Employers should review their ACA compliance processes carefully in light of new data issued by the Kaiser Family Foundation (KFF). Below we’ve identified why.
Key PTC findings
Health exchange enrollees claimed an estimated total of 9.7 million Premium Tax Credits (PTCs) throughout the 2021 tax year. This information represents over $56 billion in funds allocated to Americans in support of obtaining more affordable health coverage.
PTCs subsidize the cost of government-sponsored healthcare and allow individuals within certain income brackets to obtain more affordable health insurance, but they’re also the trigger for the IRS identifying ACA non-compliance with the Employer Mandate.
Under the ACA’s Employer Mandate, ALEs, or employers with 50 or more full-time employees and full-time equivalent employees must:
- 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 safe harbors for calculating affordability.
The IRS is able to identify non-compliance by referencing a PTC application with an individual’s 1095-C
form, which is filed by employers annually.
By carefully reviewing the two, the IRS can identify if the individual received an adequate offer of health insurance from the employer and subsequently determine if the recipient was eligible for a PTC. In either scenario, the burden of proof falls on the organization for disputing claims around employees receiving PTCs.
Why are PTC allocations increasing?
Biden’s American Rescue Plan plays a significant role in the high turnout in PTC allocations because it expanded PTC eligibility for Americans with income beyond 400% of the federal poverty level. The healthcare reform also allows individuals with income at 150% of the FPL to obtain coverage for $0 monthly premiums and low-cost deductibles.
Needless to say, the incentive was there for individuals to obtain coverage through a state or federal health exchange.
In fact, Biden’s American Rescue Plan made quite the impact on the health insurance ecosystem. According to a recent statement from the White House, the American Rescue Plan also:
- Increased total healthcare coverage by 21%.
- Saved individuals over $800 throughout the year due to reduced healthcare costs.
- Welcomed almost 6 million new Americans to ACA coverage.
There’s no debating that the ACA is stronger than ever thanks to advancements coming from initiatives like the American Rescue Plan. In addition to the aforementioned items, it helped increase overall ACA coverage enrollment, which recently reached the historic high of 35 million.
How to prepare
While it’s true the effects of increased PTC expansion eligibility expire at the end of this year, Biden has communicated on multiple occasions his desire to make the expansion permanent, or at the very least extended for years to come.
What it means for organizations is that PTC allocations will continue to go up. More employees may decline employer-sponsored healthcare coverage and opt for coverage through state and federal health exchanges. The PTC distribution may even further increase if a new IRS proposal that modifies ACA affordability becomes law.
Your organization needs to take precautions now to prepare for IRS correspondence relating to employees obtaining PTCs. If your ACA compliance processes are not buttoned up, the IRS could very well identify lapses in coverage and poor compliance with the Employer Mandate and subsequently issue the penalty Letter 226J.
To prepare, consider taking the following steps:
- Implement a monthly ACA compliance process. This process will assist in extending health coverage offers on time. Staying on top of your ACA compliance processes on a regular basis also paves the way for a smooth filing season and minimizes penalty risk.
- Store all supporting documents digitally. Everything from the summary of benefits, to individual offers, and methodologies for calculating ACA affordability should be saved digitally. This will assist in proving adequate offers of coverage that were made on time.
- Partner with an expert in ACA compliance. Truth is, managing sound ACA compliance on your own is a full-time job. Small HR professional teams struggle to meet the ever-changing and ongoing challenges associated with the ACA’s employer mandate. Choose a vendor with a proven track record for preventing ACA penalties, such as Trusaic. To date, we’ve helped prevent over $1 billion in ACA penalties for our ACA clients.
To get a better understanding of your ACA compliance status now, get your ACA Vitals score below.
When the conversation begins, try to act naturally – don’t bombard the person with questions hookups in birmingham and stories, but don’t try to be too reserved and cold either. During the conversation you can get to know each other a little, if, of course, your object of desire also shows interest in regular communication.
To gain invaluable insights on penalty amounts, affordability percentages, filing deadlines, expert tips for responding to penalty notices, and proven strategies for minimizing IRS penalty risk, download the ACA 101 Toolkit.