During the last four and a half years, the Obama administration has faced dozens of lawsuits challenging the legality of certain provisions in the Affordable Care Act (ACA); issued thousands of pages of complex regulations implementing the law; struggled to sufficiently educate businesses about the law’s employer provisions; and botched the launch of HealthCare.gov, otherwise known as the health insurance marketplace.

As the American public’s frustration regarding the health care law intensified, the Republican majority in the U.S. House of Representatives moved forward with frequent votes to repeal all or parts of the law and held multiple hearings to shine light on its costly and burdensome provisions. Congress likely will revisit ACA provisions in 2015, and is expected to move toward a “fix and replace” policy if additional attempts to fully repeal the law are unsuccessful.

In the meantime, employers cannot sit on the sidelines and wait for Congress to act. Important implementation and enforcement deadlines are approaching, such as the employer mandate (“pay or play”) and the information reporting provisions. It is critical that employers take action in order to be compliant.

Employer Mandate

Generally, under the employer mandate provisions, an “applicable large employer” (ALE), defined as an employer with 50 or more full-time employees and full-time equivalent employees, must offer full-time employees a certain level of coverage or be subject to a penalty. A full-time employee is defined as working at least 30 hours per week each month (or 130 service hours monthly). To determine full-time employee status, an employer may use a look-back measurement period of three to 12 months.

Effective in 2015, employers with 100 or more full-time employees and full-time equivalent employees are required to comply with the employer mandate or be subject to a penalty. An ALE will be subject to a penalty if it does not offer “minimum essential coverage” to at least 70 percent of its full-time employees and their dependents, and at least one full-time employee receives a premium tax credit in the marketplace.

This will change to 95 percent beginning in 2016. A dependent is defined as a child under 26 years old; a spouse is not considered a dependent for purposes of assessing the penalty.

For failing to offer minimum essential coverage, an ALE will be assessed a penalty of $2,000 per full-time employee minus the first 80 full-time employees (30 beginning in 2016).

An ALE also will be assessed a penalty if it offers minimum essential coverage to at least 70 percent (95 percent beginning in 2016) of its full-time employees and their dependents, but at least one full-time employee receives a premium tax credit in the marketplace because:
  • the full-time employee was not offered employer coverage; or
  • the coverage offered was not “affordable” or fails to provide “minimum value.”
The penalty assessed on the ALE will be $3,000 per each full-time employee receiving a premium tax credit in the marketplace, capped at $2,000 per full-time employee minus the first 80 full-time employees (30 beginning in 2016).

“Affordable” means that a full-time employee’s premium contribution is not more than 9.5 percent of his or her annual household income. Because an employee’s household income is generally unavailable, the employer may utilize the following safe harbors to demonstrate affordability: W-2 wages, the rate of pay and the federal poverty line. “Minimum value” means the employer’s health plan pays for at least 60 percent of the total covered health care costs.

Exceptions
Employers with 50 to 99 full-time employees and full-time equivalents are not required to comply with the employer mandate until 2016 if they meet certain Internal Revenue Service (IRS) certification requirements; however, such employers are subject to the ACA’s information reporting requirements under Internal Revenue Code (IRC) sections 6055 and 6056 beginning in 2015.

Employers with fewer than 50 full-time employees and full-time equivalents do not have to comply with the employer mandate. However, small employer health plans are required to cover “essential health benefits” (effective 2014). Further, small employers that self-insure will be subject to IRC section 6055 beginning in 2015.

Information Reporting Requirements
The ACA also includes onerous employer reporting requirements. Beginning in 2015, employers with 50 or more full-time employees and full-time-equivalent employees—as well as employers of any size that self-insure—are required to report certain information about the type of health insurance coverage offered (IRC sections 6055 and 6056) to the IRS. Employers must collect the information required to be reported beginning in 2015 and file the information reporting returns with the IRS in 2016.

Under section 6056, to verify compliance with the employer mandate provisions, ALEs are required to file returns with the IRS that report detailed information about the health insurance coverage offered to full-time employees.

Under section 6055, to administer the individual mandate, self-insuring employers (of any size) must file returns with the IRS that report detailed information about the minimum essential coverage offered to individuals. An ALE that self-insures is required to report under both sections 6055 and 6056, but can use a single form to satisfy reporting obligations under both sections.

In addition to filing information returns with the IRS, an employer must provide a related statement to each full-time employee under section 6056 and to each covered individual under 6055. Information reporting forms and instructions are available at www.irs.gov.


Karen Livingston is director of policy for Associated Builders and Contractors. For more information, email livingston@abc.org. Members of Associated Builders and Contractors may refer to the Health Care Law Employer Tool Kit, located under the Education & Training tab on www.abc.org, for help navigating ACA provisions. Resources include reference guides, articles, webinars, PowerPoint presentations and regulatory guidance.