The Affordable Care Act, or ACA, celebrated its six-year anniversary on March 23. While it has been a point of controversy since President Obama signed it into law, whitehouse.gov states that more than 90 percent of Americans now have access to health coverage.
For businesses, the ACA has meant increased compliance and added pressure to extend coverage to more employees. 2016 is bringing more of the same, as the employer mandate/employer penalty provision is now in effect. The employer mandate requires that all businesses with 50 or more full-time equivalent employees either provide health insurance to a least 95 percent of full-time employees and dependents up to age 26 or pay a fee.
For health care providers, the ACA has increased the number of patients insured by high-deductible, high-copay plans, which has led to more provider time spent collecting patient payments, as well as more time-consuming and complex transaction processing. Several other trends have intensified these challenges, including a rise in bad debts, the move to electronic payments processing and a growing demand for greater cost transparency.
Employer mandate compliance
By now, most applicable businesses are in compliance with the employer mandate. However, they still face some compliance challenges. The following is an overview of where businesses tend to struggle:
Employee classification: Many businesses have independent contractors who are, in fact, common-law employees. This misclassification can have broader implications than the ACA. It is also important for businesses to properly count hours of service for employees who are paid when work is not performed as well as properly classify and report hours for variable hour and seasonal employees.
Meeting reporting requirements: The deadline for providing Form 1095-C disclosure to employees for 2015 has passed. Upcoming IRS deadlines include May 31 for paper filing and June 30 for electronic filing of Form 1095-C (with Form 1094-C Transmittal). Penalties for missing filing dates can be significant: $250 for each affected employee.
Reduction of hours: ERISA Section 510 prohibits employers from reducing employees’ hours of work to prevent them from qualifying as full-time employees. Violators could be subject to ACA penalty provisions as well as equitable relief and plan reformations, as per ERISA Section 502.
For more information on ACA tax provisions for employers, visit the IRS website at irs.gov/Affordable-Care-Act/Employers.
Emerging business opportunities
The impact of the ACA on the overall economy has been hotly debated. However, the ACA undeniably has been a boon to certain markets. For example, the health care information technology market is swelling, thanks to the federal government’s legislative and financial incentives for technological progress. While most industries have adopted technology much earlier, the health care industry is really just now catching up.
These changes are coming in waves. The first wave encouraged digital infrastructure and electronic health records adoption, a market that is now mature. This wave was initiated in 2009, when Congress passed the Health Information Technology for Economic and Clinical Health Act, which offered health care providers a carrot-and-stick approach to adopting meaningful use of this technology. This act incentivized hospitals, medical groups and doctors’ offices with more than $30 billion to change from paper patient medical records to electronic medical records and use them in a meaningful way.
The push was successful overall. As of April 2015, 95 percent of all eligible and critical access hospitals have demonstrated meaningful use of certified health IT.
The ACA set the stage for the second wave of technology, which builds on electronic records by adding performance and quality reporting metrics into the mix. The ACA changes the payment paradigm in health care by tying revenue to value and outcomes, versus volume of patients seen. Thus, new technologies are necessary for gathering, sharing and analyzing vast amounts of data to manage the health of an entire patient population. Other technologies are addressing connectivity and interoperability issues, since moving to a value-based outcomes model requires better care coordination.
As a result of the growing demand for solutions to help with the transition to value-based care, as well as evolution of new technologies designed to power the next generation of solutions for the U.S. health care market, the health care IT market expects to double in the near term. The ACA has played a large role in this. The health care sectors and insurance industry have also experienced growth under the ACA.
Anticipating what’s to come
According to the U.S. Treasury Department, approximately 96 percent of employers are small businesses and have fewer than 50 full-time equivalent employees, which means they are exempt from the employer responsibility provisions. Of those who do have to comply with the employer mandate, only a fraction don’t already offer qualifying coverage to full-time employees.
Given that it’s an election year, there’s a lot of rhetoric about what will and won’t happen to the ACA in the future, depending on who wins a seat in the White House. It’s important to hear past the noise and pay close attention to any real developments and the effects they may have on your business. Business owners are best advised to work with their legal, accounting and employee benefits advisers.
James Barger is president of KeyBank’s Rochester Market. He may be reached by phone at 585-238-4121 or email at email@example.com.
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