“Affordable” Care Act: the Irony of Rising Healthcare Costs for Families and Employers

woman-in-hospital-1051476-mIn the wake of the Affordable Care Act (ACA), healthcare costs continue to rise both for the average American family and for their employers sponsoring healthcare plans. According to a recent article in the Insurance Journal, healthcare costs for the typical American family of four will increase by $1,456 this year, or 6.3% over last year’s costs. Total healthcare costs for this family are projected at $24,671, with the employer paying $14,198 of those costs and families paying the remainder. Our Atlanta and Augusta Healthcare and Employment law firm sees these numbers as a continuing trend of increased healthcare costs to families and employers, which have doubled in the last ten years, according to the article.

Employer Healthcare Coverage Responsibilities Under the Affordable Care Act

Businesses defined as larger employers under the ACA (those with 100 or more employees as of 2015 and 50 or more employees subject to the Employer Shared Responsibility provisions as of 2016) must offer to applicable employees affordable healthcare coverage that meets particular standards. Under the Employer Shared Responsibility provisions, employers who fail to offer required coverage at a required minimum level to full-time employees and their dependents face penalty payments.

Larger employers also have certain annual reporting requirements in regards to their full-time employees under the law. Fortunately for those employers, the law also provides for various forms of transition relief.

To illustrate the responsibilities and penalties applicable to larger employers under the ACA, the Henry J. Kaiser Family Foundation published this flow chart in late 2014. Further guidance for employers as to their responsibilities under the ACA is provided by the federal Internal Revenue Service (IRS).

IRS publication #5208 provides that the following formula may be useful in determining whether your business is a large employer for purposes of the ACA:

  • Determine how many full-time employees you had each month.
  • Determine how many full-time equivalent employees you had each month.
  • For each calendar month, add those numbers together to get a monthly total.
  • Add up the monthly totals.
  • Divide the sum of the monthly totals by 12.

The IRS and the Department of Treasury have issued additional guidance in the form of final regulations on the Employer Shared Responsibility provisions, as well as proposed regulations on the related Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered under Employer-Sponsored Plans.

Although the ACA does not require small businesses to offer employee healthcare coverage, the law provides certain incentives for small employers who wish to do so. For example, small employers (those with less than 50 full-time equivalent employees) who provide employee healthcare coverage may purchase insurance through the federally run Small Business Health Options (SHOP) exchange. Small employers may also qualify for certain tax credits, depending on the number of employees and their salaries, and on the amount of employee healthcare costs borne by the employer. The ACA also offers grants to enable small employers to start employee wellness programs.

Independent contractors are not considered employees subject to ACA coverage and reporting requirements. Typically, individuals with an independent trade or profession offering their services to the general public, such as doctors, dentists, veterinarians, lawyers, accountants, contractors and subcontractors, are independent contractors. But whether they are independent contractors or employees depends on the facts of each case. A payer assessing whether a given professional is an independent contractor or employee must evaluate whether the payer has a right to control or direct only the result of the work – or rather, the substance of what will be done and how it will be done.

The IRS is scrutinizing the definition of independent contractor, presently offering 20 factors to consider in distinguishing an employee from a contractor:   Employers should be aware that definitions and requirements, or IRS interpretation of independent contractor status could change, resulting in new responsibilities under the ACA.

If you have questions about this post, contact us today for additional information.

 

Disclaimer: Thoughts shared here do not constitute legal advice. Please consult with an attorney to discuss your legal issue.

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