By Kate Graham
This is in light of current statute language that states subsidies are available in exchanges established by the state. With much at stake for all parties, the vote wasn’t even close. Coming in at 6 to 3 in favor of Burwell, the Court majority agreed with the Administration’s position that the language in question is ambiguous, and that other sections of the statute show Congress’ intent to provide subsidies across the board.
What does it all mean?
The Court’s decision undoubtedly brings peace of mind to the 6 million people poised to lose subsidies through the federal exchange. For employers, at the very least, it brings an end to the uncertainty of whether or not they’ll have to meet the employer mandate. Those that were hoping for relief from the annual reporting requirements must now move forward with their compliance strategies (hopefully, they have them). In terms of the ACA as a whole, it’s business as usual for employers. But business as usual does not mean complacency. While having to comply with the employer mandate in 2015 was a big ACA milestone for employers, it was certainly not the last. Annual IRS reporting requirements and the excise “Cadillac” tax on high-cost health plans remain significant hurdles.
The challenge for employers
It’s no secret that employers offering self-insured health plans and/or those subject to the employer mandate have felt considerable angst from the ACA reporting requirement that took effect this year. Designed to help the IRS track who is in compliance and who is not, the process of reporting has proven to be a complex undertaking. It not only forces employers to extract and integrate data from multiple information systems, but also makes them translate that data into reporting codes that are then used to report monthly activity for each employee.
Given the cumbersome nature of these tasks, it follows that employers who are not prepared to dedicate sufficient resources to the matter, or look to third-party reporting solutions, may be in trouble. And while 2015 reporting is not due until early 2016, employers should not wait to make plans.
The “Cadillac” tax drives perspective
Going forward, there is additional pressure on employers as a result of the looming “Cadillac” tax, which will create a seismic shift in the way employers view the ACA. A tax on high-cost health plans that begins in 2018, it requires employers to pay a 40 percent excise tax on the annual cost of health coverage that exceeds statutory thresholds (generally $10,700 individual / $27,500 family in 2018). Thresholds will be adjusted annually by the rate of general inflation (versus the much higher rate of medical inflation). So the question for employers is not whether their plans will exceed the limits, but how quickly they will exceed the limits and what they can they do to mitigate the damage.
It’s all about preparation
The answer, again, is all about preparation. Strategic benefits plan design is critical when it comes to protecting budgets and maintaining compliance. To that end, there are a few key questions employers should already be asking when it comes to building out a strategy:
- How long can your organization sustain the rate of health care increase it has experienced in recent years?
- Are your benefits strategy decisions made with next year in mind or with an eye on long-term impact?
- Is it time to consider strategies that give employees more of a stake in the game (e.g., consumer-driven health plans, defined contributions, private exchanges)?
- Are you confident your organization is prepared for the ACA challenges that lie ahead?
The answers will do more than just keep an employer compliant. They also can inform the right strategy, be effective in recruiting and retaining top talent, and be differentiators from an overall business perspective.
Last, but not least, it’s important to find the right partner to help you navigate through the gray areas of the law, of which there may be many. The goal is to find a consultant that understands your industry, your employee population, your business goals, and your challenges. You also need a firm that is a step ahead of the rest in knowing how statutory thresholds work, and who can provide realistic and practical solutions. Those employers who lean on partners without these critical abilities may find themselves wishing they hadn’t.
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Kate Graham is HCR Strategist and Sr. Consultant at Trion Group. “The above article represents the opinions of Trion, a Marsh & McLennan company. Any questions or comments should be directed to them via their website www.trion-mma.com.”
Note: The Patient Protection and Affordable Care Act is a complex law. Any statements made by Trion Group, a Marsh & McLennan Agency, LLC Company concerning tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as accounting, tax, or legal advice. We recommend that you seek the advice of your own tax, accounting and legal advisers as to whether or not the health plans you select are compliant with the Patient Protection and Affordable Care Act, including the minimum essential coverage requirements.