Executive Action on the ACA and What It Means For Employers
Last week President Trump used executive authority twice in ways that will affect the Affordable Care Act.
First, he ordered regulators to expand the availability of Association Health Plans (AHPs) – a practice where by small businesses and/ or individuals band together to form a large group for the purpose of purchasing group health coverage. He also encouraged the increased use of Short Term Limited Duration Insurance (STLDI) and Health Reimbursement Arrangements (HRAs). In general, AHPs and STLDI are less expensive than ACA compliant health plans which makes them attractive to some buyers, but they also offer less in terms of coverage benefits. Some are concerned that making these alternatives more widely available will siphon low risk, cost conscious buyers out of the individual market. The result is the individual market is left with a higher risk pool which in turn will drive premium prices higher.
The next day, the President announced that his administration was ending ACA cost sharing subsidies. These payments from the Federal Government to private insurance carriers were designed to encourage carriers to limit policy holders’ out of pocket expenses. Without the subsidies, premiums are expected to rise.
So what does it mean?
Both actions were directed at the workings of the individual insurance markets. These are the marketplaces (such as healthcare.gov) where indivduals who are not covered by an employer sponsored plan go to purchase coverage.
While the impact on the individual market will be seen in the coming weeks and months, neither of these actions effect the Employer Shared Responsibility requirements in the ACA. The rules for applicable large employers have not changed and remain in full effect.
Could the IRS be signaling intent to enforce the ACA?
Are you prepared for an IRS compliance audit? After years of delay the IRS could be moving closer to enforcement.
One of the remaining questions surrounding the Affordable Care Act is when the IRS will get serious about enforcement. Since its inception, the ACA has required large employers to offer health benefits according to complicated eligibility and affordability rules, as well as execute difficult year end reporting. Failure to comply was intended to trigger hefty penalties – except that enforcement hasn’t really take place. Even though 2017 has been marked by Executive Orders and failed legislative efforts aiming to repeal or modify the ACA we may be nearing the time that enforcement finally begins.
Recently, the IRS published Information Letters from its Office of Chief Counsel. The letters re-affirm employers’ obligations under the ACA and the associated penalties for non-compliance. In fact, the letters specifically call out that the ACA Executive Order in no way changed employers’ obligations under the law. The letters are from earlier this year and their inclusion on the site would seem to indicate that the IRS has the intention of enforcing the employer provisions.
Navigating these complex regulations alone can be risky – the potential for huge penalties remains high. Employers of all types and sizes turn to the experts at HB Solutions for help managing their Affordable Care Act compliance. Visit http://acahelp.com/contact/ to start the conversation.
The IRS is Set to Launch a New System Aimed at Enforcing the Employer Penalties Under the Affordable Care Act
Last month the Treasury Inspector General for Tax Administration released an assessment of the Internal Revenue Service’s efforts to implement the Employer Shared Responsibility provision of the ACA. The audit found that the IRS was delayed in developing “key systems needed to identify noncompliant employers subject to an Employer Shared Responsibility payment.” The same audit also revealed that the situation will change very soon.
A January 2015 CBO report forecasted employer paid penalties under the ACA would exceed $164 billion in ten years, including $64 billion by 2020. Employer- paid penalties are a key piece of the funding required to support subsidies for buyers in the individual marketplaces. To date, the IRS has lacked the tools to identify and pursue those penalties. The Inspector General reports that while the IRS has been behind schedule in developing systems, they are now completed and they are anticipated to come on line in May 2017.
The program in question, the ACA Compliance Validation (ACV) system will “use employer related information returns as well as other tax data to identify employers that are not compliant with the Employer Shared responsibility Provision and may be subject to the Employer Shared Responsibility Payment.” The ACV will also help the IRS identify missing or improper reporting on forms 1094-C and 1095-C which enables the pursuit of penalties under §4980H(b).
The Federal Budget Process Could Put the Squeeze on Healthcare Reform
At HB Solutions, our clients often ask us to comment on the news coming out of Washington about the Affordable Care Act. We frequently publish articles that relate to the ACA, here is our observation on the latest developments.
If you have been following the news, you may have heard of a renewed effort to repeal and replace the Affordable Care Act. Aside from reaching a consensus of the substance of the replacement, enacting changes in 2017 may prove unworkable. That’s because any legislation to change or roll back the ACA will utilize a parliamentary procedure called Budget Reconciliation. For most of us, the term doesn’t mean much, but it’s having a big impact on any effort to make changes for 2017.
The reason? The repeal and replace advocates are using the budget process to attempt to advance their legislation because budget bills need only 51 votes in the Senate, making the maneuver an attractive option in the narrowly divided chamber. But this tactic could present a problem for any changes to be effective this year. Congress may be running out of budget votes for the 2017 fiscal year. In fact the next scheduled vote tied to the budget is scheduled for the end of April when it will consider a continuing resolution to fund the government for the remainder of the year. At the present time there is no healthcare reform bill to vote on or attach to the budget vote. After the April vote, the focus will likely turn to the 2018 budget – work on that gets underway in August.
So even though the debate may continue in the months ahead, the actions that may result are probably focused beyond this year.
The Current Outlook for Health Care Reform: What Employers Need to Know
Throughout the first quarter of 2017, Health Care Reform-related issues continue to dominate the headlines. The topic commands attention and for good reason, with healthcare expenditures heading toward 20% of the US economy.
So far this year, we have seen legislative efforts to repeal and replace the Affordable Care Act and an Executive Order directing federal agencies to lessen the fiscal and administrative impacts of the ACA.
Bottom line: with all of the activity and headlines, let’s review where we are.
Effects of the Executive Order
Thus far, there have been no tangible effects from the Executive Order on employers. The only action taken to date is the IRS announcement that it will accept individual tax returns that fail to indicate whether the individual (and dependents) were enrolled in Minimum Essential Coverage. Prior to the Executive Order, those returns would have been rejected.
It is possible that federal agencies such as the Department of Health and Human Services could alter some of the ACA requirements as we know them today. It is also important to note that the discretion the agencies have only extends to rules they make in enforcement of the law, not to change the law itself.
To date, Congress has not been able to agree on repeal and replace bill that can attract enough votes to be passed. The key points of the debate have centered on:
The future of expanded coverage under Medicaid
The form and amount of assistance that will be offered to buyers in the individual marketplaces.
It is unclear when, or if, Congress will revisit healthcare reform legislation this year.
So where does that leave employers today?
First and foremost, all of an employer’s obligations under the ACA remain in place.
Employer Mandate – offer of coverage to at least 95% of full-time employees and compliance with Affordability requirements
Reporting requirements – timely creation, distribution, and filing of Forms 1095-C and 1094-C
In addition, all of the penalties associated with employers obligations remain in effect. An aggressive enforcement of ACA penalties could be disastrous for a business. An employer with just a few hundred employees risks more than $1,000,000 in penalties for ACA non-compliance.