Perhaps you have put your compliance efforts on the back burner, hoping the ACA will just go away. We have heard many reasons for this procrastination, including the constitutional challenge to the individual mandate, the 2008 presidential election, and the enforcement delay of the employer mandate. Or maybe it’s because the ACA is complicated and the compliance requirements seem to change every day. However, the latest Circuit Court decisions, both issued on July 22, 2014, should not be used as yet another excuse to delay the development and implementation of your 2015 ACA game plan.
On July 22, 2014, a three-judge panel for the U.S. Court of Appeals for the District of Columbia held that premium tax credits and cost-sharing reductions (subsidies) could not be offered in federally-facilitated health insurance marketplaces, limiting subsidies to coverage purchased in state-run exchanges. The same day, the U.S. Court of Appeals for the Fourth Circuit issued a decision upholding the IRS rules that permit subsidies in exchanges established by the federal government. It is anticipated that there will be a request for reconsideration by the full panel of D.C. Circuit judges and, if there is still a conflict between the D.C. Circuit and the Fourth Circuit, the matter could go to the Supreme Court. Thirty-six (36) states currently have federally-facilitated exchanges. The individual mandate requires most U.S. citizens to either maintain health insurance coverage or pay additional taxes. Without subsidies for lower-income residents in federally-facilitated exchanges, access to affordable health insurance could be limited, making it more likely that individuals who cannot afford to purchase coverage will have to pay additional income taxes.
But these cases involve more than just the individual mandate. Subject to certain transition rules, large employers generally must comply with the employer mandate in 2015. The employer mandate requires large employers to offer affordable, minimum value health care coverage to employees who work, on average, at least 30 hours a week or 130 hours a month (ACA full-time employees), or risk penalties, called assessable payments. But those penalties are only triggered if an ACA full-time employee, who is not offered the affordable, minimum value health coverage by his or her employer, purchases coverage through an exchange and qualifies for subsidies. If there are no subsidies available in federally-facilitated exchanges, employers whose employees obtain coverage in those exchanges could not be penalized, even if they did not offer affordable, minimum value coverage to those ACA full-time employees.
While we need to see how this ultimately plays out, you need to either start or continue your 2015 ACA compliance efforts. Unfortunately, compliance with the ACA is not “one size fits all.” Each employer needs to develop its own compliance plan, tailored to its business, workforce demographics and budgetary constraints. If you know you must comply with the employer mandate in 2015, you should already be tracking hours of service or know how you will otherwise identify your ACA full-time employees. How you manage this process is particularly important if you have part-time, variable hour or seasonal employees. In addition, you need to have adequate payroll and recordkeeping processes in place to comply with complex IRS information reporting and employee statement requirements beginning January 1, 2015. Note that on July 24, 2014, the IRS issued draft forms that employers will use to report on health coverage offered to their employees. In a Statement by the IRS, it is anticipated that draft instructions for these forms will be posted to the IRS website sometime in August, 2014.