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.

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 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%.

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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.

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.

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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.

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.

Forgotten details of ACA Compliance

Forgotten details of the ACAAs healthcare reform presents more pressing dilemmas for business owners, employers are looking towards insurance brokers to be their expert consultants. Brokers and agents who can devise a complete coverage package for their clients stands the best chance of keeping the decision-makers trust and the company’s business. Unfortunately, some brokers are forgetting about the little details of the ACA that can cost the most money. As a broker, it’s your responsibility to keep your clients informed.

Here are 7 details you or your clients may have missed.

  1. Update employee handbooks

If an employee handbook doesn’t reflect a company’s current benefits offering or is not properly updated, efforts may be in vein. Especially once an audit rolls around, as both the IRS and the Department of Labor may request copies for examination.

  1. Be explicit with the health care coverage offered to employee.

The ACA makes it mandatory for all large employers (those with 50 or more full-time employees/equivalents) to offer health care coverage to their 30+ hours a week employees. Failure to communicate with employees raises the risk of employees applying for subsidies on the exchange resulting in per-employee penalties that will add up quickly. Within the handbook, employers need to make sure the criteria for eligibility for health care coverage complies with the ACA.

  1. Document employees who WAIVE coverage

Should employees waive their coverage, employer’s need to protect themselves with documentation. Healthcare.gov supplied the employer appeal request form earlier this year, which requires employers to provide a reason an employee wasn’t eligible for a subsidy and requests documents to support their case.

  1. Don’t discount your full-time equivalent employees

Under the ACA, anyone employed by your company for 30 or more hours per week is eligible for an offer of health care coverage. That may include, “interns,” “temps,” and “part-timers.” The ACA defines who is eligible based on the hours of service and not the titles the company gives such workers. These workers may be eligible for health care and the employer will want to ensure that they are offered coverage if they fall within the eligibility definition.

  1. Include legal waiting period for health care in employee handbook

90 days is the maximum acceptable waiting period for health care under the ACA. Not three months (as some months have 31 days), and not the day after the 90th day (as that exceeds 90 days). The language used must be firm, 90 means 90, an overage of days will come back to haunt employers.

  1. Provide Summary of Benefits Coverage (SBC)

Just as important as offering coverage is educating your employees on what their coverage includes. An SBC breaks down the coverage for employees in an easy to understand format and must be provided beginning on the first day of the first open enrollment period under the ACA.

  1. Calculate eligible employees correctly (or hire someone that can)

Calculating full-time employees is a no brainer for most employers but calculating seasonal or full-time equivalent employees is an area with huge error for most. It’s important to stay educated with the current changes to the law or contract a company to handle it, like FreedomCare.

Share this valuable information with your clients. With renewals coming up for next year, make their compliance a top priority and call FreedomCare. Quotes are generated in less than 2 business days.

Employers on the hook for $228 billion in ACA penalties

Employers on the hook for $228 billion2016 brought enforcement of required reporting for the Affordable Care Act (ACA) and thousands of US employers are not in compliance with the laws. This is going to translate into billions of dollars in tax penalties. Some employers chose to do nothing when it came to the law; others may think they are compliant. The opportunity for error was extensive. Brokers and employers trusted insurance companies to help them navigate the laws and choose a plan that met the requirements of the ACA.

The annual baseline budget projections by the Congressional Budget Office and Joint Committee on Taxation (CBO), is projecting employer responsibility penalties to total $228 billion over a 10-year period from 2017 to 2026. The individual mandate penalty will yield a projected $28 billion, along with high-premium employer plans (aka the Cadillac Tax) is expected to yield $18 billion.

You may have clients who have done nothing to avoid these penalties or even clients who think they’ve done all they need to do. We have tools and resources available to help you determine whether or not your clients are protected.

Congress has a 10-year projection of collecting these penalties from employers, the only solution is guaranteed compliance with a plan from FreedomCare.

3 reasons to self-fund health benefits under the ACA

3 reasons to self fund acaSelf-funding controls costs.

Under the ACA, fully insured carriers are facing higher exposure to claims without the ability to include rate adjustment factors for health conditions and demographics. New rules limit the insurance carriers’ ability to charge higher premiums for older, riskier individuals now that certain risk reduction strategies are not allowed. These costs will most likely be passed on to employers and individuals.

Self-funding keeps the employers best interest as the priority.

There are some fixed costs of administering a self-funded healthcare plan, such as claims processing, stop loss premiums and administrative fees. Self-funded employers only pay the direct costs of administering employee claims. If the employee base is relatively healthy, having a self-funded plan can be one of the best ways to manage rising costs. When employers choose to self-fund their health plan, they have access to all claims submitted, including Minimum Essential Coverage (MEC) plans. The claims administrator should be able to provide reports of what claims were paid and when they were paid.

Self-funding is customizable.

The costs of fully insured plans are unpredictable for employers since carriers have control over monitoring employee health and underwriting for risk. With fully insured plans, employers don’t have access to employee health claims which is a significant advantage of self-funded plans.

In conclusion, the ACA has changed the healthcare landscape. But your self-funded client will be better positioned to save on healthcare costs while providing a quality health benefit plan that meets or even exceeds the requirements of the ACA. Take advantage of our experience and quality products, give FreedomCare a call today.

4 tips when determining how many full-time employee’s under the ACA

  1. First add up the low-hanging fruit.4 Tips FT employees

If an employee is expected to work 30 or more hours per week, he/she is classified as a full-time employee. You can immediately put all of these people in one category.

  1. Decide how you’ll track hours for variable-hour or seasonal employees

An employee is a variable-hour employee if his/her weekly schedule fluctuates above and below 30 hours.

The IRS has proposed a safe harbor method for employers to determine each employee’s full-time status by counting employee hours using a look-back/stability period. There are two types of measurement periods:

  • The initial measurement period for new employees and;
  • The standard measurement period for ongoing employees. The measurement must be between 3 and 12 consecutive calendar months.

If the variable-hour employee averages at least 30 hours per week during the measurement period, then the employee will be considered full-time during the following stability period (which needs to stay consistent with the measurement period). The employee’s status is “locked in,” regardless of the average hours worked during the stability period.

The stability period always begins immediately after the end of the measurement period and must be at least six consecutive months or the duration of the measurement period, whichever is greater. For example, if the employer used a 12-month look-back period, the duration of the subsequent stability period must be 12 months.

  1. Review your company’s eligibility definition 

The ACA full-time employee definition differs from the 40-hour per week full-time eligibility requirement that many companies currently use. Adjust accordingly to make things less confusing for you.

  1. Don’t forget about ERISA while trying to become ACA compliant.

In a class action suit filed by Dave & Buster’s employee, Maria De Lourdes Parra Marin, claims her employer announced that compliance with the ACA would require a cut in hours to reduce the number of full-time employees from 100 to 40 for the purpose of avoiding $2 million in additional health insurance costs. After the employer mandate took effect, she alleges her hours were in fact cut, she lost full-time status, and her insurance was cancelled.

While an employer who reduces employee hours would not violate any specific provision of the ACA, Dave & Buster’s employees are pursuing their claim under ERISA.

“Under Section 510 of ERISA, an employer cannot intentionally interfere with an employee’s right to benefits,” says Lorie Maring an attorney with the Atlanta office of Fisher & Phillips LLP. “What plantiffs are claiming is that by reducing their hours, the company was intentionally interfering with their right to receive health insurance.

How can your clients stay out of trouble and protect themselves? Self-funding health care benefits with FreedomCare can give them peace of mind and control over their health benefits. We have guaranteed ACA compliant solutions available at different rates to meet the needs of most employers. Reach out today.

Disclaimer:

This article is not to be offered as legal or tax advice. Neither Freedomcare nor the publisher are engaged in legal or tax advisory services. For advice on specific tax or legal questions, contact an attorney, CPA or other professional advisor. IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.