Are You in Compliance with the Affordable Care Act?

grandfather clock close upTime is up! Now you need to ensure that you are in compliance with the Affordable Care Act (ACA).

One of the many significant provisions under ACA is the requirement that all applicable large employers (ALEs) are subject to the employer shared responsibility provisions (ESRP) which became effective January 1, 2015. An ALE is defined as an employer who employs 50 full-time equivalent (FTE) employees.

Under the employer shared responsibility provisions, an ALE must provide affordable and minimum essential coverage to its full-time employees and their dependents. These provisions are commonly referred to as the “employer mandate” or the “pay-or-play provisions.” An employer-sponsored health plan provides “minimum” value if the plan covers at least 60% of the total cost of benefits expected to be incurred under the plan.  As it may be difficult for an employer to determine if a plan is affordable for an employee’s household, the employer can utilize three IRS safe harbors listed on the IRS website. These safe harbors allow employers to consider their employees’ W-2 wages, rate of pay, and rank within Federal Poverty Level (FPL) guidelines.

In order to ensure compliance with the employer shared responsibility provisions, ALEs are required to report certain health insurance coverage information to their full-time employees and to the IRS for the 2015 calendar year. Form 1095-C, Employer-Provided Insurance Offer and Coverage, and Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, must be filed with the IRS no later than February 28, 2016, (March 31, 2016, if you have more than 250 employees, which would require that both forms be filed electronically).

An employer is required to furnish Form 1095C to each of its full-time employees. Every employer must submit summary information using Form 1094-C when transmitting Forms 1095-C to the IRS. Together, these two forms are used in determining whether an employer owes a payment under the employer shared responsibility provisions.

If your company utilizes a payroll service to prepare your payroll tax returns, it is our understanding that many payroll companies now offer a separate service to prepare Forms 1094-C and 1095-C. Therefore, if applicable to your company, contact your payroll service now regarding employee tracking and preparation of these returns. DO NOT wait until December to begin this process!

The above information relates to employers with 50 or more full-time employees, but small employers (fewer than 50 employees) also are subject to the regulations governed by the ACA. If you are a small employer and you offer health insurance to your employees, you do need to ensure that coverage qualifies under the minimum essential and affordable guidelines. However, small employers are not required to file Forms 1094-C and 1095-C.

In addition, it is important to note that in the days before ACA, many small employers did not maintain group health plans but instead reimbursed the employees for a portion (or all) of their insurance premiums or directly paid the premium to the insurance company. As of January 1, 2014, these arrangements were no longer allowed under ACA as they are considered employer payment plans and thus considered group health plans. Consequently, these plans cannot be integrated with individual market policies to satisfy the requirements and market reforms under ACA and may be subject to an excise tax.

However, transition relief from the excise tax was granted by the IRS in February 2015. This relief excused small employers from the excise tax through June 30, 2015, as the IRS acknowledged that it may take time for small employers to cease these types of plans and shop around for new insurance. Therefore, if you have such an arrangement post June 30, you may be subject to a $100/day excise tax per applicable employee.

If a small employer cannot offer a group health insurance plan, it can increase an employee’s compensation in order to help curb the cost of insurance as long as the increase is not contingent upon purchasing health insurance.

ACA requirements are complex and arduous, and failure to comply can cost your company substantial taxes and penalties.

If you would like more information about compliance with ACA provisions or have other tax-related questions, contact the experts listed below at PYA (888) 420-9876.


Shannon Euart

Shannon Euart

Senior Manager

Related Posts
Bundled Payments for Care Improvement – Advanced (BPCI-A) is the Center for Medicare and Medicaid Innovation’s (CMMI) latest voluntary alternative payment model (APM), and it is garnering a great deal...
Read More

Choosing Wisely – BPCI-A Episode Selection Due August 1

About one-third of all hospitals and clinicians now participate in the Medicare Shared Savings Program (MSSP).  For those considering participation, the Centers for Medicare & Medicaid Services (CMS) offers a...
Read More

While You Are Waiting: Getting Ready to Apply for the MSSP

PYA has released a new white paper explaining how competing health systems may overcome antitrust obstacles to merger by formally committing to population health improvement in the communities they serve....
Read More

PYA White Paper Explains How Pro-Competitive Impacts of Hospital Consolidation Can Overcome Antitrust Concerns

PYA announces that Marci Nielsen, Ph.D., has joined as a Principal within its Consulting service line. Marci Nielsen has a passion for equitable, person-centered care.  Given her background, with -...
Read More

Health policy expert Marci Nielsen, Ph.D., noted for putting patients in the center of healthcare, is the newest principal at PYA.

The new Tax Cuts and Jobs Act (TCJA) can be confusing for many-- especially small business owners.  Although many aspects of the TCJA have been discussed, one component of the...
Read More

Government Clamps Down on “Deductible Fun” for Businesses

As businesses consider the impact of the Tax Cuts and Jobs Act (TCJA) introduced late last year, the corporate tax rate is receiving substantial attention.  However, according to a 2014...
Read More

2018 Tax Reform – The Excess Loss Limitation Likely to Squeeze Owners of Cyclical Businesses

PYA Principals David McMillan, Michael Ramey, and Martie Ross authored an article that was recently published in the AHLA Transactions Guide.  The article, “Overcoming Antitrust Obstacles to Mergers by Committing...
Read More

Overcoming Antitrust Obstacles to Mergers by Committing to Population Health Improvement

PYA has released a new white paper offering healthcare organizations guidance for conducting claims-based reviews in light of the U.S. Department of Health and Human Services Office of Inspector General’s...
Read More

PYA White Paper Offers Guidance for Conducting Claims-Based Reviews of Inpatient Quality Reporting Data and the Link Between Payment and Quality

According to its tagline, Atlanta Business RadioX spotlights “the city’s best businesses and the people who lead them.”   PYA is pleased to share that one of its own, Consulting Principal...
Read More

PYA’s Lori Foley Shared Insight in Live Radio Interview

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop