Myths and Truths to Pesky ACA Questions

The Affordable Care Act has been a topic heavily covered in the news for over four years now, and it’s not showing any signs of slowing down. All the buzz has inevitably led to some confusion of facts and inaccuracies of truth when it comes to what employers should know about the ACA. Between the heavy media coverage, debating political parties, and superfluous chatter, it can be hard to know what is true.

1. MYTH: Employers who are subject to Employer Shared Responsibility in 2015 can eliminate their penalty risk by providing adequate and affordable coverage to 70 percent of their full-time employees.

TRUTH: The only way to eliminate the Shared Responsibility penalty risk is to offer both adequate and affordable coverage to 100 percent of full-time employees.

2. MYTH: The 9.5 percent of Box 1, W-2 income affordability safe harbor is the only available safe harbor.

TRUTH: There are three available safe harbors. Of these, the Federal Poverty safe harbor is the easiest to administer and many employers already meet the requirements.

3. MYTH: The 90-day eligibility waiting period requirement is part of Shared Responsibility.

TRUTH: It is actually part of the Market Reform Rules and is effective when the 2014 plan year began. Also, a first of the month following a 90-day waiting period is not compliant, so many employers are selecting first of the month following 60 days to make it simpler.

4. MYTH: The only place to purchase individual health policies is via an ACA exchange.

TRUTH: Individuals can still purchase policies off-exchange. On or off exchange, the offered policies are mostly from private insurers and the rates are generally the same. However, premium assistance for those who qualify is only available on the exchange.

5. HALF MYTH: Small businesses with existing health plans should strive to keep their employee count below 50 full-time employees and equivalents.

TRUTH: Small business owners should not limit the growth of their business without first determining if they’re at risk of paying a Shared Responsibility penalty. It’s possible they are already in good shape.

6. HALF MYTH: Before the Affordable Care Act, fully insured health plans were not subject to nondiscrimination requirements.

TRUTH: While it’s true that a fully insured health plan is not yet subject to the to-be-determined ACA nondiscrimination rules, a Section 125 plan is and has been subject to nondiscrimination rules. If an employer with a fully insured health plan allows their employees to pay for their share of the health premiums pre-tax through a Section 125 plan, the employer is subject to Section 125 nondiscrimination rules.

7. MYTH: We don’t have the final regulations, so we cannot make plans.

TRUTH: This is the worst one of the list. Now’s the time to finalize your strategy.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary