ACA Compliance – What Employers Are and Are Not Doing
While employers that are affected by the Affordable Care Act (ACA) have had several years to prepare to meet the law’s complex requirements, an important question is: how prepared is your organization to demonstrate compliance?
To help organizations gain insight into how the ACA is affecting U.S. employers, the ADP Research Institute® (ADP RI), a specialized group within ADP®, surveyed more than 800 heads of HR and senior HR/Benefits executives and managers in midsized (50-999 employees) and large organizations (1,000 or more employees). Survey responses provide insight into what organizations are and are not doing, as they navigate the ACA’s complexity.
Who’s In Charge of ACA Compliance?
Taking on ACA challenges appears to be a team effort. Study results indicate that most midsized and large organizations are relying on people in different functional areas to make strategic decisions concerning ACA compliance. In more than half of midsized organizations, the key decision maker is the Chief Executive Officer, while 60% of large employers assign this level of decision-making to the Head of Human Resources. However, the Head of HR is usually the person who manages day-to-day tasks that relate to ACA compliance for most organizations, regardless of size.
Who’s Receiving Coverage?
The study reveals that many organizations are not only extending health care coverage beyond ACA full-time populations, but also are not choosing to limit employee hours in response to ACA service-hour requirements.
The competition to attract talent appears to be the core business reason driving these decisions. Specifically, at least half of all organizations surveyed indicate they are extending coverage to employees who do not qualify as ACA full-time. Moreover, only a quarter of midsized employers surveyed already either have or are planning to limit the hours of at least some employees.
Are Employees Paying More for Health Care Costs?
According to the ADP RI study, employers are shifting health care-related costs to their employees. About 70% of midsized organizations and 80% of large organizations are increasing the share of costs that they charge their employees in the form of deductibles and co-pays. More significantly, the study found that employers are beginning to emphasize consumerism into the health care cost equation through revised plan design. (Consumerism essentially engages employees more directly to help improve their health care buying decisions.) The most dramatic step toward consumerism is taking the form of Consumer-Driven Health Plans (CDHPs), which are the most effective plan design for actively engaging employees and their covered dependents in health care decisions.
In addition, the study indicates that nearly 20% of midsized employees and more than a third of large organizations have introduced a low minimum value plan as part of their ACA compliance strategy. Implementing a CDHP with a 60% minimum value would help simplify record keeping and reporting, and could play a role in reducing the Excise Tax penalties – a 40% tax that takes effect in 2018 on high-cost health plans above a certain threshold.
Are Employers Effectively Addressing Affordability Requirements?
Another area in which employers are challenged is how to address affordability requirements under the ACA. The study shows that a significant proportion of employers – who have or are planning to extend health care benefits – report they remain unsure concerning which of the three affordability safe harbors they will utilize for their employees.
Employers facing ACA compliance should select an affordability safe harbor and test plans offered to make sure that at last one plan offered with at least 60% minimum value is also affordable, based on the employee cost for self-only coverage.
How Prepared Are Employers for What Comes Next?
The ADP RI study clearly indicates that ACA compliance remains an area of concern for most employers faced with the task of meeting ACA requirements. Surprisingly, a majority of midsized and large employers believe their organizations are still not fully prepared to administer all applicable ACA requirements accurately. A major reason for this appears to be a lack of being able to properly integrate data from disparate systems (Payroll, Benefits, Time and Labor Management, and HR) – essential to successfully achieving ACA compliance.
Of those employers who believe they can access the data to comply with the ACA, many are still not confident that they can accurately compile and report required health care-related information to the Internal Revenue Service, and provide required notices to employees in a timely fashion.
Although ACA compliance necessitates resources, it does not have to drain an employer’s internal talent, systems, and other assets. Organizations facing data integration and/or information-reporting issues can derive positive benefits from engaging a third-party service provider that has a comprehensive ACA solution, which includes certified expertise and a dedicated service component. Regardless of which path an employer takes toward putting in place an effective ACA management solution, the ACA is the law and the ACA compliance clock relentlessly keeps on ticking.