Real Answers to Pressing ACA Compliance Questions

Navigating the complexities of the Affordable Care Act (ACA) can be a daunting task for any organization. Understanding its provisions, compliance requirements and the impact on both employers and employees is crucial in today's ever-evolving healthcare landscape.

To shed light on these intricate topics, we've compiled a comprehensive guide that addresses the most pressing ACA compliance questions facing businesses and HR professionals. This article draws upon the expertise of seasoned professionals like Ellen Feeney, Vice President, Counsel at ADP, who has provided valuable insights in our previously published articles. Her knowledge and practical advice form the backbone of our discussion, ensuring that you receive accurate, actionable information to guide your ACA compliance strategies.

Whether you're grappling with the nuances of ACA plans, the differences between the ACA and Obamacare or the specific requirements for various types of employees, this article aims to provide real answers to these pressing questions, empowering you to navigate ACA compliance confidently.

What does ACA stand for?

ACA stands for the Affordable Care Act, a comprehensive healthcare reform law enacted in March 2010. Commonly referred to as Obamacare, the ACA represents a significant overhaul of the U.S. healthcare system, aiming to increase health insurance quality and affordability, lower the uninsured rate and reduce the costs of healthcare.

What is ACA compliance?

ACA compliance refers to the adherence to the various requirements and regulations set forth by the Affordable Care Act. This involves ensuring that health insurance plans meet the standards of coverage and affordability as defined by the ACA. For employers, compliance also includes offering health insurance to full-time employees, reporting health coverage information to the IRS and adhering to specific employee classification guidelines.

Who must comply with ACA?

The ACA mandates compliance from several groups:

Employers: Specifically organizations with 50 or more full-time or full-time equivalent employees are required to offer health insurance that meets ACA standards of affordability and coverage.

Individuals: While the individual mandate requiring all individuals to have health insurance or face a penalty has been eliminated at the federal level, some states still have their own individual mandates.

Insurance providers: Health insurance companies must adhere to ACA guidelines related to coverage benefits, pre-existing conditions and cost-sharing limits.

What are the major provisions of the Affordable Care Act?

The Affordable Care Act includes several key provisions:

Expansion of Medicaid: The ACA allowed states to expand their Medicaid programs to cover more low-income adults.
Health insurance marketplaces: These online marketplaces were established for individuals to shop for and enroll in health insurance plans.
Employer mandate: Large employers (with 50 or more full-time employees) must offer health insurance that meets ACA standards.
Protection for pre-existing conditions: Insurers cannot deny coverage or charge higher premiums based on pre-existing health conditions.
Young adult coverage: Young adults can stay on their parent's health insurance plans until age 26.
Essential health benefits: ACA-compliant plans must cover a set of essential health benefits, including emergency services, maternity care and prescription drugs.
Preventive care: Health plans are required to cover preventive services without charging a copayment or coinsurance.

What is the health insurance marketplace?

The Health Insurance Marketplace, often referred to as the Exchange, is a service available in every state where individuals, families and small businesses can shop for and enroll in affordable health insurance plans.

The Marketplace provides plan options with varying levels of coverage and cost and it also offers information to help consumers understand their insurance options. Importantly, the Marketplace is the only place where individuals can qualify for cost assistance through tax credits or subsidies based on their income, which can significantly reduce the cost of insurance premiums and out-of-pocket expenses.

How does the ACA work?

The Affordable Care Act (ACA) works by providing a framework for increasing health insurance coverage to more Americans while controlling healthcare costs. The key mechanisms include:

Insurance marketplaces: These online platforms offer a range of health insurance plans to individuals and small businesses, often with subsidies for eligible low- and middle-income people.
Employer mandate: Large employers are required to provide health insurance to full-time employees or face penalties.
Medicaid expansion: States have the option to expand Medicaid eligibility to cover more low-income individuals and families.
Regulations on insurance companies: Insurers are prohibited from denying coverage for pre-existing conditions, must provide coverage for essential health benefits and are subject to rate reviews and rebates if they spend too much on administrative costs.
Individual mandate: Originally, most Americans were required to have health insurance or pay a penalty, but the federal penalty was eliminated in 2019. Some states have implemented their own individual mandates.

What is an ACA plan?

An ACA plan refers to a health insurance policy that complies with the regulations set forth by the Affordable Care Act. These plans are available through the Health Insurance Marketplace and must cover a standard set of essential health benefits, including emergency services, maternity care, mental health services and prescription drugs.

ACA plans are categorized into different metal levels—Bronze, Silver, Gold and Platinum—based on the percentage of healthcare expenses the plan covers relative to the average enrollee's expenses. ACA plans also cannot deny coverage or charge higher premiums based on pre-existing conditions and must offer preventive care services at no additional cost to the insured.

ACA vs Obamacare

The terms "ACA" and "Obamacare" actually refer to the same legislation: the Affordable Care Act. The ACA is the official name of the law, while "Obamacare" is a colloquial term derived from the name of former President Barack Obama, who signed the Act into law. There is no difference between the two in terms of the law or its provisions. The use of "Obamacare" often reflects a more informal or political context, whereas "ACA" is used in more formal or legal contexts.

What triggers an ACA penalty?

An ACA penalty is triggered when an employer or individual fails to comply with the requirements of the Affordable Care Act. For employers, penalties are generally triggered under two scenarios:

Employer mandate penalty: This applies to employers with 50 or more full-time employees (or equivalents) who either do not offer health insurance coverage or offer coverage that does not meet the minimum standards of affordability and adequacy set by the ACA. If any full-time employee receives a premium tax credit for purchasing insurance through the Health Insurance Marketplace, the employer may be subject to a penalty.

Reporting penalties: Employers are required to report certain information about the health coverage they offer to the IRS. Failure to provide accurate and timely reporting can result in penalties.

For individuals, the federal individual mandate penalty for not having health insurance was eliminated in 2019. However, some states have implemented their own individual mandates and failing to have health insurance in these states can trigger a state-level penalty.

Does an employee's waiver of coverage affect ACA compliance for employers?

Feeney: Despite employees opting out of health insurance coverage, employers are still obligated to adhere to ACA compliance and reporting requirements. This includes offering eligible full-time employees qualifying health insurance and documenting this offer through IRS forms 1095-C and 1094-C. The responsibility to comply with the ACA's employer mandate and associated reporting duties remains, regardless of an employee's decision to decline the offered coverage.

Is the employer mandate still in effect despite the elimination of the individual mandate penalty?

Feeney: The abolition of the federal individual mandate penalty does not affect the employer mandate under the ACA. Employers with 50 or more full-time or equivalent employees must continue to provide affordable health insurance coverage.

This requirement persists despite the removal of the individual mandate penalty and failure to comply can result in significant penalties. Accurate tracking and reporting of employee work hours, health coverage offers and plan details are crucial for maintaining compliance.

What is the impact of employee coverage waiver on employer reporting?

Feeney: Even if employees waive the offered health insurance coverage, employers must still fulfill the ACA employer mandate and its reporting requirements. Critical to this process is the provision of Form 1095-C to each full-time employee and the submission of these forms, along with Form 1094-C, to the IRS.

This reporting demonstrates the employer's compliance with health coverage obligations under the ACA. Maintaining accurate records and ensuring timely submission of these forms are essential aspects of ACA compliance, regardless of whether employees accept or decline the offered health insurance.

Are there employer requirements for state-level individual health insurance mandates?

Feeney: Yes. Employers must comply with specific state-level reporting requirements in states with individual health insurance mandates, such as New Jersey, the District of Columbia and Massachusetts.

The complexity of ACA reporting is heightened in these states, demanding diligent tracking and reporting by employers. In 2020, states like California, Rhode Island and Vermont will also implement individual mandates, although Vermont will not require employer reporting at this stage.

How do long-term leaves affect the employer mandate's W-2 safe harbor rules?

Feeney: There are no specific exceptions in the W-2 safe harbor rules for employees on long-term leave. Employees on paid disability leave are considered to have "hours of service" for ACA full-time determination. Employers must continue offering these employees affordable health coverage if they are deemed full-time under the ACA.

Compliance with employee leave laws and ACA requirements, such as calculating average hours of service, can be complex, highlighting the need for ongoing ACA expertise and compliance management.

Is health insurance coverage required for non-traditional workers under the ACA?

Feeney: Under the ACA, employers with 50 or more full-time or equivalent employees must offer health coverage to all employees who average 30 or more hours per week or 130 or more hours per month. This requirement includes non-traditional workers such as seasonal employees and F-1 visa holders.

Employers should measure and compare an individual's hours of service against the ACA's full-time employee criteria, independent of their internal definitions of full-time and part-time status.

What considerations are important for ACA-compliant wellness and tobacco-cessation programs?

Feeney: With respect to the employer mandate, without question, it's all about affordability. Employers need to consider how these programs could impact the affordability calculations for health care under the ACA.

For example, in 2024, a healthcare plan is deemed affordable if the lowest-cost self-only option is below 8.39% of an employee's income. Additionally, employers must navigate and comply with federal rules regarding the conditions for offering these programs, ensuring they don't adversely affect the affordability criteria set by the ACA.

Compliance with other relevant laws like the Americans with Disabilities Act, the Genetic Information Nondiscrimination Act, COBRA and HIPAA is also crucial. Given the complexity and evolving nature of these regulations, employers are advised to have HR and benefits staff who are well-informed about compliance requirements for these types of programs.

Master ACA compliance with confidence

Understanding and adhering to the Affordable Care Act is vital for every organization. This guide, rich with insights from experts like Ellen Feeney, is designed to empower you with the knowledge needed to navigate ACA compliance confidently. We've tackled crucial questions and provided straightforward answers, helping you ensure that your organization meets ACA standards and optimizes healthcare offerings for your employees.

As you continue to explore the intricacies of the ACA and its impact on your organization, don't miss the chance to deepen your understanding. Read "Why Should You Care About the ACA?" Get ahead, stay compliant, and transform ACA challenges into strategic advantages for your organization.