Total employer penalties related to the act’s health insurance mandates are expected to top $31 billion for the 2016 tax-reporting period, or almost 50 percent above the original, $21 billion estimate calculated by the Congressional Budget Office (CBO), according to a new report from Accenture.
The CBO’s estimate is the total amount in penalties it projected that employers not offering insurance coverage (“non-compliant employers”) would be forced to pay under the law. But the additional $10 million Accenture takes into account is a segment of employers it found were unintentionally non-compliant. In other words, employers that may offer health insurance, but might be mistakenly penalized because they fail to meet the reporting requirements of the Internal Revenue Service, and therefore are found to be non-compliant under the PPACA.
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“Because employers have not yet owed penalties for the employer mandate, there is limited awareness of the reporting requirements,” said Accenture Senior Manager Josh Tauber in an email.
Under the mandate, employers with more than 50 full-time employees must provide health insurance. As Accenture explained in a press release accompanying its report:
“For the 2016 benefit year, to avoid incurring the ‘part A’ penalty, employers must offer minimum essential coverage to 95 percent of employees and dependents under 26 years old.”
Another “part B” penalty might be incurred by employers if they fail to meet the minimum value or affordability requirements included in the PPACA.
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Of course, the fate of the PPACA is now up in the air, as President-elect Donald Trump has said that repealing the law will be one of the actions he prioritizes once he takes office in January.
As for the reason why some employers might find themselves in the group of unintentionally non-compliant businesses? Dumpy information technology systems.
“Our analysis revealed a significant potential additional penalty exposure primarily due to employers’ lack of adequate IT systems to compile accurate reports,” Tauber said. “For employers, initial implementation of IT systems that produce compliant reporting under the law will require investment.”
For now, assuming the PPACA remains on the books, Tauber recommends employers take these three steps to avoid incurring penalties in the future:
Assess the company’s reporting practices – Check whether the company has monthly data available and whether tracking by Employer Identification Number is available.
Evaluate organizational “pain points” – Tauber said these are “things like unlinked data systems and/or data systems not linked at the EIN level.” He also added that it’s important an employer “has a way to track employees of the past and the current workforce who have a 30-hour work week, as the traditional ‘part-time’ definitions would likely not produce accurate [reporting] results.”
Re-organize and regroup.
Make sure any internal team that oversees PPACA compliance includes representatives from human resources and the finance department. “Employers should also consider working with a third-party partner who has an established approach and technology platform to accelerate activities,” Tauber said.
Correction: An earlier version of this story included a quote from Accenture Senior Manager Josh Tauber on employers’ awareness of reporting requirements for the mandates, which has since been amended for clarity.
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