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ACA-Related Costs and Premiums Predicted to Increase in 2017

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ACA-Related Costs and Premiums Predicted to Increase in 2017

With the 2017 open enrollment for the Affordable Care Act (ACA) or “Obamacare” just around the corner, states are beginning to approve insurer rate requests. Based on the results so far, people who buy health insurance on their own via the marketplace can expect some steep premium surges. Employers, also, can expect hikes in ACA-related costs and health insurance premiums.

Cost impacts of the ACA

Costs for the lowest and second-lowest ACA silver plans are soaring faster in 2017 than in previous years, according to the Kaiser Family Foundation. For example, the cost of the second-lowest silver plan in certain major cities analyzed in the Foundation’s report is predicted to increase by a weighted average of nine percent in 2017 – a sharp jump from two percent in 2016.

Some states have already begun approving insurer rate plans, and the numbers depict some extensive premium hikes for individuals who purchase health insurance through the marketplace. Mississippi has endorsed increases of approximately 43 percent. In Tennessee, an average increase of 62 percent has been approved for one of the state’s largest marketplace plans; and California has announced an average increase of 13.2 percent.

According to Kaiser Health News, large employers expect their healthcare costs to rise by around six percent in 2017, and most employees of large businesses can expect a five-percent increase in their premiums. Based on a 2016 survey, employers are also anticipating a spike in their general administrative ACA expenses for 2017 – with reporting, disclosure and notification requirements being the primary cost drivers. There’s also the delayed 40-percent Cadillac tax on high-cost, employer-sponsored plans, which is forecast to be a significant ACA cost driver beyond 2017.

ACA penalties expected to rise

ACA penalties are expected to climb in 2017. For example, the penalty for not offering minimum essential coverage is expected to increase to $2,260 per full-time worker in 2017, compared to $2,160 in 2016. According to the Congressional Budget Office, the effect of employer penalty payments on the government’s revenue will mostly escalate in 2017 and beyond – with the biggest change being from $9 billion in 2017 to $16 billion in 2018.

Cost control measures

According to the International Foundation of Employee Benefit Plans, to contain ACA-related costs employers are increasing:

  • Out-of-pocket limits
  • In-network deductibles
  • Employees’ portion of premium costs
  • Copayment and coinsurance rates for primary care
  • Employees’ share of prescription drug expenses
  • Employees’ share of dependent coverage costs

Other cost-cutting strategies include:

  • Adopting high-deductible health plans
  • Expanding employee wellness programs
  • Dropping, or attaching a surcharge to spousal coverage
  • Modifying prescription drug benefits

Tax incentive for SHOP employers

Small employers who buy health insurance through the Small Business Health Options (SHOP) may qualify for the SHOP tax credit, which can help offset the cost of providing health insurance to workers. To qualify for the credit, employers must have fewer than 25 full-time equivalent employees who each earn an average salary of around $50,000 or less per year, pay at least 50 percent of their full-time employees’ premium and offer coverage to full-time employees via the SHOP marketplace. The smaller the company, the bigger the credit, which is capped at 50 percent of the employer’s contribution toward employees’ premium costs.

Businesses with fewer than 50 full-time and full-time equivalent employees are not subject to the ACA’s Employer Shared Responsibility provisions and can therefore simply choose not to offer health insurance. But, an analysis published by the New England Journal of Medicine concluded that employers competing for top talent will continue to provide health benefits and will not shift employees to an insurance marketplace – though this could change if the Cadillac tax is implemented.

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.

 

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.



Author Bio:

Jason Bodin has been the communications pulse for a number of organizations, including Paycom, where he serves as director of public relations and corporate communications. He helped launch Paycom’s blog, webinar platform and social media channels. He aided in the development of Paycom’s tool to assist organizations in complying with the Affordable Care Act, one of the largest changes in health care the country has seen. A graduate of the University of Oklahoma, Bodin previously worked for ESPN and FoxSports. In his free time, he enjoys adventuring with his family, reading and strengthen his business acumen.

Deadline Extended

Employer Deadline Extended for Furnishing 2017 ACA Forms

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Distribution of 2017 Affordable Care Act (ACA) Forms 1095-B or -C to your employees has been extended.

As issued in Notice 2018-06, the IRS has extended the deadline from Jan. 31 to March 2. (However, the deadline to provide Forms W-2 and 1099 to employees and contract workers remains as Jan. 31.)

Filing deadlines unchanged

While the deadline to furnish forms was extended, the filing deadlines remain the same: Feb. 28 for paper forms, and April 2 for electronic forms.

IRS Notice 2018-06 emphasizes that employers who do not comply with the due dates for furnishing or filing are subject to penalties under sections 6722 or 6721.

Good-faith transition relief extended

The IRS also announced the extension of good-faith transition relief. This may allow an employer to avoid some penalties if it can show that it made good-faith efforts to comply with the information reporting requirements for 2017.

This relief applies only to incorrect and incomplete information reported on the ACA forms, and not to a failure to file or furnish the forms in a timely manner. Additionally, the IRS stated it does not anticipate extending either the good-faith transition relief or the furnishing deadline in future years.

Contact a trusted tax professional if you have questions on how this may affect your business specifically.

Click here to read more about how the ACA is affect by the new Tax Cuts and Jobs Act.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

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Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio:

As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

Employers Unaffected by ACA Changes in New Tax Law

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On December 22, President Trump signed the Tax Cuts and Jobs Act. The bill includes a provision that reduces the penalty for not complying with the Affordable Care Act’s (ACA) individual mandate to $0, effectively removing the penalty for individuals who do not have health insurance coverage after the effective date of Jan. 1, 2019.

However, this update will not impact employers, since the law does not remove the employer mandate (the requirement that large employers offer health insurance coverage to their full-time employees or pay a penalty) or the associated employer reporting requirements. Large employers subject to the mandate still face penalties if they fail to comply with either, and the IRS has begun sending out notices with preliminary assessments of the employer shared responsibility penalty for tax year 2015.

Employers subject to the employer mandate should continue to comply and be prepared to file Forms 1094 and 1095 with the IRS in accordance with the normal deadlines.

For the 2017 tax year, the deadlines to provide Forms 1095-C to employees is Jan. 31, 2018.  The deadline to file Forms 1094-C and 1095-C with the IRS is Feb. 28, 2018 if filing paper forms, and April 2, 2018, if filing electronically.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio:

As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

ACA Employer Shared Responsibility Payments

IRS Quietly Prepares to Assess ACA Employer Shared Responsibility Payments

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Late last week, without announcement, the IRS amended a FAQ about its planned process for assessing employer shared responsibility payments (ESRPs) under the Affordable Care Act (ACA). Previously, the document suggested that further guidance would be forthcoming, prior to notifying affected applicable large employers (ALEs) about potential penalties owed under the federal health care law’s employer mandate.

That statement is now gone. In its place are several questions and answers detailing how the IRS will notify companies that they may owe an ESRP. In addition, the IRS intends to send assessments for the 2015 tax year in “late 2017,” which gives the agency approximately six weeks to do so.

Deadlines

The IRS notification will take the form of Letter 226J, which will include a month-by-month payment summary and a list of employees who:

  • were full-time employees for at least one month of the tax year
  • also received a premium tax credit
  • and did not allow the employer to qualify for an affordability safe harbor or other relief

While Letter 226J will indicate the employer’s deadline to respond, recipients generally will have 30 days from the letter’s printed date to contest its information. Then, following correspondence between the IRS and the ALE, if the agency determines the employer indeed is liable for an ESRP, the IRS will issue a demand and instructions for payment, via Notice CP 220J.

The FAQ’s changes to describe specific procedures and deadlines represent the clearest indication we have received that the IRS soon will notify ALEs that they may owe an ESRP for 2015. If such notifications are sent within the next few weeks, it will mark significant news.

For more on ACA, check out the October 2017 article: Trump Announces 2 Changes to ACA 

Tags: , ,
Posted in ACA, Blog, Featured

Erin Maxwell

by Erin Maxwell


Author Bio:

As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

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