ACA-Terms with Double Meaning

Full Time | Before the actual first reporting period of 2015, “full time” could be a multitude of things based on the definition in your employee handbook. Each company could set its standards for what this meant and the calculations that were applied. 

January 1, 2015, changed this term to mean one thing and one thing only for all businesses across the U.S.: Any employee working on average above 30 hours per week or 120 hours per month is now “full-time.” 

Before this date, full-time typically meant a 40-hour work week. The ACA meaning, however, reduced full-time defined hours to 30 hours per week, and employers are responsible for tracking these hours.

Full Benefits | “I got a new job and one of the main reasons I took it was because it offered a full benefits package.” Employers today are more aware of which plans meet the ACA standards than they were before, such as health plans vs. ancillary plans. 

The qualifying health coverage that an employer needs to provide to avoid IRS penalties is a minimum essential coverage plan. This can include plans such as Medicare, Medicaid, student health plans, etc. 

Ancillary plans such as vision and dental insurance do not have to be reported. The sad part is employees are still at the disadvantage of not knowing what FULL HEALTHCARE COVERAGE even means. 

For employers to comply with ACA standards, plans must meet a certain criterion to be considered acceptable plans. Those plans must include minimal essential coverage, minimal value coverage, and still be affordable (our next defined term) for those enrolled. 

In recent years, Conditional and individual coverage Health Reimbursement Arrangement (ICRHA) plans have to be included as well. Employers must understand these terms to avoid reporting incorrectly and facing IRS penalties.

Minimal Essential Coverage. Overall, the policy must cover 60% of covered cost and 10% of essential health benefits, which are:

i. Chronic disease management, preventive care, and wellness services;

ii. Outpatient care (or “ambulatory patient services”);

iii. Emergency services;

iv. Hospitalization (inpatient care);

v. Laboratory services;

vi. Prescription drugs;

vii. Mental health and substance use disorder services, including behavioral health treatment;

viii. Rehabilitative or habilitative services and devices;

ix. Maternity and newborn care; and

x. Pediatric services (including oral and vision care for children).

Minimal Value Coverage | The above is covered at or above a threshold level. Usually this means the plan pays 60% of the actuarial value of the total allowed cost dictated by the plan elected. 

Affordable Coverage | “You won’t believe it, but my new security job provides full benefits, and it only costs us $195.97 per month for the entire family!” Unfortunately, the itemized expense receipt starts adding up as soon as an employee crosses the threshold into a medical facility and each aspect utilized is charged back to them at a premium. 

When the bill comes in, the employee realizes they have been paying for what many call a “masked” benefit plan. The employer pays nothing, the employee pays a fee for their plastic “health” card, but in the end, it’s just a façade. 

Terms Related Solely to the ACA

These terms above only touch on the surface of the many business words affected by the ACA. Now, let's explore more terms that have changed because of it.

226-J Letter | This is the critical letter that employers do not want to receive. The letter states that an employer has not met the standards of, or was late in filing, their ACA compliance and therefore are informed of their infraction and charged a hefty monetary penalty. 

These penalties have increased annually and, depending on employee headcount, can lead to employers paying hundreds of thousands of dollars in fines to the IRS.

Employer Mandate | This is a list of tasks an employer must complete to remain compliant with the ACA to avoid receiving one of those very expensive IRS penalty letters. These tasks include, but are not limited to: 

• Tracking employee hours
• Calculations for affordability of plans
• Monthly updates of codes and employee contribution of benefits to populate the 1095-c form
• Completing a 1095-c for each employee and a 1094-c for the employer and distributing that to the employee and IRS on the deadlines mandated. (March 2nd for distribution of 1095-c’s to employees; and March 31st for electronic filing to the IRS.)

Applicable Large Employer (ALE) | An employer who employs, on average, 50 or more full-time equivalent employees per month throughout the year.

Breaks in Service | This term specifically refers to the time limit mandated by the ACA in which an employee does not have hours worked but remains an ongoing employee of the company. The limit to this “break in service” is 13 weeks. 

This policy was implemented in response to bad business practices such as terminating employees prematurely so that benefits would not have to be offered or to prevent them from being considered full-time.

The Marketplace | This is the general term that has become very popular to describe HealthCare.gov or individual states’ websites, in which one can go to select health benefits that meet the ACA standards when those standards aren’t met by their employer. 

Many states offer their own marketplaces while the federal government manages a Marketplace exchange for any resident in any state. Once an employee receives coverage from the Marketplace, this will signal penalties for the employer. Many believe that each site or provider is individually funded or privately subsidizes the insurance when in most cases, it is the federal government.

Staying Up-to-Date on ACA Compliance Terminology

Clearly, there's much more to explore in the realm of ACA-related business terms. We can go on and create a new glossary of ACA terms specific to how businesses describe functions post-Affordable Care Act. The terms listed here are just the beginning of what employers need to grasp to ensure compliance."

It is best to find an ACA reporting software, that will keep up to date with compliance and ultimately will also save organizations time and money by reporting swiftly and accurately. Otherwise, an employer can face large penalties, and their business can be affected greatly.