An employer’s guide to open enrollment: How to avoid ACA penalties
Despite vast efforts by the Trump administration, the Affordable Care Act (ACA) remains pretty much intact. And while the fate of the ACA could very well be decided at the midterm elections, employers must come to grips with the fact that, as of right now, there will be consequences for anyone who fails to comply with ACA regulations.
The IRS is continuing to send penalty letters, known as Letter 226-J, to applicable large employers (ALEs) that may be subject to employer shared responsibility payments (ESRPs) for ACA compliance mistakes from 2015. On top of that, the IRS is preparing to send out the letters for 2016. Suffice to say, this is not the time to be ill-informed about the ACA – no matter how confusing it may be.
Open enrollment, a crucial period for the healthcare industry and insurance markets, is one of the biggest points of confusion. With individual markets suffering from shortened enrollment periods and higher prices this year, how will that affect employers and employees?
To shed some light on the situation, we’ve compiled information on how employers should proceed during open enrollment.
Word from Capitol Hill
Over course of his first 20 months in office, President Trump has signed a number of executive orders pertaining to the ACA and the individual markets it influences. These orders—beginning with one that tells government agencies to “lessen the burden” of the ACA—have largely left the landscape unchanged. His most important decision, announced in October 2017, was to end the cost-sharing subsidies that help insurance companies fund the individual markets, thus driving up uncertainty and in turn, costs.
Between these executive orders and the time for open enrollment (November 1, 2018 to December 15, 2018), the country remains confused over who should be getting coverage, who will be getting subsidies, and who can get fined for what.
For employers, not much has changed. The ACA employer mandate and its reporting and compliance requirements remain in place, as do the penalties that come with them.
One of these penalties is the fine you could get if an employee purchases subsidized insurance from the individual markets. To avoid this, ALEs need to take the proper steps to ensure they’re offering affordable coverage of minimum value to full-time employees and their qualified dependents. You must also document these offers in the case of an IRS audit.
How to avoid thousands of dollars in penalties during employer open enrollment
Despite minimal change, employer open enrollment continues to remains tricky.
Typically, you’ll have a representative from the insurance company or your broker speak to eligible employees about how their health care options may have changed in the past year, and ask if anyone would like to make any changes to their enrollment. This meeting should be well documented and announced to your employees in a way that is typical of your company, and that is likely to be read (or listened to), and understood by all the necessary employees.
Ensure open enrollment notifications are delivered throughout the company, and if you can, document that everyone received them with some kind of online survey or read receipt. A simple communication oversight or undelivered email could, in the eyes of the IRS, mean you didn’t offer a particular employee health insurance.
If employees want to waive the company’s health insurance, make sure you provide a waiver for them to sign indicating this choice. These waivers are particularly important, as they can be your safety net in case of an audit. If there’s no proof that an eligible employee waived a valid offer of health insurance it will be difficult to demonstrate you made an offer.
Remember, the threat of fines is real, as the IRS continues to send letters to ALEs in order to identify and penalize those employers who did not provide affordable coverage of minimum value to eligible employees. With ACA enforcement underway, thorough documentation of all offers of coverage and employee waivers is essential.
Don’t get dinged during open enrollment
Like most significant moments in health care compliance, open enrollment is often complicated for employers, and only made more complicated by the inconsistent rhetoric coming from Capitol Hill. While not much has changed from an organizational standpoint, confusion has certainly ratcheted up due to the lack of communication and open enrollment advertising on the individual markets.
Overall, the advice remains the same: Continue reporting as usual, keep a good paper trail, and don’t let the confusion distract you from your ultimate compliance goals.