HR must stay compliant with ACA obligations despite prospects for bipartisan relief
With the Republicans’ failure to pass a bill to repeal and replace the Affordable Care Act (ACA), employers should plan to remain compliant with all ACA employee health coverage and annual notification and information reporting obligations.
Even so, advocates for easing the ACA’s financial and administrative burdens on employers are hopeful that at least a few of the reforms they’ve been seeking will resurface in the future, either in narrowly tailored stand-alone legislation or added to a bipartisan measure to stabilize the ACA’s public exchanges. Relief from regulatory agencies could also make life under the ACA less burdensome for employers.
“Looking ahead, lawmakers will likely pursue targeted modifications to the ACA, including some employer provisions,” said Chatrane Birbal, senior advisor for government relations at the Society for Human Resource Management (SHRM). “Stand-alone legislative proposals have been introduced in previous Congresses and sponsors of those proposals are gearing up to reintroduce bills in the coming weeks.”
These legislative measures, Birbal explained, are most likely to address the areas noted below.
The “Cadillac” tax on high-cost employer-sponsored health plans is set to take effect in 2020. Bipartisan legislation has already been introduced in the current Congress to repeal the 40 percent excise tax “and will likely receive considerable attention,” Birbal noted.
A big hurdle, however is “replacing the lost $90 billion in revenue that the Congressional Budget Office expects the Cadillac tax would bring in over a 10-year budget window,” said Brian Gilmore, lead benefits counsel and vice president at San Mateo, Calif-based ABD Insurance and Financial Services, a benefit brokerage firm. “The wrong way to address the lost revenue would be to cap the tax exclusion for employers’ health care costs,” he noted, expressing a concern that Birbal said SHRM and other employer groups share.
The ACA requires employers with 50 or more full-time employees or equivalents to provide ACA-compliant health care coverage. The employer mandate, also known as the shared-responsibility provisions or the pay-or-play rules, “creates a strong incentive for employers to stay below the 50 full-time employee threshold on average each calendar year,” Gilmore said. The rules “also create a strong incentive for employers to satisfy their labor needs through part-time employees. Repealing the pay or play rules should therefore help address the current underemployment problem plaguing many workers still struggling to find full-time work.”
Definition of a “Full-Time” Employee
The ACA defines full-time employees entitled to receive health coverage from large employees, and who are counted within the ACA’s 50 full-time employee threshold, as those who work a minimum of 30 hours per week. Assuming that the employer mandate remains in place, SHRM and other employer groups support proposals to change the definition of full-time employee to 40 hours per week (the standard pre-ACA definition). The current definition “imposes significant costs on employers, particularly in industries with a low-paid workforce,” Gilmore said.
In addition, the monthly measurement and lookback measurement methods for determining employees’ full-time status “have presented an unreasonable burden” on employers, he noted.
A proposal to modify the ACA definition of “full-time” employee for purposes of health care coverage passed in the House of Representatives in 2015, Birbal said.
Defining “full-time” as an employee working 30 hours a week “is inconsistent with standard employment practices in the U.S. today and other federal laws,” according to a SHRM position paper. “Some employers have opted to eliminate health care coverage for part-time employees, while others have re-engineered staffing models to reduce employee hours below the 30-hour threshold that triggers the coverage requirements.”
Definition of Seasonal Employee
The ACA requires that large employers cover their full-time employees, but the final regulations provide that seasonal employees do not qualify as full-time employees under certain circumstances, even if they work 30 hours or more per week.
For instance, whether or not large employers must offer coverage to full-time but seasonal employees is based on two factors: how long these employees work for the employer; and which measurement period the employer chooses to use.
Navigating this exception is complex, Birbal noted, and employers would welcome a simplified approach if the employer mandate isn’t repealed altogether.
Annual Information Reporting
Employers have sought to ease the employee tracking and IRS reporting requirements for employers offering health coverage to their employees. To prepare and file Form 1095-C, for instance, involves tracking the hours worked by variable-hour employees each month.
Employers will be looking for ACA legislation to simplify their reporting obligations, Birbal said.
In addition to congressional action, regulatory guidance from the departments of Labor, Health and Human Services, as well as from the Treasury and the Internal Revenue Service—the agencies responsible for ACA oversight—is anticipated, Birbal said.
“Recall that President Trump issued an executive order in January directing federal agencies to minimize the ACA’s regulatory burden where possible,” she noted. “These regulatory burdens may include easing employer reporting requirements and the employer pay-or-play penalties.”
While any reduction in the ACA’s administrative burdens through rule-making would be welcome, major changes may require new legislation, which will need bipartisan support to pass, Birbal pointed out.
For Now, Business as Usual
It bears repeating that unless and until the law or federal rules are altered, “for employer group health plans, it’s business as usual,” said Edward Fensholt, senior vice president and director of compliance services at Lockton, a benefits brokerage and consultancy based in Kansas City, Mo., “The ACA, its employer mandate, the year-end reporting, and all the rules regarding the benefits a health care plan must offer and who they must offer them to, remain in full force and effect.”
“Even though an executive order was issued earlier this year directing the federal government agencies to minimize the burdens [of the ACA], the IRS has confirmed in two letters from the Office of Chief Counsel that the law has not been changed,” said Greta Cowart, a benefits attorney in the Dallas office of Winstead.
The IRS clarified, she added, that “an applicable large employer is still subject to the employer shared responsibility payment if it fails to offer coverage to a sufficient percentage of its full-time employees in 2017 or if it has a full-time employee obtains coverage on the insurance marketplaces and receives assistance or a tax credit and the employer’s coverage is not affordable or did not provide minimum value.”
Employers subject to the ACA’s reporting requirements “should prepare to comply and report for 2017 on Forms 1095-C and 1094-C,” Cowart advised.