Employer mandate penalties are coming

It’s been two years of required reporting of the Employer Mandate under the Affordable Care Act (ACA) but the IRS has yet to impose any penalties on employers for failing to comply with the law. This delay has suggested to some employers that the IRS would not be enforcing the mandates or collecting penalties. The Treasury Inspector General for Tax Administration (TIGTA) just released a report that is a game changer.

On April 7, 2017 TIGTA issued its, “Assessment of the Efforts to Implement the Employer Mandate under the Affordable Care Act.” In this report, TIGT explained that the IRS has developed an ACA Compliance Validation (ACV) System. It will be used to identify potentially non-compliant Applicable Large Employers and calculate the “A” penalty under the Employer Mandate. The IRS has been developing the ACV system since July 2015 with a scheduled completion date of January 2017. However, “the implementation of the ACV System has been delayed to May 2017.”

The report states that once the systems are in place, the IRS will be able to mass identify noncompliant employers. This will allow the IRS to send notices to noncompliant employers for any and all reporting years.

This means that time is up for employers who were delaying. The current lack of IRS notices for noncompliance with the Employer Mandate does not imply that the IRS does not intend to enforce the Employer Mandate. The IRS will come knocking, they are just running behind schedule. FreedomCare has the solutions you need, answer our simple questionnaire to get started.

Will you have to prove your compliance?

Last November, a few weeks after the national election, the Internal Revenue Service (IRS) began to issue notices to employers who may have failed to comply with the Affordable Care Act (ACA). These notices appeared to be the start of the IRS ACA audit process.

Just a few weeks ago, Speaker Paul Ryan stated the ACA will be the law of the land for the “foreseeable future.” Companies are still liable for penalties incurred for ACA non-compliance as long as current regulations are in effect. Failure to successfully defend the IRS audit could mean significant ACA-related penalties.

These regulations are still in full effect:

  • Companies with 50 or more full-time employees, including equivalents, must offer health insurance of a certain quality to their full-time employees and their dependents – or face a penalty.
  • The threshold for classifying an employee as full-time, and thereby eligible for an offer of coverage, is an average of 30 service hours a week.
  • Employers large enough to comply with the ACA still won’t be fully ACA-compliant no matter how generous their offers of coverage are unless they also meet annual reporting requirements.
  • Employers must produce health-benefits forms (1095-Cs) for their full-time employees and copy the IRS on what’s documented on those forms.

Complying with the provisions of the ACA will be required until legislation has passed both houses of Congress and has been signed into law. But don’t worry, it’s not too late, give FreedomCare a call and we can get you or your clients compliant today.

Why self-fund?

With the health benefits market changing so much, the costs of different plans can be all over the place. How would you like better, more cost-effective solutions for your clients to choose from?

Every year, most employers dread shopping around for their plan for the next year but they go to their broker and get several quotes, most employers decide on the most inexpensive plan, then the next year the rates raise with renewals and they are back in this vicious cycle repeating it every couple of years. As the employer or broker, it’s hard to feel like you have any control.

“Insurance can cost close to $10,000 per employee per year, so employees cost as much as $1 million a year. Self-Insurance can save 12 percent, or $120,000, which can be used to hire more employees or grow the business.” – Michael Turpin, Insurance executive.

The potential to save money increases from year to year. For employers, self-funding is a no brainer.  With FreedomCare’s unique structure, our plans protect the employer by collecting a monthly rate to cover claims and build a reserve. Over the years, the employer can build up their reserve utilizing our FreedomCaptive. Learn more and increase your control, give FreedomCare a call today.

Executive Order on the ACA – What does it mean for you?

On Inauguration Day, President Trump signed an executive order concerning the Affordable Care Act (ACA) and the White House issued an immediate regulatory freeze. This has caused a lot of confusion and misinformation.

It is important to understand that the executive order doesn’t change the current state of law as it relates to the employer shared-responsibility provisions of the ACA and employer reporting. The Executive Order does not in and of itself change the legal status of the ACA. Only Congress can repeal the law. Because the order does not specify actions to be taken, it is not yet clear how the order will be implemented by federal agencies. Applicable Large Employers (ALEs) that are subject to the ACA Employer Mandate are required to furnish to their full-time employees a Form 1095-C by March 2, 2017 and to file them with the IRS by February 28 (March 31 if filed electronically).

At this point, employers should continue to consult their legal counsel on how to comply with all current ACA rules and regulations as the IRS retains its ability to penalize employers that do not accurately and timely file all ACA forms. Do you have questions on whether or not you or your clients fall into the ALE category? Still unsure about reporting requirements? Give FreedomCare a call today.

Self-funded plans – How much can you really save?

We talk a lot about how much money you can save by self-funding your health plans, but when it comes to the dollars and cents, how much can you really save? Here is a scenario from one our actual clients. We’ve changed the company name for privacy.

ABC Hospitality has 139 individuals and is currently fully insured with a “fully insured” carrier.

  • Current Premium $650,000 annually.
  • Claims experience shows that only 40% of ABC’s annual health insurance premium is due to claims.

If ABC Hospitality, sets up its own Self-Funded Major Medical Plan, with a PPO, and better administration, why can’t they then retain the excess funding instead of paying it to the fully insured carrier?

Partially Self-Funded Healthcare Quote with Reinsurance for ABC Hospitality:

Specific Deductible: $25,000.00

Specific Contract Period: Incurred from [1/1/16] through [12/31/16], paid through [3/31/17]

Aggregate Contract Period: Incurred from [1/1/16] through [12/31/16], paid through [3/31/17]

Fixed Costs

Employee Only - $204.50

Family

Monthly fixed costs

96 Covered

43 Covered

$19,632.00

$8,793.50

$28,425.50

Maximum Claim Factors/Costs: (Aggregate Factors)

Employee Only - $212.97

Family

Monthly fixed costs (aggregate attachment point)     

96 Covered

43 Covered

$20,445.12

$9,157.71

$29,602.83

Conventional Equivalents: (total maximum monthly costs)

Employee Only  - $417.47

Family   

Total Maximum Monthly Costs    

96 Covered

43 Covered

$40,077.12

$17,951.21

$58,028.33

Maximum Annual Plan Year Cost (worst case scenario)  

$696,339.96

Fixed Costs includes: I.D. Cards & Electronic Provider Directories, Plan Document, Employee Only Booklets, Aggregate & Specific Reinsurance, Monthly Accommodation, TPA Admin Fee, PPO, HIPAA, EDI, Cobra & utilization review.

ABC’s worst case scenario is $696,339.16, ABC must reserve $58,028.33 monthly for claims. But this is only in a worst case scenario, which is rare. This can only happen with everything goes wrong with the self-funded plans and there are catastrophic medical conditions and illnesses.

Analysis: While ABC’s self-funded rates took a slight increase over this year’s premiums, they were facing a potential 6% increase from their current carrier. As you can see, the self-funded quote is slightly higher but if you analyze their claims trend over the past year, ABC Hospitability has the potential to get $166,788.00 back in claims funding.

Note: Not only can an employer potentially save money on their returned claims but they can roll their 1st years self-funded savings into reserves for their second year. When they increase their reserves, they can afford to take on more risk which lowers their fixed costs each and every year. This leads to an even greater reduction in their overall costs.

As you can see, the potential amount an employer can save can be significant but it also enables an employer to have more control over plans. A common misconception is that control only means you get to design your own benefits but you can also structure your plan to pay in different ways and incentivize employees to catch billing errors and lead healthier lifestyles. Let’s start the process today and get you and your clients self-funded.

Self-Funded health plans, the new standard

self-funded-health-plans-the-new-standardDue to rising health insurance premiums, more and more employers are opting to self-fund their employee health benefit plans. According to a report done by the Employee Benefit Research Institute (EBRI) the percentage of U.S. private sector employers offering at least one self-funded health plan rose from 28.5 to 89 percent from 1996-2015. Small and midsize employers all over the country are opting out of their traditional benefit plans in favor of self-funding their employee health plans.

It is important to note that just from 2013 to 2015:

Small Employers rose from 13.3% to 14.2% and Midsize Employers rose from 25.3% to 30.1%.

self-funded-increase-graphic-01

self-funded-increase-graphic

It’s hard not to draw a connection between the implementation of the Affordable Care Act (ACA) and the increase in self-funded employers. Under the federal Employee Retirement Income Security Act of 1974 (ERISA), which provides the legal framework for the uniform provision of health benefits by employers doing business anywhere in the country, state laws (other than insurance laws) are generally pre-empted. This means that self-funded health plans may not have to satisfy state health insurance laws, including state-mandated reserve, benefit, claims, premium, and other requirements, which results in ease of administration and lower expenses. In contrast, fully insured plans are required to cover state mandated benefits and pay state insurance premiums.

Not only that but the ACA identifies 10 benefit categories that must be included as essential health benefits for fully insured small-group market plans. But self-funded plans are not required to cover each of these essential health benefits.

When self-funded arrangements are properly designed, like the ones FreedomCare offers, there are several ways an employer can benefit.

Help your clients join these savvy employers from around the country and take control over their plan by self-funding their employee health benefits. By choosing FreedomCare, we take the leg work out of self-funding, we handle all administration, paying of claims and reinsurance. The ease of a traditional plan with the value of self-funded.

How to prepare for earlier reporting in 2017

How to prepare for earlier reporting deadlinesLast December, most employers were relieved when the IRS provided extensions of employee notifications and filing deadlines for Affordable Care Act (ACA) reporting. Unfortunately, this may have set up those same employers for failure as it will seem like these deadlines are coming 2 months earlier in 2017. To prevent this from happening, here are 4 ways to prepare for earlier reporting in 2017.

1. Give yourself plenty of cushion to submit required filings on time.

This year employers must provide 1095-Cs to employees by the end of January, indicating month-by-month coverage provided through the end of the previous December.

ACA Reporting Deadlines_with citationThese forms are required of most employers;

  • Employers of any size that sponsored a self-insured health plan providing minimum essential coverage must distribute to enrolled employees and file with the IRS Form 1095-B, showing a health plan enrollment.
  • Applicable large employers with 50 or more full-time employees or equivalents must distribute to enrolled employees and file with the IRS Form 1095-C, showing compliance with employer shared responsibility/minimum essential coverage requirements.

2. It’s now 95%, not 70%.

Unfortunately, last years extended reporting deadlines may not be the only things that trips up employers this year. Starting in 2016, all organizations with 50 or more full-time employees or equivalents must insure 95 percent of their full-time employees to avoid liability under the ACA’s shared responsibility provisions, and the resulting penalties.

The thing is, some employers may not understand that it’s not a 95% average for the year, it’s 95% for each month. If an employer had a month where they fell below 95%, then the employer is exposed. The employer could be facing penalties for the months when they were below the threshold.

The IRS will ask for payroll and benefits data, this will help them determine whether the indicator codes used on Form 1095-C are accurate. With last year’s 70% threshold, employers had a lot more leeway.

3. Exchange notices have been arriving.

Employers also need to be on the lookout for exchange subsidy notices. Notices pertaining to 2015 coverage, are now being sent from the ACA’s Health Insurance Marketplace. These notices allege that a full-time employee received subsidized coverage on an exchange because the employer failed to provide qualifying coverage.

4. Determining eligibility is an on-going effort.

The coverage provided to each full-time employee needs to be tracked and recorded every month. This needs to be an ongoing process for employers to get ready for the next year’s annual reporting. Employers can find relief by working with companies who offer tracking services that work in conjunction with payroll companies as part of their coverage. FreedomCare is one of the only options that provides this integration.

Employers that were close to the 50 or more full-time employee threshold last year need to make sure they stay on top of their eligibility. They need to run the numbers each month to make sure they aren’t on the hook. It would be terrible to find out too late and be liable for penalties for the whole year.

Reach out to FreedomCare, we can help you calculate and determine whether or not an employer needs to offer coverage. Trust us, it’s much less expensive than paying the penalties.

Deadlines have passed – Penalties are coming

Filing deadlines have passed, penalites are comingAs we head into August with the 4th quarter rapidly approaching, the deadlines for the IRS required ACA form filings have passed. Unfortunately, a lot of employers still have questions or haven’t even filed yet.

Well back in July, the IRS held an Affordable Care Act Information Returns Program (AIR) webinar where they shared their publication, 1586. They covered a lot of information and clarified a lot of questions employers have been asking.

Just in case you aren’t sure what the AIR policies include;

Under the Affordable Care Act (ACA), insurance companies, self-insured companies, large businesses and businesses that provide health insurance to their employees must submit information returns to the IRS reporting on individual’s health insurance coverage.

ACA information returns include:  

  • Form 1094-B, Transmittal of Health Coverage Information Returns
  • Form 1095-B, Health Coverage
  • Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
  • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

The 1596 publication made it clear that the penalties for incorrect forms or forms that haven’t been filed could devastate an employer’s bottom line.

IRS Penalties_logo_cite

With this type of reporting, it’s more than just proofing your documents and filing. Employers need to consult professionals who can help them ensure their compliance. I have some good news though, some of these penalties are still preventable.

According to the IRS, corrections or late forms need to be filed as soon as possible. It’s better to file late then to not file at all. Don’t let these fines hit your business or your clients.

Use our years of experience and expertise and contact FreedomCare today to protect yourself and your clients.

The opportunity you’re missing

The opportunity you're missingIn our continuously changing market, it can be difficult to guide your clients in what direction to go in when selecting benefits. With so many options available, it can get overwhelming very quickly. What if you offered them a solution that satisfies the laws, saves them money and allows for more control?

You’ve probably heard about the advantages of when a company chooses to self-insure their health benefits through a captive insurance company. They can save money on their premium contributions and more. But, what most people don’t know is that not only does a captive insurance company provide significant financial advantages, it also allows for control over a company’s benefits offering and the claims that come in.

The volume of claims data that can be accessed through a captive, in the right hands, can help employers target and improve their benefits offering for their employees and their families. Armed with the data of what their employees need, employers can develop wellness programs and incentives to keep their employees healthy and drive down the costs associated with their health plan. Traditionally captive insurance and self-insured plans were only available to larger employers and businesses. But through FreedomCare’s unique approach, we make them available to businesses of all sizes.

Our experienced self-insured team has developed seamless processes that allow our clients to manage their costs, plan for higher dollar claims and see great success with their plans.

Choosing FreedomCare allows you to have one place for everything you need to self-insure and form your captive solution. If you’re not offering this to your clients, you’re missing a huge potential opportunity.

You can’t take the summer off from the ACA

4 reasons you cant take the summer offIt’s July and we are halfway through the summer; I know a lot of my clients and brokers are taking their yearly family vacations.

While you should enjoy time with your family, the end of the year will be here before you realize and unfortunately we can’t afford to take the summer off from the Affordable Care Act (ACA).

Here are 4 reasons why.

1.  IRS penalties are accruing monthly.

We commonly refer to the IRS penalty amounts as an annual amount but the penalties are actually calculated on a monthly basis. Acting sooner rather than later and getting a compliant plan in place can save employers valuable dollars on penalties that won’t have the opportunity to accrue.

2.  Exchange notices are arriving.

For every employee that logs onto the Insurance Exchange and receives a health care subsidy, a complex trail of communication and paperwork begins that requires employers to prove the status of their health care offering. If an employer has chosen to offer coverage that isn’t compliant or no coverage at all, they will have no choice but to pay the penalties.

3.  Employee eligibility is constantly changing.

Employee status can change on a daily basis, so employers can’t afford to take a break from data collection and management. Employers have to be ready for whatever comes their way – even an IRS audit. ACA requirements have become tougher in 2016, employers must now offer affordable coverage to at least 95% of their full-time employees – up from 70% in 2015. As these and other changes take place, employers have to continue to calculate benefits eligibility and affordability for required employees.

4.  Annual reporting is just around the corner.

Reporting is an annual event. But employers can’t take a break for the rest of the year, the ACA record keeping they do all year is essential for the next reporting season. This includes the information employers must provide to the IRS and their employees that demonstrates the health care coverage offered to employees meets minimum essential and affordability requirements of the ACA.

Bottom line? The ACA is complex and this year the rules are firmer than ever. Most organizations don’t have the expertise and processes to stay on top of these changes and take accurate action.

The good news is, we can help with all of these issues and more. But employers need to take the first step and not delay. Choose to benefit from our comprehensive expertise so you can look forward to smooth ACA compliance and a great rest of the year.