Affordable Care Act FAQs
Some of our most frequently asked Affordable Care Act questions:
What is the Affordable Care Act (ACA)?
The Patient Protection and Affordable Care Act (PPACA or ACA for short) is comprehensive health care reform legislation that was passed in 2010. The ACA includes an array of requirements for individuals, employers, and health plans.
What are the 4 basic parts of the ACA?
1. Employer Shared Responsibility: Employers with over 50 full-time employees & full-time employee equivalents must offer to full-time employees affordable insurance that meets minimum value. If not, the employer is exposed to possible penalties.
2. Individual Shared Responsibility: Most individuals must obtain “minimum essential coverage” for themselves and their dependents starting January 1, 2014 or pay a tax.
3. Exchanges/Marketplace & Subsides: The exchange/marketplace is a state and or federal website that offers a variety of private health insurance plans available for purchase by individuals. Qualifying individuals can receive subsidies towards monthly premiums and cost sharing expenses.
4. Market Reforms:The ACA made big changes to how the health insurance industry works. The list is too long to share in its entirety, but here’s a few examples: updates to coverage limits and the elimination of pre-existing condition exclusions for children. A requirement that all health plans provide coverage to any applicant and that an SBC be provided to both applicants and enrollees. As well as, requiring complete coverage of preventive services, an extension of dependent coverage up to age 26, requirements to control premium growth, and benefit design changes to the individual and small group markets.
What information do I need to track under ACA?
Tracking for Employer Shared Responsibility (Employer Mandate) is very different from tracking for Information Reporting (Forms 1094-C and 1095-C).
Employer Shared Responsibility: To determine eligibility for health coverage under these rules, employers track hours of service, over a period of time (a measurement period ) that is usually 12 months, to obtain a monthly average. If the average is 130 hours or more per month, the employee is eligible coverage during the associated stability period (usually 12 months as well). The Measurement Method rules laid out in the regulations are complicated, but it’s important to understand and apply them correctly to avoid penalties.
Information Reporting: To collect the appropriate data to populate Forms 1094-C and 1095-C, employers must track information on a monthly basis each calendar year. Tracking includes, but is not limited to, monthly employee counts, monthly cost of coverage, and whether and when coverage was offered. Like Employer Shared Responsibility tracking, Information Reporting rules laid out in the regulations are technical, but it is important to understand and apply them correctly to avoid penalties.
What is a full-time equivalent employee?
A “full-time equivalent employee” is two or more part-time employees whose hours total 120 hours in a month. A full-time equivalent employee is calculated on a monthly basis and is used as part of the calculation to determine employer size.
How do I determine my employer size?
Various provisions of the ACA define a large employer differently, so it is important to understand the definition within each ACA provision. For example, under Employer Shared Responsibility provisions and under Information Reporting provisions, a large employer is one with 50 or more employees (full-time employees plus full-time employee equivalents). There are specific calculation methods within the rules; however, under Form W-2 Benefits Reporting, a large employer is one who issues at least 250 Form W-2s that calendar year.
What is Information Reporting?
Large employers (employers with at least 50 full-time employees plus full-time employee equivalents) are required each year to file specific information with the IRS and to furnish information to employees about the health coverage they offer. Rules vary on which employees must receive the forms, but generally it is full-time employees. To report, large employers will use new IRS Forms 1094-C and 1095-C. The rules for filing and furnishing these forms require certain monthly tracking during the calendar year and expose employers to Information Reporting penalties if done incorrectly.