An Unexpected Solution to Employee Healthcare Mandate Penalties
At the beginning of 2015, President Obama’s employer healthcare mandate began to take effect. However, it wouldn’t be until several years later that employers began to receive penalty letters from the IRS.
If you’re a business owner and have recently started receiving these letters in the mail, it’s time to take action. The employer healthcare mandate can cripple your business’ growth. However, with the right help, you can avoid the worst of these fines and penalties and create a framework to do so in the future.
As healthcare consultants, we have multiple large and small companies in the Houston, Texas area and around the state restructure their employee health benefits packages to adhere to these guidelines. Let’s take a look at the history of the mandate and a few simple things you can do to avoid employer mandate fines.
The History of Employer Healthcare Mandate Penalties
The Employer Healthcare Mandate for the Patient Protection and Affordable Care Act (PPACA) took effect in 2014. Under the new law, the employer mandate requires businesses with more than 50 full-time employees to provide minimum health insurance to some 95% of their full-time employees. A failure to provide this coverage will result in a fee charge.
Additionally, the mandate requires that the insurance provided is affordable. Affordability is determined by deciphering if employee contributions are less than the indexed threshold of 9.56% in 2018 and upwards of 9.86% in 2019. This would be after their 401(k) contributions, their total monthly wages, or if they are in the Federal Poverty level for an individual. The mandate also requires that at least 60% of the cost of health services is covered by the employer plan.
The question is, when should employers expect penalties? Penalties are applied if any employee that is working full-time purchases coverage on the Marketplace and earns a federal premium subsidy. This can happen if your coverage doesn’t provide the minimal essential coverage required by the PPACA and follows the percentage index threshold mentioned above.
Unfortunately, many employees mistakenly thought that the government would not follow through with the penalties proposed. Instead, they assumed that the government would simply shut them down for failing to adhere to the guidelines for the employer mandate. However, much to their surprise, they are now receiving penalties in the mail.
The penalty for failing to offer any coverage is $2,320 per full-time employee, after the first 30 employees. This penalty goes into effect even if only one employee buys marketplace coverage. If your plan fails to meet the minimum essential coverage requirements and the coverage offered isn’t affordable, then the penalty is the lesser of $3,480 per full-time employee who earns a subsidy or $2,320 per full-time employee after the first 30.
The I.R.S. Is Now Enforcing the Employer Mandate
While threats of penalties have always laid in the peripherals of most employers and decision makers, there is no more time to wait to get in line with the employer mandate.
In October 2017, the IRS started sending out notices to small and large businesses informing them that they failed to meet the standards for the employer mandate and are now liable for penalties.
The reason for the delay in enforcing the penalties came from the IRS’ internal systems, with representative stating they needed more time to comply with the new regulation.
While the individual mandate for the Affordable Healthcare Act was repealed, the employer mandate is much too lucrative for the government to repeal. It is expected to earn the government $207 billion over just the next 10 years.
Employers, therefore, should prepare to meet the employer mandate standards if they would like to avoid the hefty fines associated with a failure to do so.
Ensuring Your Employee Healthcare Plan Covers Dependents
Another element that can cost employers big time is failing to provide plans that cover dependents. Federal law requires that any health insurance plan offered must cover dependents in their plans. Interestingly, this does not mean that employers pay more for their plans. In fact, the cost of adding a dependent will be passed on to the employees who elect for coverage. Because of the way the ACA is set up, this will not affect the cost of employee-only coverage either. It is, however, optional to allow spouses to participate in your employee insurance coverage options.
What About the 4980H(a) Penalty?
As healthcare consultants in Houston, Texas, we often get asked about the 4980H(a) penalty as well. The question is, what is the maximum the employer can bill employees while avoiding this penalty. Also, what is the minimum that employers must pay?
For a large employer to fail to offer a plan for the calendar year of 2018, the adjusted amount would be $2,320 and the adjusted $3,000 is about $3,480. If you fail to offer any sort of plan, the penalty would be $2,320 per employee. Alternatively, if your plan doesn’t meet the minimum value requirement, you can expect to pay $3,480 per employee who applies for coverage on the marketplace and gets that subsidy.
Facts about the Employer Healthcare Mandate
Fact: You can offer alternative plans to meet minimum coverage and steer employees away from the federal marketplace.
We help employers set up alternative plans that meet the minimum essential coverage and make it impossible for an employee to reject. This helps you avoid the fines associated with marketplace purchases and subsidies. One issue is that these plans tend to be too expensive and it’s difficult to create a group.
Fact: There are multiple ways to calculate full-time employee status.
To determine how many so-called “qualified” full-time employees you have involves complex calculations. There are several ways to determine how many full-time employees you have, which requires assistance from healthcare consultants.
Fact: Your enrollment periods cannot exceed 90 days.
Employees must have access to health care insurance within 90 days of their start date for your insurance to meet the ACA standards.
Fact: You will be notified by the Health Insurance Marketplace if employees receive subsidized coverage.
When you receive that notification, be aware that the fines will be triggered. Just a single employee can trigger the penalties from the IRS. That’s why it is so important to prepare your plans accordingly.
How We Can Help
The employer healthcare mandate is a complex animal. As health insurance brokers in Houston, Texas, we are ready to help you find a solution once and for all for avoiding healthcare mandate penalties. We have over 3500 employees on plans that alleviate the IRS penalty for good. Contact us directly to learn what that solution is and how you can implement it in your company.