Deciding if your organization should continue to provide health coverage is a complicated choice. On one hand, deciding to stop providing coverage eliminates administrative burdens. But there are other things to consider about not providing coverage, which could lead to expensive penalties. Consider the following challenges:
Challenge 1: The No-Coverage Penalty
Employers with 50 full-time employees or more who do not provide coverage are subject to the non-deductible no-coverage penalty. In 2015, there will be transitional relief for those with 50-99 employees. Learn more here.
Challenge 2: Notice and Reporting Obligations
Some ACA requirements apply to all employers, not just those who sponsor group health plans. Most employers who choose to not offer coverage are still subject to the following requirements:
- Providing a Notice of Exchange to all employees, regardless of business size.
- Reporting to the IRS whether or not minimum coverage is provided to full-time employees. This requirement becomes active in 2015, and the first return due date is in 2016. Implementing guidance has not yet been issued.
- Providing a written notice to all full-time employees regarding employer coverage.
Challenge 3: Human Resource Burdens
Employers that choose to exit the market will inevitably shed one set of HR administrative tasks while adopting another. These burdens may include:
- Problem Solving (or not!): Most employees rely on HR to help them deal with issues that arise under their employer’s health plan. Employees will lose time away from work trying to resolve these problems on their own. HR will need to understand multiple health insurance policies on the market and exchange resources in order to assist with these new problems.
- Employee Relations: Some employers have concluded that it’s less expensive for them to accept penalties and terminate health coverage than it is to continue to provide a group plan. This choice must be accompanied by clear messaging to employees about its impact.
Key messages include providing highlights of other company-sponsored benefits, explaining financial positives like increases in employee compensation, and the opportunity to enroll in a marketplace plan and potentially receive a subsidy or tax credit. It’s also important to provide assistance in navigating individual coverage options.
In addition to these new challenges presented by the ACA, new compliance requirements can present additional administrative hurdles for small and large businesses.
Key Disclosure Rule
Employers are obligated to provide a Summary of Benefits and Coverage to new hires and employees during open enrollment periods. Here’s what you need to know:
- Appearance and format are strictly governed by federal regulations; the Department of Labor published a template.
- Preparation and distribution of the SBC is the responsibility of both the plan administrator and insurer for insured plans and the sole responsibility of the administrator for self-funded plans.
- SBC must be provided to all eligible enrollees on day one of annual enrollment. It can be provided to the employee on behalf of eligible dependents and to COBRA participants in conjunction with open enrollment.
- Distribution to newly-eligible employees is required, and must be provided with enrollment materials. Special enrollees must receive an SBC within 90 days of enrollment.
New Fees and Taxes
Additional costs and administrative steps have been created by new Health Care Reform legislation. These include:
- PCOR (Patient-Centered Outcomes Research Fee): $2.00-$2.08 depending on plan year. Employers sponsoring self-funded group health plan coverage have the obligation to report and pay this fee. This fee is subject to indexing in future years. The fee provides funding for the Patient-Centered Outcomes Research Institute, which funds studies and trials aimed at providing more effective treatment measures.
- Transitional Reinsurance Program: This program funds state-based exchanges to mitigate risk associated with selection of new enrollees. This program will require a fee of $44 in 2015 and $27 in 2016 per covered life. Self-funded plans are responsible for making payments to the government; cost will be included in fully-insured plan rates.
- Annual Fee on Health Insurers: Beginning in 2014, insurers are subject to annual fees apportioned among all health insurers based on market share. It is not assessed directly on group plans but will likely trigger premium increases.