About the ACA
Under the Affordable Care Act (ACA), some employers must now meet certain health insurance coverage and reporting guidelines. The employers required to follow these new laws are Applicable Large Employers (ALEs), and they’re employers with at least 50 full-time employees or full-time equivalents.
Employer Shared Responsibility
Employer Shared Responsibility was enstated by the ACA, and is made up of the provisions that ALEs must now meet. One of these provisions states that ALEs must offer at least the Minimum Essential Coverage (MEC) of health insurance to their full-time employees, including their spouses and dependents (if any). If the ALE cannot do this, or refuses to do so, they’ll be subject to an employer shared responsibility payment. The provisions also state that ALEs must report the coverage they offer to the IRS and their covered employees each year.
Minimum Essential Coverage (MEC)
The Minimum Essential Coverage (MEC) was set by the ACA as a baseline for the least amount of coverage an individual can have -- or an ALE can offer -- while remaining in compliance with the new laws. Coverage under these plans is considered to be at least MEC:
- ACA Compliant employer-sponsored coverage
- Individual Marketplace coverage
- Medicare Part A
- Medicare Advantage Plus
- Most Medicaid
- CHIP, Children’s Health Insurance Program
- Certain VA coverage
- Most TRICARE types
- Peace Corps coverage for volunteers
- Refugee Medical Assistance
Minimum Value (MV)
The Minimum Value (MV) is another baseline set by the ACA for coverage obtained by individuals and offered by employers. For a standard population, the MV is met if the health plan in question pays for at least 60% of the total cost of medical services. The benefits of the health care plan must also include substantial coverage of inpatient hospital and physician services, and must be offered to your employees’ dependents and/or spouse as well to meet the MV standard.
Self-Insured vs. Fully Insured
Fully insured and self-insured are two types of health plans ALEs can choose to offer to their employees. In fully insured plans, ALEs pay a per-employee premium to a chosen insurance company. The insurance company then assumes the responsibility of providing health coverage when needed. For self-insured plans, ALEs use the money they would’ve normally paid an insurance company to directly pay healthcare claims to providers. An insurance company or other 3rd party usually administers self-insured plans, but the ALEs bear the risks associated with offering health benefits.
Offers of Coverage
ALEs can offer employees different types of coverage under the ACA. Part of ACA reporting for ALEs is indicating the Offer of Coverage with an indicator code:
- 1A. Qualifying Offers
- 1B. MEC/MV offered to employee
- 1C. MEC/MV offered to employee, MEC offered to dependents
- 1D. MEC/MV offered to employee, MEC offered to spouse
- 1E. MEC/MV offered to employee, MEC offered to dependents and spouse
- 1F. MEC w/o M/V offered to employee, spouse, and dependents
- 1G. Coverage offered to a non-FT employee who enrolled in self-insured coverage
- 1H. No coverage offered
- 1I. Qualifying Offer Transition Relief 2015
Employer Penalties
ALEs are at risk of incurring penalties from the IRS for not following ACA compliance. ALEs can be fined if they refuse to offer coverage to their employees, the coverage they offer doesn’t meet MEC or MV standards, or they incorrectly report (or don’t report at all) the coverage they offered.