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Most believe the largest cost increases related to the Affordable Care Act are yet to come
The Affordable Care Act (ACA) has brought increased health care costs to many employers, but the majority of organizations believe the largest cost increases are yet to come, shows a new survey by the International Foundation of Employee Benefit Plans.
The survey report, 2015 Employer-Sponsored Health Care: ACA’s Impact, notes:
• One-third of employers (33 percent) expect the greatest cost increase from ACA implementation to take place in 2016, as new reporting, disclosure and notification requirements take effect.
• Over one-quarter (27 percent) expect the largest cost increase in 2018, when the impending excise tax on high-value plans (the “Cadillac tax") kicks in. The nondeductible 40 percent excise tax will be levied on plans that cost in excess of statutory thresholds (in 2018, $10,200 for self-only and $27,500 for family coverage), regardless of whether premiums are paid by employers or employees.
The survey also asked employers what they think will be the top compliance-related cost-drivers going forward. They responded:
• The excise tax on high-value plans (20 percent of employers).
• General administrative costs (19 percent).
• Costs associated with reporting, disclosure and notification requirements (13 percent).
“Employers need to devote significant time and energy to maintain compliance with the law,” explained Julie Stich, CEBS, director of research at the foundation, in a news release. “The extensive amounts of data that employers are required to collect can take hours [of labor] and even require complex IT infrastructures. The process has meant a cost increase for many, especially smaller organizations.”
Most employers (71 percent) think the costliest years are yet to come, but that doesn’t mean they aren’t already feeling a financial impact. Eighty-two percent say the law is increasing their organization’s costs this year, with most projecting a 1 percent to 6 percent increase in compliance expenses.
Employers are taking a number of steps to help control costs related to the Affordable Care Act. *HDHPs. A significant number report that, due to the law, they have increased their emphasis on, have added or are considering adding a high-deductible health plan (HDHP). HDHPs have lower premiums than other health plans, which can help employers avoid triggering the excise tax.
• HSAs and HRAs. Forty-two percent of employers have or are considering an HDHP with a health savings account (HSA), 13 percent an HDHP with a health reimbursement arrangement (HRA), and 11 percent an HDHP with no account. HRAs are employer-funded, while HSAs can be funded by employers and employees. Both vehicles can help employees handle the financial burden posed by high deductibles (see the SHRM Online article Health Care Consumerism: HSAs and HRAs)
• Full-replacement approach. Nearly one in 10 organizations said they had adopted a “full-replacement” HDHP strategy, where HDHPs are the only plan options provided, to avoid the excise tax. An additional 19 percent are considering doing so.
“High-deductible health plans are proving a popular option among employers that are looking for a way to hold both current and future health care costs in line,” said Stich. “As employers face the upcoming 'Cadillac tax,' it’s likely that HDHPs will continue to gain popularity.”
The survey found that just over half of the employers taking part in the survey are on pace to trigger the excise tax in 2018, but only 3 percent actually plan to pay the tax. Of those looking to avoid the tax, 53 percent have added or plan to add a high-deductible health plan.
In addition, 13 percent report they will not incur the excise tax because they have already taken action to avoid it.
Despite the three in five respondents who feel the law has had a negative impact on their organization, nearly all employers (96 percent) anticipate they will be continuing to offer health care coverage five years from now.
“Health care benefits are seen as essential for attracting future talent and retaining current high-quality employees,” said Stich. “Employers may change the structure of their health care plans or shift some of the cost burden to their employees, but it doesn’t appear they will stop offering health care benefits anytime soon.”
The survey was conducted in March 2015 among HR and benefits professionals in the databases of the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists. The organizations represent a wide base of employers from nearly 20 industries.
Tracking and Reporting Employee Data
In 2015, companies with 100 or more full-time employees (or the equivalent in part-time employee hours) were required to begin complying with the ACA’s “shared responsibility” mandate to offer minimum essential health coverage that is affordable to their full-time employees and dependents, or pay certain penalties, although they will have two years to phase up to the requirement to cover 95 percent of their workers. Companies with 50 to 99 full-time or equivalent employees have another year—until 2016—to comply with the coverage requirements.
If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an “applicable large employer” (ALE) subject to the ACA’s coverage mandate or the employer information reporting provisions. Employers with 50 or more full-time employees or full-time equivalents are considered ALEs.
Providing reports to employees. For ALEs, the first Forms 1095-C (the statements for 2015) must be provided to each full-time employee no later than Feb. 1, 2016 (Jan. 31, 2016, being a Sunday).
Filing reports with the IRS. ALEs must file Form 1094-C and Form 1095-C for each employee with the IRS for the 2015 calendar year no later than Feb. 29, 2016 (or March 31, 2016, if filed electronically). Regulations under section 6081 address extensions of time to file information returns.
The required IRS forms must contain data tracked month-to-month in 2015, detailing employee’s hours worked as well as employee’s access to employer-provided health care and employee contributions to employer-provided health care.
For those with 100-plus full-time employees or part-time equivalents, penalties for noncompliance with the ACA’s requirements will be assessed in 2016 based on 2015 data. For those with 50 to 99 full-time employees/equivalents, penalties will be assessed in 2017 based on 2016 data.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.
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