ACA compliance: 4 hidden penalty triggers to avoid
Here’s a compelling reason to review your ACA compliance efforts ASAP.
By the end of 2018, the DOL intends to audit every applicable U.S. employer for ACA compliance.
Whether the agency can make good on that goal is up for debate. But the implication is clear: Most employers will have their ACA practices put under the microscope.
And while there is no shortage of guidance (40,000-plus pages) from the feds, sifting through – and making sense of it – can seem impossible.
30 ways to get penalized
At the 2016 SHRM Conference, David Lindgren, a compliance officer with Flexible Benefit Service Corporation, listed 30 separate requirements that could trigger ACA compliance penalties as well as certain exceptions that allow some firms to avoid both the administrative headache of compliance and the cost impact of non-compliance.
While some ACA regs have specific non-compliance penalties, most violations carry fines of $100 per participant per day, up to a $500,000 max.
Because many employers are so focused on major ACA provisions – shared reporting, Cadillac Tax, etc. – it’s easy for some minor ACA tasks to fall through the cracks. But as Lindgren warns, those minor mistakes can carry major penalties.
Beyond reporting
Here are just a few of the more problematic ACA penalty triggers:
Penalty trigger: Plans must provide written notice of a coverage recission.
How non-compliance can happen: Generally, recissions (or retroactive cancellations of coverage) aren’t allowed under the ACA except in the cases of fraud or material misrepresentations – such as when an employee lies about an individual being a spouse or dependent.
But if employers rescind coverage and fail to give the employee a notice about the coverage rescission, the penalty is a big one: The coverage rescission is invalidated.
Penalty trigger: The requirement to provide health plan participants with a written notice of patient protection.
How non-compliance can happen: This simple step is often missed because employers assume the insurer is providing the notice, and the insurer assumes it’s being taken care of by the company. But if the notices don’t go out, firms are subject to the standard penalties ($100 per participant per day, up to a $500,000 max).
Penalty trigger: The requirement that health plans must provide coverage for approved clinical trials.
How non-compliance can happen: Clinical trials are broken down into Stages 1, 2, 3 and 4. Many plans had been structured to only cover Stage 3 or 4 trials. If you insurer still has these restrictions, you can be subject to the $50/$300,000 health reform penalties.
Penalty trigger: Revising COBRA General and Election notices to include ACA Marketplace details.
How non-compliance can happen: Many plans are unaware of this requirement, and non-compliance carries the standard ACA penalties. Luckily there are templates firms can use to update their COBRA notices.
A 5-part compliance strategy
To help with your compliance efforts, Lindgren offered a five-step strategy to use with every ACA reg:
1. Find out if the rule affects your health plan. Ask, “Is there an exception for this reg?”
2. Determine if you’re already in compliance.
3. Decide your company’s financial/risk tolerance. Will taking a penalty make more sense than putting the time/resources into compliance?
4. Create a corrective action plan to fill in any gaps. Compliance tends to involve many different areas. So you’ll want to make sure Payroll, Finance and IT are all on the same page.
5. Audit your plan throughout the year for changes, compliance issues.
Based on “ACA Compliance: Avoiding the 30 Penalty Triggers,” by David Lindgren, presented at the 2016 SHRM Conference and Exposition
