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Following the 2021 tax year, the ACA has garnered the highest number of enrollments it has ever seen.
Over 35 million Americans have obtained health coverage because of the ACA, according to a report issued by the Department of Health and Human Services (HHS). Of the 35 million enrollees, an estimated 13.6 million enrolled through health exchanges, and over 21 million opted into Medicaid coverage, including 16.8 million who were not eligible prior to the ACA’s expansion.
This record-high participation in ACA-sponsored coverage has reduced the overall uninsured rate across the U.S. from 10.3% in quarter 4 of 2020 to 8.8% in quarter 4 of 2021.
The drop in uninsured represents nearly 5 million Americans obtaining health coverage over the course of 2021. What’s interesting is that individuals whose income falls 200% of the Federal Poverty Level experienced a more significant drop in uninsured rates, in comparison to higher earners.
HHS Secretary Xavier Becerra said in a press release issued last week, “Today’s historic reports show we are delivering on our commitment to bring health care coverage to as many people as possible. We will continue to push for comprehensive ACA coverage and Medicaid expansion and work with states to make comprehensive health care accessible and equitable for families across the country.”
A significant contributing factor to the record high ACA enrollment can be attributed to Biden’s various efforts to strengthen the healthcare law throughout the COVID-19 pandemic, such as special enrollment periods, which allowed Americans to obtain coverage outside the normal window. These special enrollment periods saw over 2.5 million enrollees, including individuals from more conservative states like Texas.
The 2022 open-enrollment period, which ran from November 1 to January 15, too played a critical role in generating greater healthcare participation. Thanks to increased outreach efforts, additional funding for ACA navigators, and more insurer participation, the period bore witness to even more healthcare signups.
Perhaps the greatest driver for increasing healthcare signups though was the American Rescue Plan, which made Premium Tax Credits (PTCs) available to low-income individuals for free or very little. It also expanded for the first time, subsidies to individuals who earn above 400% of the FPL, capping the monthly amount they would pay to no more than 8.5% of their household income.
The PTC subsidies set forth via the American Rescue Plan are set to expire at the end of this year, but the Biden administration is proposing new legislation that could possibly extend the expansion beyond this year.
While the administration looks for ways to ensure healthcare assistance remains affordable and accessible for Americans, employers should take note of how the increased issuance of PTCs could impact their ACA compliance processes.
When an employee receives a PTC from a state or federal health exchange, whether it be rightfully or wrongfully obtained, it prompts the IRS to verify it by reviewing an organization’s 1095-C forms. This process can result in non-compliance penalties under the ACA’s Employer Mandate
Under the ACA’s Employer Mandate, ALEs, or employers with 50 or more full-time employees and full-time equivalent employees to:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and
- Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability.
Organizations that fail to comply with this section of the healthcare law can be subject to ACA penalties, like Letter 226J. And with more PTCs likely issued over the following years, employers should take caution as PTCs are the trigger for the IRS issuing penalty notices.
Best practices encourage you to explore your current ACA processes now. This will help you understand any areas of concern that may pose ACA penalty risk down the line. To get an idea of where you stand regarding ACA compliance, get your ACA Vitals score below.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.
