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.

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.

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.

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.

Beyond the ACA, the top 5 reasons to offer employee’s health benefits

Beyond the ACA, top 5 reasons to offerThe Affordable Care Act has been around for several years now, the employer mandated penalties regulated by the IRS are in full effect. Most employers are offering at least Minimum Essential Coverage plans to their employees. If we look past the law, beyond the $2,000 and $3,000 penalties, why should employers offer health benefits to their employees?

It’s simple, one of the most vital components of running a successful business is attracting and keeping great employees. While there are different ways to accomplish this, offering your employees benefits tends to be one of the most cost-effective ways.

We’ve gathered the top 5 reasons for employers to offer coverage below.

  1. Attract top talent.

    • A survey by McKinsey Quarterly showed that attracting and retaining talent was the biggest reason that companies offered employee benefits. 46% of employees say their company’s health care program was an important reason they chose to work for their current employer. It helps to attract top talent by having tangible benefits that differentiate your business from your competitors.
  2. Minimize your turnover rate.

    1. It’s difficult for a business to make serious progress when employees are constantly coming and going. 55% of employees say their company’s health care program is an important reason they stay with their current employer. By investing in your employees and offering benefits, it shows that you have their best interest in mind and value their job performance. This also helps to improve your stability as a company.
  3. Better morale.

  4. Healthier employees.

    • When your employees have health coverage, there is a higher likelihood that they will have regular checkups and take preventative medical steps, which will lead to fewer unexpected sick days.
  5. Better job performance.

    • By offering benefits, you give employees more of a reason to care about your company and remain loyal. According to a survey done by the Society of Human Resource Management, 71% of employees who are satisfied with their benefits reported that they are more loyal to their employer. As a result, they will be motivated to work harder, which can lead to greater productivity and a higher quality of work.

These all sound like no brainers but what if my client’s company is barely scraping by and can’t afford health benefits from traditional carriers? Check out our article about self-insuring your health benefits, you might be surprised what a small business can afford with the help of FreedomCare.