Affordable Care Act: What You Need to Know Now

As the end of 2015 nears, we’ve heard lots of questions about the Affordable Care Act (ACA) from our clients. Two things that employers need to do to prepare for 2016 are to determine their eligible employees and establish their insurance options.

Determine Employees Eligible for Insurance

For the 2015 plan year, many organizations were able to take advantage of transition relief to avoid the “play” mandate, but in 2016, this transition relief goes away and will force most organizations with 50 or more full-time equivalent employees to offer insurance. Employees who should be offered insurance for the 2016 plan year include those who are 1) categorized as full time; and 2) variable hour employees who averaged more than 30 hours/week for the Measurement Period. For many employers, the Measurement Period runs from October 2014 to the pay period ending after October 2, 2015. The Administrative Period, which should be no longer than 90 days, can begin with the pay period ending after October 2, 2015.

Run a report from your payroll system to review all of your active employees. Employees who are classified as Full Time, or variable hour employees who averaged 30 or more hours per week and worked the entire measurement period should be offered insurance to be effective January 1, 2016.

Be sure key data is accurate for all of your employees, including:

  • Full Time vs Part Time Status
  • Employee Name
  • Social Security Number
  • Birth Date
  • Job Class
  • Hire Date, Termination Date, and Leave Code
  • Salary/Rate of Pay and Date of Last Change
  • Benefit Eligibility Date

Establish Your Insurance Options

Your responsibility as an Applicable Large Employer is to offer bronze single coverage to your eligible employees AND to allow them to cover their dependents. You must subsidize bronze single coverage for your eligible employees based on one of three safe harbors:

a) The employee contributes up to 9.5% of their gross taxable wages each payday toward their insurance premium and the employer contributes the remaining amount. This method will generally result in the largest contribution from the employee, but if an employee is not paid (i.e., on leave of absence), no deduction can be withheld.

b) The employee contributes a flat amount each payday calculated as 9.5% of their hourly wage as of the beginning of the year multiplied by 130 hours times 12 months divided by 26 paydays (assuming bi-weekly payroll periods). This method results in consistency for the employee, and if the employee is not paid for a particular payday, the employer can make up missed deductions or require the employee to reimburse missed amounts.

c) The employee contributes an amount based on the federal poverty level. This method results in the lowest contribution from the employee.

Check with your insurance carrier to determine when your open enrollment period will be for 2015.

Frequently Asked Questions

Q: Can I offer different levels of insurance to different categories of employees?

A: The answer depends on whether your insurance plan is fully insured or self-insured. There are no discrimination rules for fully insured plans that would keep you from offering a different level of coverage to your employees than to your manager employees, for example. However, if you have a self-insured medical plan, you may not discriminate between classes of employees.

Fully insured plans can also provide a different employer subsidy for employees in different classifications. You are only required to subsidize the employee’s election of single bronze coverage.

Q: Why does the Administrative Period begin after October 2 – that seems like an odd date?

A: The Administrative Period cannot last longer than 90 days and needs to be completed by the end of the year, so the earliest it can start is October 3.

Q: Am I required to offer any insurance besides group health? What about vision, dental, cancer, etc.?

A: Under the ACA, you are only required to offer group health insurance to the employee plus dependents. You are not required to offer any additional types of insurance, nor do you have to offer spousal coverage.

Q: If an employee enrolls in our group health program but wants to stop mid-year, can they?

A: It depends. If the employee’s deductions are being taken out on a pre-tax basis (i.e., through a cafeteria plan), they can only alter their deductions due to a change in family status (marriage, divorce, birth or adoption of a child, death or loss of a dependent, or change in work hours that results in a change in coverage). If the employee’s deductions are being taken on an after-tax basis, they can discontinue the insurance but will not be able to re-enroll until the next open enrollment period.