualifies for a hardship exemption.
Large Employer Reporting Requirements. Congress required applicable large employers to furnish and file information reports detailing offers of health insurance coverage to full-time employees. Congress authorized the IRS to determine how these reports must be prepared and when they are due.
Reasonable Cause Waivers. Congress included a waiver provision in the ACA so employers showing reasonable cause could avoid the penalty for failing to comply with the ACA’s reporting requirements. Congress authorized the IRS to define and determine whether an employer qualifies for a reasonable cause waiver.
Large Employer Penalty. Congress created a penalty for applicable large employers failing to offer full-time employees a minimum level of health insurance coverage, which must be paid when the employer receives a notice and demand for payment. Congress made the IRS responsible for not only determining when payments would be due, but for sending the actual demand for payment.

As you can see, various executive agencies have quite a bit of power to affect how the ACA is interpreted, applied and enforced. This power was given to them by Congress when the ACA was enacted. The Executive Order merely directs how these agencies must exercise the authorities and powers they already had under the ACA.

However, there are limits to this power. Formal rule and regulatory changes should be subject to the Administrative Procedure Act’s notice and publication requirements. This process can take months, possibly years. There may be a bit more flexibility when it comes to less-than-formal agency actions, but there are still statutory and constitutional limits that cannot be exceeded.

How far will President Trump and the executive agencies take the Executive Order to push their agenda? How far will opponents let them go before pushing back? How will the courts rule if (when) lawsuits are filed? The only thing we know for sure is that change is coming.

Setnor Byer Insurance & Risk is committed to guiding you through the constantly developing health care landscape. Check back with us periodically for future informational updates about the Affordable Care Act or contact us if you would like to discuss how we can help you comply with health care reform.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

IRS Extends Deadline to Furnish ACA Forms to Individuals and Good-Faith Relief from ACA Reporting Penalties

On November 18, 2016, the Internal Revenue Service gave employers averaging at least 50 full-time or full-time equivalent employees in 2015 (Applicable Large Employers or ALEs) an early holiday gift. The IRS extended the Affordable Care Act’s due date to furnish 2016 Forms 1095-C to individuals from January 31, 2017 to March 2, 2017. The IRS also extended last year’s transition relief to protect ALEs from penalties if they make a good-faith effort to comply with the ACA’s 2016 information and reporting requirements.

The IRS did NOT extend the due date for ALEs to file their 2016 Forms 1094-C and 1095-C, which must still be filed with the IRS by February 28, 2017 (March 31, 2017, if filed electronically).

Under the ACA, ALEs are required to annually furnish Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to individuals on or before January 31 of the following calendar year. ALEs must also file Forms 1095-C and 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) with the IRS on or before February 28 (March 31 if filed electronically) of the following calendar year.

The IRS determined that a substantial number of employers need additional time beyond January 31, 2017 to prepare and furnish their 2016 Forms 1095-C to individuals, which is why the due date was extended to March 2, 2017. This extension does not require the submission of a request or other documentation. However, the IRS determined that employers do not need additional time to meet filing deadline, so the due date to file 2016 Forms 1095-C and 1094-C with the IRS remains February 28, 2017 (March 31, 2017, if filed electronically).

Perhaps more important is the extension of last year’s transition relief from penalties that may be imposed for failing to comply with the ACA’s 2016 information and reporting requirements, which can be substantial. The penalty for failing to timely furnish correct Forms 1095-C to individuals is generally $250 per individual. The penalty for failing to timely file correct Forms 1095-C with the IRS is generally $250 per form.

To avoid these penalties, an ALE must show that it made a good-faith effort to comply with the ACA’s 2016 requirements to furnish information about employer-provided health insurance coverage to individuals and file this information with the IRS. This relief only applies to forms with incorrect or incomplete information, such as missing or inaccurate taxpayer identification numbers, dates of birth, etc. It does not apply to ALEs that do not make a good-faith effort to comply with the reporting requirements or that fail to file or furnish forms by the due dates.

In determining good faith, the IRS will consider whether an ALE made reasonable preparation efforts to furnish and file the necessary forms, such as gathering and transmitting the necessary data to an agent to prepare the data for filing with the IRS or testing its ability to transmit information to the IRS. The IRS will also consider the extent to which an ALE is taking steps to ensure that it will be able to comply with the 2017 reporting requirements.

These extensions only apply to the ACA’s 2016 reporting requirements. The IRS does not anticipate extending this transition relief, either with respect to the due dates or with respect to good faith relief from penalties, to reporting for 2017.

Setnor Byer Insurance & Risk is committed to helping clients protect their businesses and navigate the ACA’s reporting requirements. Please contact us for more information about our online tool for preparing, furnishing and filing ACA forms.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Gender Identity and Sex Stereotyping Under the Affordable Care Act

Did you know that the Affordable Care Act (ACA) contains a civil rights provision? The ACA prohibits discrimination on the basis of race, color, national origin, sex, age or disability in certain health programs and activities. Despite becoming law in 2010, final implementation rules were not issued by the Department of Health and Human Services (HHS) until May 2016. On July 18, 2016, the Nondiscrimination in Health Programs and Activities final rule went into effect.

Under the ACA, individuals cannot be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any covered health program or activity on the basis of race, color, national origin, sex, age or disability. Though the final rule generally incorporates existing federal nondiscrimination laws and policies , provisions dealing with sex discrimination, primarily gender identity and sex stereotyping, are getting the most attention.

The final rule states that sex discrimination includes discrimination based on sex, pregnancy, childbirth and related medical conditions. Individuals cannot be denied health care based on their sex and women and men must be treated equally in terms of health care and insurance coverage. However, the final rule also prohibits discrimination on the basis of gender identity and sex stereotyping.

Gender identity is an individual’s internal sense of gender. It may be male, female, neither, or a combination of both. An individual’s gender identity may be different from the sex they were assigned at birth. A transgender individual is an individual whose gender identity is different from the sex assigned to that person at birth.

Sex stereotypes are stereotypical notions of masculinity or femininity. They include expectations of how individuals represent or communicate their gender to others and that individuals will consistently identify with and conform to stereotypes associated with their assigned gender. Sex stereotypes also include gendered expectations related to the appropriate roles of a certain sex.

According to HHS, categorical coverage exclusions or limitations for all health care services related to gender transition are discriminatory. Individuals must be treated in a manner consistent with their gender identity. Providers may not deny or limit treatment that is ordinarily or exclusively available to individuals of one gender because the person seeking treatment identifies as belonging to another gender.

The manner in which the final rule expanded the traditional scope of sex discrimination to include gender identity and sex stereotyping represents a fairly significant policy shift. However, HHS admits that the final rule does not resolve whether discrimination on the basis of an individual’s sexual orientation alone violates the ACA’s nondiscrimination provision. Nevertheless, HHS states that allegations of sexual orientation discrimination will be evaluated by the Office for Civil Rights to determine whether they involve the sorts of stereotyping that violate the ACA’s nondiscrimination provision.

Despite not being directly covered by the ACA’s nondiscrimination rules, many employers will be affected indirectly. Employers providing fully insured group health plans may be affected because their insurance companies are covered by the rule. Employers using a covered third-party administrator to manage their self-fund group plan may also be affected by the rule. Consequently, employers should have at least a basic understanding of the ACA’s nondiscrimination rules.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care landscape and offer a number of valuable risk management solutions to help you properly and efficiently manage your employee benefits, group health and business insurance programs.

Please contact us if you would like more information about complying with the Affordable Care Act or subscribe to our weekly risk mangement newsletter.

Supreme Court Requests Compromise Options in ACA Contraception Case

In Zubik v. Burwell, the U.S. Supreme Court is considering whether the rights of religiously affiliated nonprofit organizations are violated by the Affordable Care Act’s contraceptive-coverage mandate. Given the sensitive, often contentious issues raised in this case, the public is anxiously awaiting the Court’s decision. However, many were surprised when less than a week after hearing oral arguments, the Court ordered the parties to provide potential compromise solutions.

The ACA generally requires group health insurance plans to cover preventive care and screenings for women without cost sharing elements (copayment, coinsurance, deductible), including all contraceptive methods approved by the Food and Drug Administration. Though generally mandatory for nonprofit employers with no religious affiliation and for-profit employers that are not closely-held (the Hobby Lobby case), religious and religiously affiliated employers can avoid the contraceptive-coverage mandate, either by exemption or accommodation.

Exemption. Federal regulations authorize an exemption for nonprofit religious employers, including churches and their integrated auxiliaries. These employers are not bound by the contraceptive-coverage mandate. Their employees and dependents do not have guaranteed contraceptive coverage.
Accommodation. Religiously affiliated nonprofit corporations may obtain an accommodation that relieves them from complying with the mandate. These employers must notify their insurance company, third-party administrator or the Department of Health and Human Services of their religious objections to providing insurance coverage for contraceptives.

Under the ACA, religious employers are exempt from the mandate, but religiously affiliated employers must take steps to obtain an accommodation. Nevertheless, these employers are not required to contract, arrange or pay for contraceptive coverage. According to the Secretary of Health and Human Services (Burwell), the regulatory process to obtain an accommodation does not substantially burden religiously affiliated employers seeking to avoid the mandate.

Though some of the employers in Zubik are entitled to an accommodation, they argue that the process itself violates their sincerely held religious beliefs. According to these employers, complying with the regulatory mechanism to obtain an accommodation would make them “complicit in providing contraceptive coverage” in violation of their religion.

The passing of Justice Scalia leaves only eight justices to decide this case. Many believe they are evenly divided. In the event of a 4-4- tie, the lower court rulings would remain intact, which could lead to inconsistent application of the law nationally because the Zubik case is actually a consolidation of several different cases from across the country. Perhaps this explains why the Court issued an order directing the parties to discuss ways to reach an acceptable compromise.

We may never know for sure why the Court did this, but it will be interesting to see if this exercise produces any results. Fortunately, we shouldn’t have to wait long because the Court didn’t give the parties much time. All briefs must be filed by April 20, 2016.

Stay tuned…

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care landscape. In addition to our other valuable risk management solutionse, Setnor Byer Insurance & Risk has an online tool to help clients complete their ACA information reports.

Please contact us if you have any questions or would like to discuss how we can help you comply with health care reform.

Is Your Group Health Plan Considered ‘Affordable’ under the ACA?

Applicable Large Employers (ALEs) are generally employers that average at least 50 full-time and full-time equivalent employees. Under the Affordable Care Act, ALEs can either provide health insurance coverage to employees or pay a penalty. To avoid a penalty, ALEs must offer health coverage to at least 95% (70% in 2015) of its full-time employees and their dependents. But, not any old group health insurance coverage will do.

Coverage that is offered must provide minimum value and must be affordable. The minimum value requirement is generally met if the plan covers at least 60% of the costs of benefits. To be affordable, the employee’s share of the premium cannot be more than 9.5% of that employee’s annual household income.

Since employers generally will not know each full-time employee’s household income, employers may use one or more of the ACA’s three affordability safe harbors. If an employer satisfies one or more of these safe harbors, coverage will be considered affordable even if it costs more than 9.5% of a particular employee’s annual household income.

Form W-2. Coverage will generally be considered affordable if the employee’s required calendar year contribution for the employer’s lowest cost self-only coverage does not exceed 9.5 percent of that employee’s Form W-2 wages.

Calculated on an employee-by-employee basis at the end of the calendar year.

Employee’s required contribution amount or percentage must be consistent throughout the calendar year, so discretionary adjustments to employee contribution requirements for a pay period are not allowed.

Wages are adjusted if coverage is not offered for an entire calendar year.

Generally produces the highest ‘affordable’ monthly contribution because the calculation is based on wages for all hours worked and paid time off wages (sick, vacation, etc.).

Optimal for employers with a relatively stable workforce that are unlikely to reduce compensation levels during the year.

Rate of Pay. Coverage will generally be considered affordable if the employee’s required monthly contribution for the lowest cost self-only coverage does not exceed 9.5% of an amount equal to 130 multiplied by the employee’s lowest hourly rate of pay during the calendar month or the hourly rate on the first day of the coverage period (generally the first day of the plan year), whichever is lower. Monthly salaries are used for non-hourly employees.

Calculated monthly on an employee-by-employee basis.

Employees credited with 130 hours of work per month, regardless of hours actually worked.

Generally produces a lower ‘affordable’ monthly contribution than the Form W-2 safe harbor because the calculation is based on wages for 130 hours of work per month (30 hours per week).

The maximum monthly ‘affordable’ contribution for an employee making the federal minimum wage of $7.25 per hour is $89.54 ($7.25 x 130 = $942.50 x .095 = $89.54). The monthly maximum would be $123.50 for an employee making $10 per hour and $148.20 for an employee making $12 per hour.

Federal Poverty Line. Coverage will generally be considered affordable if the employee’s required monthly contribution for the lowest cost self-only coverage does not exceed 9.5% of the applicable calendar year’s federal poverty line (FPL) for a single individual, divided by 12.

The 48 contiguous states are given a single FPL; Alaska and Hawaii each have their own FPL.

The 2015 FPL for the 48 contiguous states is $11,770, so the maximum monthly ‘affordable’ contribution would be $93.18.

Generally produces the lowest ‘affordable’ monthly contribution of all the safe harbors.

These safe harbors are optional. ALEs may use one or more of these safe harbors and can apply them to any reasonable category of employees, but they must be applied uniformly and consistently to all employees in a category. Reasonable categories can be based on specified job categories, compensation type (hourly or salary), geographic location or other similar bona fide business criteria.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care landscape. In addition to our other valuable risk management solutions, Setnor Byer Insurance & Risk has an online tool to help clients complete their ACA information reports.

Please contact us if you have any questions or would like to discuss how we can help you comply with health care reform.