Navigating ACA Penalties – Tips for Staying Compliant

The individual mandate penalty has been eliminated, but there are still penalties for not offering health insurance in certain areas of the country. Additionally, ACA penalties are still in place for applicable large employers (ALEs).

While some ACA Compliance requirements may change from year to year, best practices can help businesses stay compliant and avoid costly fines.

Educate Your Employees

The ACA, sometimes known as Obamacare, is a complex law that mandates that businesses offer their employees health insurance. The firm might face severe financial penalties if it doesn’t comply. Due to this, it is critical for businesses to comprehend the ACA’s laws and regulations as well as how to maintain compliance.

Each year, the Department of Health and Human Services (HHS) releases new guidance for ACA compliance. This announcement, known as the “Payment Notice,” typically comes out in December or January and determines how out-of-pocket maximum limits are calculated for the following year.

These calculations are important to determine whether a plan offers enough affordable coverage and employers who do not offer the correct calculation risk receiving an IRS penalty for noncompliance. The penalties can be quite significant, reaching thousands of dollars per full-time employee.

Companies must know their ALE status and the number of full-time employees to avoid these costly fines. They must also be familiar with the IRS’ affordability of safe harbors, as these can help reduce ACA penalties.

In addition, employers need to educate their employees about the ACA Marketplace, as some of them may be eligible for premium tax credits or other financial assistance that can make enrolling in the company’s plan more affordable. This can be a great way to encourage employees to take responsibility for their health and wellness by making better decisions regarding their healthcare.

Create a Workplace Culture of Compliance

Even if you do it regularly, more is needed to educate employees on compliance issues. Building a true culture of compliance must be integrated into every facet of business operations and processes. Your organization must commit to building a positive workplace culture to do this.

This starts with leadership, with executives peppering verbal and written communications about the importance of compliance. The organization will follow suit if leaders can make a case for why a company must prioritize ethics.

Creating a culture of compliance also means establishing consequences for noncompliance, such as disciplinary action or termination. This helps employees understand the risk they take when they ignore a regulatory framework and can help deter them from taking unnecessary risks.

Finally, your organization must create a system for measuring progress toward a compliance culture, such as using workforce surveys to gauge employee sentiment. In addition to revealing how your culture stands, these surveys can facilitate conversations among managers and staff and allow individuals to pinpoint specific areas where they can improve their own ethical conduct.

It’s also a good idea to hold regular workshops where senior management members can share their personal stories of ethical and compliance struggles or successes, as this can foster an open, honest environment for dialogue. You can also highlight organizational-level accomplishments through senior management updates, newsletters, or intranet/wall boards, giving employees a reason to celebrate their compliance success.

Monitor Your Data

The ACA’s mandate and employer-shared responsibility provisions are complicated, and the penalties for not offering qualifying coverage are steep. It’s important for brokers to understand how these rules apply to their clients and to help them avoid future penalties by keeping records accurate, monitoring compliance, and establishing a compliance program. In addition, brokers should be prepared to assist their clients if they receive an ACA penalty from the IRS.

In the exhibit, we present three groups of studies that have attempted to evaluate the impact of the individual mandate’s elimination. The first group of studies surveyed insurance enrollees about their intentions to drop their coverage due to the penalty’s repeal. This approach has the advantage of leveraging data on actual enrollment decisions, but survey respondents may misreport their intentions.

The second group of studies used a regression discontinuity design to compare insurance enrollment patterns before and after the ACA’s mandate penalty was eliminated. This type of analysis is designed to control for the impact of other policies that might have changed coverage incentives, such as Medicaid expansions or changes in tax credit eligibility. 

Hire an Expert

As a benefits broker, you must balance numerous rules and regulations for your clients. The ACA has added another layer of complexity to your role, so you must have a strong partner who can guide you and keep your clients compliant.

A benefits expert can guide navigating the ACA’s strict compliance checklist and help reduce the risk of penalties. They can also help you develop a communication plan that helps employees understand the changes and how they might affect their circumstances.

Large employers must comply with the ACA’s employer mandate, known as “pay or play.” This requires them to offer qualified health coverage to at least 95% of their full-time workers. Employers that don’t meet this requirement can face significant fines.

Keeping meticulous records is critical for compliance with the ACA’s pay-or-play rule. This is especially challenging for healthcare organizations, which often have variable-hour staff that may work across multiple locations and different employment entities (EINs).

In addition, the ACA requires companies to file forms 1094 and 1095 and pay fees based on their size and type of self-insured plan. These forms must be filed consistently to generate data reports that an ACA specialist can review.