Top 4 most common ACA questions employers ask
The Affordable Care Act can be confusing to businesses and their human resources teams, especially those that now meet the set definition of an applicable large employer (ALE) – companies with more than 50 full-time workers. Organizations often encounter similar problems and inquire about the same issues. Here are the top four questions employers ask in reference to the ACA and its standards:
1. What is play or pay?
Under the ACA, ALEs are required to provide health insurance that provides minimum value – covers at least 60 percent of coverage costs – to their employees. Companies that follow this obligation are considered "playing," whereas those that don't potentially face the incurment of penalties and are, therefore, "paying." This option has many different names, according to the IRS: Pay or play, Employer Mandate, shared responsibility. Although many companies may not want to utilize their funds for health coverage for workers, especially if they didn't have to in the past, complying with the employer mandate can actually save them money in the end. The cost of insurance that adheres to ACA rules can be much less expensive than the penalties businesses can accrue for lack of compliance.
2. How can companies calculate full-time equivalent employees (FTEs)?
To understand whether they're a small or large employer and subject to the Employer Mandate, businesses must determine the number of full-time equivalent employees they have on their rosters. According to the IRS, full-time employees are people who work at least 30 hours per week, or 130 hours per month. To calculate FTEs, businesses need to count the number of workers who are not full time, divide that amount by 120, then add the number of full-time workers. This equation will yield the number of FTEs companies employ. If that number is more than 50, the employer will have to provide appropriate health care.
"Dependent children must be covered until the age of 26."
3. Does employer-provided insurance cover dependents?
One of the incentives workers frequently claim for utilizing their employer's health insurance offerings is the ability to also cover their families. According to the U.S. Department of Labor, employer-provided plans that offer dependent child coverage are required to provide that insurance until adult children reach the age of 26. Both married and unmarried children are included in this obligation. On the other hand, employer plans are not required to cover employee spouses. People should be sure to ask the necessary questions relating to their company's insurance prior to enrolling.
4. What is minimum essential coverage?
Under the ACA, employers who offer health insurance to their workers must provide a plan that gives employees minimum essential coverage (MEC). Unfortunately, many businesses may be confused by this standard. Obamacare Facts lays out the requirements for a plan to be considered MEC:
- Affordability: Plans must cover, on average, at least 60% of out-of-pocket costs on required services.
- Guaranteed availability of coverage: Employees cannot be denied coverage for any reason other than the inability to pay.
- Guaranteed renewability of coverage: Workers must be able to renew the policy regardless of health status.
- Fair health insurance premiums: There are limits to the amount people can be charged based on age, tobacco use, family size and geography.
- Medical loss ratio (the 80/20 Rule): If an insurance company spends less than 80% (85% in the large group market) of premium on medical care and efforts to improve the quality of care, they must rebate the portion of premium that exceeded this limit.
- Ten essential benefits: Must provide coverage of at least ten essential health benefits.
- Dollar limits: Insurers cannot place annual or lifetime dollar limits on Essential Benefits.
- Provision of minimum value: To meet the Minimum Value requirement, a plan must cover, on average, at least 60 percent of total allowed costs i.e., what the plan pays versus what the customers pays due to deductibles, copays and coinsurance.
It's easy for employers to be overwhelmed by the many requirements and standards of the ACA. These obligations are always subject to change, forcing companies and their human resources teams to constantly be on their toes to stay current on their responsibilities. Frequently, businesses both large and small are met with issues concerning employee coverage. It's crucial for these organizations to settle their inquiries as fast as possible to avoid potential penalties that could occur in the meantime due to noncompliance.