Tikia Consulting Blog

QUESTION: Why are there multiple affordability provisions related to the ACA?

ANSWER: Under the ACA, the affordability of an employer’s plan may be assessed for the pay or play penalty, the individual mandate and the premium tax credit. Below is a brief summary of each affordability provision and to whom they apply.  The affordability test that is used varies for each provision.

• The employer shared responsibility penalty for applicable large employers (also known as the pay or play rules or employer mandate);
• An exemption from the individual mandate tax penalty for individuals who fail to obtain health coverage; and
• The premium tax credit for low-income individuals to purchase health coverage through an Exchange.

Employer Shared Responsibility Rules

The ACA’s employer shared responsibility or pay or play rules require ALEs to offer affordable, minimum value health coverage to their full-time employees (and dependents) or pay a penalty. The affordability of health coverage is a key point in determining whether an ALE will be subject to a penalty.  The percentage for 2020 is 9.78%.

Individual Mandate Exemption

The ACA’s individual mandate requires most individuals to obtain acceptable health coverage for themselves and their family members or pay a penalty. However, individuals who lack access to affordable minimum essential coverage are exempt from the individual mandate. The percentage for 2020 is 8.24%.  While the penalty is now $0, final rule notes that individuals may still need to seek this exemption for 2019 and future years (for example, in order to be eligible for catastrophic coverage).

Premium Tax Credit

The ACA provides premium tax credits to help low-income individuals and families afford health insurance purchased through an Exchange. The amount of a taxpayer’s premium tax credit is determined based on the amount the individual should be able to pay for premiums (expected contribution). The expected contribution is calculated as a percentage of the taxpayer’s household income, based on the Federal Poverty Level.

Income Level
Up to 133% FPL	2.06%
133-150% FPL	3.09-4.12%
150-200% FPL	4.12-6.49%
200-250% FPL	6.49-8.29%
250-300% FPL	8.29-9.78%
300-400% FPL	9.78%

Source: Zywave

QUESTION: What are the reporting requirements of an applicable large employer (ALE) who chooses not to offer health insurance coverage to their employees?

ANSWER: Every applicable large employer (ALE) must report to the Internal Revenue Service (IRS) and to its full-time employees regardless of whether health coverage was offered during the previous calendar year. ALEs who do not offer health insurance to their full-time employees must report to the IRS identifying themselves as an ALE and that health coverage was not offered on Form 1094-C and Form 1095-C.

ALEs must also furnish to each full-time employee the same Form 1095-C that it provides to the IRS, including identification of the employer and that coverage was not offered to the employee.

 

Source:

Information Reporting by Applicable Large Employers, IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, IRS (See Q&A’s 3and 4)

QUESTION: What are the differences between tax advantaged accounts available to an employer?

ANSWER:  Numerous differences exist between the various tax-advantaged accounts available to employers. Below is a chart that highlights the key differences.  The summary below is not exhaustive and should only be used as a quick reference.

QUESTION: How does an applicable large employer address ACA requirements for summer interns and seasonal employees?

ANSWER:  If you employ interns or seasonal employees, it’s a good practice to determine before or at time of hire how to categorize them and what ACA requirements may apply to their employment.

Interns can be structured in different ways, however, a paid intern is treated like any other employee. If an employee including an intern is hired to work full time and is expected to average at least 30 hours per week, the applicable large employee (ALE) should offer health coverage based on the company’s eligibility for new hires, ensuring that the waiting period is no later than 91 days from the hire date. If an intern is part time, the ALE should measure the intern’s hours with the same measurement period used for any variable hour or part-time employee. An unpaid intern who is not being paid for hours worked, is not considered a full-time employee or FTE under the ACA.

Some employers may use the terms interns or seasonal employees interchangeably, however, there are distinctions between the two. A seasonal employee is one whose employment must be six months or less and reoccurring each calendar year at approximately the same time of the year, such as summer or winter. If an ALE incorrectly classifies employees as seasonal but they are regularly working more than six months at a time, they really aren’t seasonal for ACA purposes. Seasonal employees are variable hour employees and if working on average over 30 hours per week, do not have to be offered coverage within 91 days of date of hire. However, average hours worked are determined based on the measurement period selected by the ALE.

 

Resources:

Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, Internal Revenue

Service, March 26, 2019, (See Q&A 27 – 28)

Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056), Internal

Revenue Service, March 26, 2019

ACA and Employers: How Seasonal Workers Affect Your ALE Status, Internal Revenue Service, July 2, 2018

 

QUESTION: Is an employer worksite medical clinic a group health plan?

ANSWER:  It depends. Worksite medical clinics, some offering round-the-clock access to medical providers via telemedicine, seem to be growing in popularity.  Promoters tout cost savings resulting from what would otherwise be lost productivity (employees whiling away afternoons waiting to see their private doctors or having to drive long distances to have blood drawn for routine laboratory work) and expenses otherwise borne by self-insured group health plans at a far higher cost per service.  Some worksite clinics have existed for decades for reasons other than cost-savings – for example, to ensure immediate treatment is available to employees if work-related injuries or illnesses occur or as part of a workplace well-being program.

The variety of reasons for having worksite clinics has caused at least as much variety in worksite clinic designs – from those that provide only first aid treatment to employees if workplace injuries occur to those that provide a full array of primary medical care services to employees and family members despite the source of injury or illness.  There also are a variety of legal considerations applicable when employers provide medical care at the worksite – particularly if the arrangement constitutes an employer group health plan.

An employer group health plan is an arrangement established by an employer to provide or pay for medical care – something all worksite clinics do.  Group health plans generally are subject to specific disclosure and reporting requirements under the Employee Retirement Income Security Act (ERISA), continuation requirements under the Consolidated Omnibus Budget Reconciliation Act (COBRA), special tax treatment conditions under the Internal Revenue Code (IRC), privacy and other requirements under the Health Insurance Portability and Accountability Act (HIPAA), and health care reform provisions under the Patient Protection and Affordable Care Act (ACA).  That said, a worksite clinic might be exempt from some or all of these requirements.

Unfortunately, whether a worksite clinic is exempt from one or another compliance requirement is a murky issue.  If the worksite clinic does more than treat minor workplace injuries and illnesses during work hours, it will be subject to ERISA, including the requirements of issuing a summary plan description and filing an annual Form 5500.  It also will be subject to COBRA, unless it is primarily providing free first aid treatment to employees for workplace injuries and illnesses.  The employer must consider how it will satisfy these disclosure, reporting and coverage continuation requirements or manage the risk of violating those requirements.  How would the employer respond to a terminated employee’s assertion of a COBRA right to continued access to the clinic?

An ERISA-covered worksite clinic might still escape other requirements unique to group health plans under HIPAA and the ACA if it qualifies as an excepted benefit by virtue of being a worksite medical clinic.  However, the enforcement agencies have not defined a worksite medical clinic for these purposes.  Given the nature of the other enumerated excepted benefits – all of which are secondary or incidental to group health benefits – it is unlikely that a worksite clinic providing services (beyond workplace first aid for employees) that supplant benefits ordinarily provided under a group health plan would qualify as an excepted benefit.  How would the worksite clinic comply with the ACA’s coverage mandates – particularly regarding employees and family members not enrolled in the employer’s otherwise compliant group health plan?

In addition to litigation that can arise over group health plan noncompliance, the enforcement agencies – primarily the Department of Labor, Internal Revenue Service and Department of Health and Human Services, can impose significant penalties on employers for violating the myriad of compliance requirements applicable to group health plans.

The bottom line is that an employer maintaining a workplace clinic (or considering one) needs to understand the group health plan compliance risks and the general risks associated with doing so and take reasonable steps to mitigate those risks.

 

Source: Monique Warren via Jackson Lewis (https://www.benefitslawadvisor.com/2019/04/articles/affordable-care-act/is-your-employer-worksite-medical-clinic-a-group-health-plan/