How to Avoid Penalties Under the Affordable Care Act
2016 is expected to be the most expensive year for businesses complying with the Affordable Care Act (ACA), said David Lindgren, senior manager of compliance and public affairs for Flexible Benefit Service Corporation, a benefit administrator headquartered in Rosemont, Ill.
It’s the first year for dealing with ACA reporting, which many employers will have to complete by the end of June, Lindgren said during a concurrent session at the Society for Human Resource Management 2016 Annual Conference & Exposition.
There are more than 30,000 pages of guidance about the law, but Lindgren said the ACA is fairly easy to comprehend. “Of course, many people would disagree with me,” he noted.
“It’s not necessarily easy to comply with the ACA, and it’s not financially inexpensive, but most of the rules aren’t overly complicated,” he said.
The federal agencies that regulate the ACA have said they intend to monitor all businesses for compliance. This may not be realistic, but employers should keep in mind that more auditing can be expected.
Lindgren identified 30 penalties associated with noncompliance and provided insight on how to avoid them.
Employers can choose to pay the penalties for noncompliance, but steep fines are often attached, he said. For example, market reform violations carry a penalty of $100 per participant per day, up to $500,000 for each violation.
Employees Must Receive Notices
Some noteworthy penalties to avoid are those associated with the failure to provide required notices to plan participants, including a written notice of patient protections.
Lindgren said sometimes employers aren’t clear about who has been designated to provide this notice. “A lot of times the insurance company thinks the employer provided it and the employer thinks the insurance company did,” he said. “So it’s important to double check who is in fact giving the notice.”
Participants must also be provided with a summary of benefits and coverage in a standardized format. Lindgren likened this format to a nutrition label on a can of soup.
A participant should be able to easily compare the benefits to other plans, such as a spouse’s plan, just as the nutrition facts for two cans of soup can be easily compared.
There is a standardized template for the summary of benefits and coverage on the Department of Labor website.
The requirement to provide a summary of benefits and coverage applies to medical plans, but not to dental or vision plans.
The summary should be distributed at the time of open enrollment and special enrollments related to qualifying events, as well as at the request of participants and when a material modification has been made to the plan.
Although there is no penalty attached for noncompliance, employers must also provide written notice about the health insurance marketplace to new hires within 14 days of their start date.
This applies even for organizations that don’t offer benefits and even to those employees who aren’t eligible for benefits, Lindgren said.
There are some exceptions. For example, if an employer isn’t subject to the Fair Labor Standards Act, then it doesn’t have to provide the marketplace notice.
Exceptions for Grandfathered Plans
Grandfathered plans aren’t subject to some of the requirements under the ACA. This includes plans purchased on or before March 23, 2010, that haven’t made certain material changes.
Lindgren noted that employers with grandfathered plans must provide written notice to participants notifying them that it is a grandfathered plan and describing what that means for participants.
If participants aren’t provided this information, the plan will lose its grandfathered status, Lindgren said.
HR Takes the Lead
Benefits compliance isn’t just a human resources issue anymore, but HR often takes the lead in compliance efforts, according to Lindgren.
However, other departments, such as finance, legal and information technology, are increasingly getting more involved.
Lisa Nagele-Piazza, SHRM-SCP, J.D., is the senior legal editor for SHRM.