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President-elect Joe Biden’s term will begin in a few short months and as he promised during his campaign, there will be a number of advancements made to the Affordable Care Act.
With the ACA likely to remain following the long-awaited Supreme Court oral arguments, here’s what we can expect Biden to implement in terms of ACA advancements and how it will impact employers.
A Biden administration has said that it would reinstate the federal Individual Mandate penalty, a move that would be largely supported, as many states have passed their own version of the law since the federal mandate was zeroed out. This move would force everyone in the U.S. to obtain health coverage that meets quality and affordability standards or face a penalty. The reinstatement of the mandate penalty would undoubtedly cause more residents to enroll in coverage. Employers, that means more of your workforce may choose to enroll in employer-sponsored healthcare.
Biden has also said that his administration will eliminate the ACA’s 400% household income threshold for premium tax credit (PTC) eligibility, opening up affordable healthcare to a much larger pool of Americans. With the requirements for premium tax credit eligibility essentially removed, the number of credits applied for and issued will likely increase. Prior to this news, PTCs were expected to increase in 2021 anyway.
This could create potential challenges for employers as PTCs are the trigger for the IRS issuing the penalty letter known as Letter 226J. If any one of your employees receives a PTC, your organization will be flagged to the IRS to ensure that it correctly complied with the ACA’s Employer Mandate. You can learn more about PTCs and their connection to ACA compliance penalties in the Trusaic Letter 226J Pillar Page.
In addition to lifting the 400% income eligibility for PTCs, Biden plans to lower the cost of health insurance bought and obtained through either a state or federal marketplace, to specifically 8.5% of total income instead of the current 9.86%. This contribution is separate from the affordability threshold that employers set for their employees, but with more affordable healthcare being offered through the marketplace, we can expect to see an increase in enrollees. More enrollees mean a greater possibility for ACA penalties being issued by the IRS to employers who fail to offer coverage to employees.
Employers, with a number of ACA enhancements coming into play in the near future, it’s time to rethink your ACA process for compiling with the healthcare law’s Employer Mandate. As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, Applicable Large Employers (ALEs), organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee, or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
Organizations should be prepared to step up their ACA compliance process, the complexities of complying with the healthcare law are likely to continue.
If your organization doesn’t have the resources or bandwidth for complying with the ACA’s Employer Mandate, contact us to learn how ACA Complete can relieve your staff of the burden of meeting the law’s requirements. Trusaic is the only organization to offer a Free ACA E-File Solution with Penalty Risk Assessment included prior to filing with the IRS.
