You can’t avoid the affordable care act
Many employers want to provide health care coverage to their employees, but tend to think the requirements of the Affordable Care Act (“ACA”) are too confusing or burdensome. Employers often want to contribute to the
cost of their employees’ health insurance without actually purchasing a group health insurance policy for all of their employees. However, recent guidance issued by the government has closed off many of the alternative arrangements that have previously been used by or suggested to employers to avoid the requirements of the ACA.
One solution employers often desire is to give each of their employees a specific dollar amount each month and let them purchase their own individual health insurance. This strategy appears to avoid the expense and hassle of purchasing an ACA-compliant group policy and allows employees to purchase coverage on the Exchange and potentially take advantage of any subsidies available. Under the guidance, so long as this is done with after-tax dollars, this is perfectly acceptable. The issue arises when the employer reimburses the employees for premiums or enters into any other payment arrangement to pay the premiums with pre-tax dollars.
The guidance indicates that these employer payment plans are eligible-employer sponsored plans subject to the ACA’s plan requirements. A plan that only provides employees a specific dollar amount to purchase individual coverage does not comply with the ACA’s annual dollar limit prohibition or the preventive services requirements. Employers also cannot contribute to HRAs or health FSAs and allow employees to purchase health insurance coverage on the individual market, except in some cases for limited excepted benefits, such as accident-only or disability-income policies. Plans that do not comply may be subject to enforcement action by the Department of Labor or the IRS and potential penalties.
Another strategy that many employers are using to help reduce costs related to health care is to institute an onsite health care clinic to meet the primary care needs of employees. An onsite health clinic is considered an excepted benefit and does not meet the ACA’s requirements. Yet, employers are frequently seeking to partner with healthcare providers to make cost-effective arrangements for these clinics. The concern appears under the insurance laws when a per member / per month payment arrangement is considered. The Missouri Department of Insurance has indicated that if a provider enters into an arrangement with an employer to provide future health care services to the employer’s employees for a fixed prepayment, the provider is engaged in the unauthorized business of insurance.
It is important for employers to understand their obligation to provide coverage under the ACA (the play or pay requirements for large employers) and whether offering benefits, funds, or premium assistance may be considered a plan that must comply with the ACA’s requirements. Many employers obtain assistance from benefits advisors to navigate these requirements. While most benefits advisors are highly competent, some may be trying to sell a product, regardless of whether it complies with the law. Due diligence is highly recommended when evaluating any benefits product or proposal, particularly if it appears too good to be true.