The IRS is coming, what to do before, during and after and ACA audit

Over the last 6 years, the Affordable Care Act (ACA) has dramatically changed the employee benefits landscape across the country for employers and employees alike. As the first year of ACA reporting deadlines have just passed, they first wave of IRS audits, as specified in the ACA, will begin.

The government views the ACA as a huge revenue source and they have pushed a lot of their resources to develop an auditing system. The federal agencies are becoming quite aggressive, especially when it comes to protecting participants, as they are charged by the law to have regular enforcement efforts.

There are many triggers that could prompt a potential ACA audit, here are 5 examples:

  1. Employee complaints
  2. Reporting failures
  3. Failures of IRS control group employers
  4. Other agencies identifying issues – (Agencies like the Department of Labor (DOL) and the Internal Revenue Service (IRS) will have a cross-referral agreement where they are required to share information about businesses not in compliance, thus triggering audits from multiple agencies.)
  5. Media reports – (Media coverage on an organization’s business not in compliance, thus triggering audits from multiple agencies.)

While you may not be able to totally avoid every trigger. The best way to avoid a full-fledged audit is to keep good records. Proper documentation is key to both avoiding and surviving an audit.

Lowering your chances of an ACA audit is key, here are 6 ways to help your organization look its best:

  1. Document good faith compliance on questionable issues – (This includes reviewing and adopting corresponding wording in all internal and employee-facing materials.)
  2. Compliance review – (Focus on administrative practices and make sure they are in compliance.)
  3. Correct failures found. (Make sure administrative processes are in order but when you discover an issue, hold internal compliance discussions to correct your failures.)
  4. Designate employee status. (Create realistic benefits expectations for employees by communicating their employee status and eligibility.)
  5. Train managers well. (Beware of practices to terminate or limit hours for employees to prevent them from eligibility levels. Understand the law and work within it for hiring, firing and scheduling practices.)

If your business is subject to an audit, knowing what it will look like and how to handle it will be key to passing with flying colors. Contact FreedomCare to help maintain your compliance and minimize your risk of an ACA audit.

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.

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.

6 overlooked requirements of ACA reporting

6-overlooked-requirements-of-aca-reportingWith 2017 right around the corner, it’s almost time for employers to submit their paperwork for their 2016 plans. Unfortunately, the leniency that was given last year is no longer available. In order to seek a waiver of penalties for the 2016 filings an employer will need to meet a standard of reasonable cause and that they acted “responsibly”.

Unfortunately, “responsibly” can be very subjective so employers need to be prepared to demonstrate the same level of quality assurance and audit rigor that is applied to other governmental reporting. To help your clients accomplish this, here are some very important details of ACA reporting:

  1. File on time – Failing to file the required forms to the IRS and provide them to employees can lead to significant penalties. These penalties are NOT tax deductible.
  2. Don’t underestimate the IRS digital data environment – The IRS is increasingly working in conjunction with other Federal agencies, so they have the ability to identify contradictory data submitted on both individual employee forms and across multiple employees, this can lead to audits. The government is projecting employer mandate penalties of $228 billion. There is clear anticipation that revenue will be generated and violations will be ascertained through information reporting filings.
  3. Communication with employees is critical – Employers need to ensure accurate names, social security numbers, dependents, waiver information, eligibility determinations and offers of coverage are documented and up to date. Employers need to remind their employees to report any name changes due to life events such as marriage or divorce to both the Social Security Administration and their human resources department.
  4. Use proper worker classifications – A key requirement under the ACA is properly identifying full time employees and equivalents to determine if an employer is an applicable large employer under the employer mandate. Applicable large employers must cover the requisite 95% of all full time employees or they are risking exposure to penalties. It was only 70% last year which meant employers had a lot more leeway they won’t have this year.
  5. Correct errors – Errors could be identified by an IRS error message, internal audit or by an employee. A corrected return corrects an inaccurate return, if a transmission or submission was REJECTED by the IRS then that rejection requires a replacement.
  6. Keep accurate records – It is important to document and retain proof to substantiate responses on ACA information reporting forms. Among the records employers should retain are:
    1. Records of employees who are provided with an offer of coverage and corresponding dates
    2. Eligibility methodology and determinations
    3. Signed waivers or opt out forms
    4. SSN solicitation records
    5. Controlled group determinations
    6. Participant communications
    7. Affordability calculations

This can get overwhelming very fast but I have some good news, FreedomCare is here to help. Give us a call, we can answer any questions and walk you through the steps you need to take.

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.

ACA Compliance Enforcement Begins!

ACA Compliance enforcement beginsEmployers are out of excuses and delays; ACA compliance enforcement has begun and they need to be compliant now. If you or your clients are an employer that decided not to choose a compliant plan or didn’t offer anything at all, the employer may be subject to penalties under the Employer Mandate.
May has been a big month for the Department of Health and Human Services (HHS). They’ve made two major announcements regarding the process for determining if an employee is eligible for a subsidy under the Affordable Care Act (ACA). Earlier this month, HHS announced that they hired a third-party contractor to conduct an “employer verification study” where the contracted company will be calling employers and asking about the health insurance coverage they offer. The purpose of these calls is to determine whether employers have successfully offered an affordable plan that meets the minimum value requirements to their employees.
The need for these calls goes back to the ACA Exchanges, a person must state that they were not offered a plan that was affordable and meets minimum value by their employer. If they were indeed offered an eligible plan, this person would be ineligible for a subsidy.
CMS also released a sample notice that the Federal Exchange will send to employers that one of their employees has submitted an application for a subsidy and claims they haven’t been offered compliant coverage.
So why does this matter to you and your clients?
Well, some employers did everything they needed to do and chose a plan that was compliant, like the ones FreedomCare offers but the Exchange did not discover that fact during the verification process. The employer will have the opportunity to contact the Exchange and provide documentation that they offered a plan that is affordable and meets minimum value requirements. After the Exchange receives this info, they will re-determine the employee’s eligibility and discontinue any premium subsidy payments.
Let’s talk about our 100% compliant ACA solutions, give FreedomCare a call asap.

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.

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.

IRS releases updates to form 720 (PCORI)

IRS releases updates to form 720 (PCORI)The ACA includes a number of fees that employers are required to pay in order to help support various aspects of healthcare reform. One of those fees, PCORI was just updated by the IRS for 2016. The deadline for these fees to be paid is July 31st, 2016.

What is PCORI and why does it matter to employers?

According to their website, “The Patient-Centered Outcomes Research Institute (PCORI) helps people make informed healthcare decisions, and improves healthcare delivery and outcomes, by producing and promoting high-integrity, evidence-based information that comes from research guided by patients, caregivers, and the broader healthcare community.” Under the ACA, all employer sponsored health plans are subject to PCORI fees.

Why was the PCORI fee created?

The PCORI fees were established under the Affordable Care Act (ACA) to advance comparative clinical effectiveness research. PCORI fees are assessed on issuers of health insurance policies and sponsors of self-insured health plans. The fees are calculated using the average number of lives covered under the policy or plan, and the applicable dollar amount for that policy or plan year.

How much is the 2016 PCORI fee?

$2.17 per life

When are the 2016 PCORI fees due and how do you pay?

For policy and plan years ending on or after October 1, 2015, and before October 1, 2016
Employers and insurers will need to file Internal Revenue Service (IRS) Form 720 and pay the updated PCORI fee by July 31, 2016.

Employers have one month to calculate and send payment to the IRS. This form is relatively simple, but is structured in a way as to cause some confusion about who it applies to.

Give FreedomCare a call to discuss how to calculate and what to do if your clients aren’t compliant.