Affordable Care Act (ACA) Compliance for Small Employers: You Have Options!
It’s about time to renew health benefit plans for 2017, and the Affordable Care Act — also known as the ACA, or in popular culture, “Obamacare”—is still offering both benefits and challenges to employers and office managers. One major problem is that many small employers with fewer than 50 employees are still unsure which regulations apply and how to comply. The goal of this article is to straighten out some of the confusion surrounding ACA requirements for small to mid-sized healthcare practices, so if that’s you, keep reading.
Here’s the good news: small employers have far more flexibility and some nice cost saving options that larger employers do not have access to. Knowing when and how the ACA reforms apply to you is key.
The Benefits of Being Small(er)
First and foremost, note that smaller employers with less than 50 employees are not required to provide group healthcare coverage to employees – it is entirely optional. If it is too much hassle or too expensive to offer group health insurance coverage, you do not have to.
If you don’t offer health insurance, employees can select their own affordable plans on the health insurance exchange (www.healthcare.gov), and possibly get tax credits based on their income level instead of a tax penalty at the end of the year. Note that it is no longer legal to provide an insurance allowance or cash stipend on a tax-free basis for the employee to use towards their own individual plan. This violates the ACA’s rule on limiting benefits amounts, and can subject you to stiff fines. Thus, if you want to contribute to an employee’s health coverage without offering a group plan, you can only do so through an increase in taxable compensation.
Remember that individuals must have minimum essential coverage or pay a fine, regardless of whether it’s available through work. So, if you have fewer than 25 employees, you may reconsider offering a plan through SHOP (the Small Business Health Options Program), as you may be eligible for employer tax credits that can pay for most of your costs. To qualify for the credits, employers must pay at least 50% of the premium costs, and your average salary must be $50,000 or less.
However, most small employers—at least those with between 10 and 49 employees—do offer a group option in order to stay competitive in hiring. If your practice does offer benefits, know that only some of the ACA regulations apply to small employers. The four main things to pay attention to are: 1) how you define full time employment for eligibility; 2) staying within the 90 day waiting period; 3) how to keep your handbook in line with your benefits; and 4) reporting and notification requirements.
- Full Time Employees. Large employers have a complicated calculation to make to determine their number of employees and whether to “play or pay.” And those with close to 50 employees should monitor their workforce in order to avoid the penalties for non-compliance. But if you clearly have fewer than 50 full-time-equivalent employees and you decide to offer a benefit, you are not bound by the requirement to offer the plan to all those who work 30 hours per week or more. You can set your full time hourly requirement for benefits lower or higher, as long as you treat everyone the same.It’s best to designate this number in your handbook. Your full time requirement does not have to be the same hourly requirement you apply to other full time benefits, such as eligibility for vacation pay. Smaller employers can continue to define full time employment based on business needs and schedule.
- Time is of the Essence – The 90 Day Rule. Small employers who offer coverage must do so before the eligible employee’s 90th day of employment. (You can always provide coverage sooner, but you must do so by day 90.) Since most plans are based on a calendar month, the most common way to do this is to have benefits start on the first day of the month following 60 days of employment. This may mean you need to plan for a new employee’s enrollment process to occur as early as 30 days in, to be sure the employee’s share of any premium can be deducted from their paycheck in advance of coverage beginning.If you want to provide access no sooner than required, be sure your policy speaks to what happens if day 90 falls on a weekend, holiday, or other time it is difficult or impossible to begin coverage. (Hint: it needs to occur the last business day prior!)
- Group Coverage and Your Employee Handbook. Your employee handbook is a critical tool to limit liability and provide clear, effective policies for your employees. It is very important that the handbook supplement, but not contradict, any of your group coverage plan provisions. It is often a good idea to refer employees to plan-provided documents for additional details rather than trying to spell everything out (again) in your handbook. This is more efficient, and reduces confusion if there is a conflict in policy.Your handbook must spell out eligibility rules clearly. Ambiguous or confusing language may be construed against you. Additionally, there must be objective, non-discriminatory criteria for providing or denying coverage. The most common “line in the sand” is full time or part time status, but be sure to specify what happens if that status changes in the future. Additionally, remember that you cannot condition coverage based on need (such as whether the employee’s spouse has coverage), nor can you condition coverage on health or physical status (i.e. you cannot provide health coverage only to younger, healthier employees).
- Reporting and Notifications. Finally, there are a few additional reporting requirements for smaller employers. All employers, whether you offer insurance or not, are required to provide all employees with a notice about the availability of the health insurance exchange at the time of hire. Model notices are available on the DOL website (follow this link for the notice to use if you are offering a plan, or this one if you are not). Also, small employers who offer health insurance plans that provide minimum essential coverage to at least one employee must complete Form 1095-B for each employee and provide it to the employee before March 31st each year. These forms, plus the transmittal form 1094-B, must be submitted to the IRS annually. If you’re like most small employers, you are relying on your accountant to tell you what you need to do for your practice as far as reporting, so you can just tuck this information away for later.
Why You Should Care About Healthcare (Either Way)
As you can see, employers are faced with more options and rules relating to group health coverage than ever before. Hopefully, this discussion has helped clear up some of the most common questions and concerns you or your practice owner might have. If you are not sure providing coverage is right for you, do not forget to look at the big picture: a healthy workforce increases productivity and decreases cost. For many employees, healthcare coverage is the second most important benefit behind vacation. Having a good, affordable plan can help you attract and keep talent, and acts as a point of pride and distinction for your business.
Even if you do not provide group coverage, remember that illness is a fact of life. Be sure to have reasonable, legally compliant sick day and leave of absence policies in your handbook to anticipate and address employee health issues before they give YOU a headache! And if you’ve been worried about missing important compliance items within the ACA or any other employment-related law, and need a confidential, reliable resource to call and ask questions, you’re welcome to contact us here at CEDR.
Friendly Disclaimer: This information is general in nature, and is not intended to replace good counsel about a specific issue with either your attorney or your favorite HR expert.