Health Care Update: Progress at a Snail's Pace
By Susan Rider
With the latest “repeal and replace” initiatives failing to gain traction in the Senate, it appears that whatever forward movement towards health care reform is going to be, at least for now, regulatory rather than legislative. Meanwhile, the huge administrative burdens on employers show little signs of easing, because the IRS, for its part, is moving forward, releasing draft versions of the 2017 Forms 1094 and 1095.
By way of a review tutorial, the “affordability” concept underlying the schedule of employer mandate penalties is in itself a simple one: If employees are found to be paying more than an “affordable” percentage of their income in healthcare premiums, they become eligible for “subsidies” in the insurance marketplace. The employers of those fallen into “non-affordability”, conversely, are penalized.
The bookkeeping is far from simple, but some basic sets of numbers govern in 2017:
- The ACA affordability threshold, which for 2017 was increased to 9.69% of income (from 9.66% in 2016).
- The ACA Employer Shared Responsibility 2017 penalty was increased to a maximum of $3,390 (per employee).
Employers will be dealing with increased administration complexity relating to determining full time vs. part time employment rules, along with increased tax reporting complexity. The burden is made heavier because, as an April 2017 Treasury IG report revealed, certain IRS processes “did not function properly, and the IRS did not have complete and accurate data to use in enforcing compliance.”
As Nick Otto writes in Employee Benefit Adviser magazine, “Large employers expect health benefits costs to increase 5% in 2018 and cost $14,156 per employee – a rise that is pushing companies to look at ways to rein in costs….Employers have come to the conclusion that, as much as they’d like for employees to be sophisticated consumers of healthcare, the system is way too complex, way too fragmented..”
That realization, Otto adds, is leading employers to look at catered services to help employees understand benefits. At our company, benefit consulting is an important component of the agency's deliverables to its clients. And, whether the movement towards health care reform remains regulatory rather than legislative for now, our task at Gregory & Appel is to apply innovative strategies to help ease the administrative and human resources management burdens for our employer clients.