Minimum essential coverage, also known as Obamacare, is designed to give coverage to those who need it most. However, there is quite a bit of confusion surrounding what minimum essential coverage actually covers for patients with this healthcare. MEC was designed to provide patients with 10 essential benefits. So what exactly are these essential health benefits?
While you’ve likely heard of Obamacare, you may not know Obamacare is the same thing as the Affordable Care Act. This healthcare law that passed in 2010, goes by a few different names. You may also see this law referenced as the PPACA or the ACA (the acronym Affordable Care Act).
How much can you save with MEC? Minimum Essential Coverage (MEC) is coverage that complies with ACA requirements. The Affordable Care Act (ACA) states that all employers with 50 or more full-time employees- Applicable Large Employers- are required to provide coverage to all eligible employees or they will be subject to fines/ penalties.
MEC plans generally cover preventative and wellness-related tests and treatments. These plans can be a great cost-effective option for larger employers. With a MEC plan, the premiums can be paid solely by the employers, the employee, or they can be co-funded. In order to be ACA compliant, employers must offer this coverage to all of their full-time or full-time equivalent employees.
How much can you save with MEC? Check out our calculator!
With all the recent changes to employment due to the global pandemic, navigating ACA compliance can be challenging. ACA noncompliance may lead to shared responsibility payments. Businesses with 50 or more full-time employees must offer affordable, minimum essential health coverage.
How can your business avoid tax penalties from the IRS?
The first step to avoid potential shared responsibility payments is to make sure your business stays compliant with the ACA shared responsibility requirement. While this may seem simple, there are few distinctions to be aware of, including determining full-time employment status and full-time equivalents, and identifying the minimum value requirements.
If employers do not cover at least 95% of full-time employees and their dependents, the employer will be subject to a shared responsibility payment.
If a full-time employee receives a premium tax credit because they were not offered coverage, the coverage was not affordable, or the minimum value was not provided, the employer may also be subject to a shared responsibility payment.
Once you have identified how to stay compliant with the ACA shared responsibility requirements, ensure your reporting is accurate and timely.
Applicable Large Employers (employers with 50 or more employees) are required to file information returns with the IRS, Forms 1094-C and 1095-C. These forms will inform the IRS of the employers that owe shared responsibility payments.
To mitigate the risk of receiving a letter from the IRS for shared responsibility payments, employers should carefully review and complete the forms above.
If you do receive a shared responsibility payment letter from the IRS, the employer has 30 days to respond. If you do need more time to gather your information, the IRS may be able to extend the 30 days deadline. Either way be sure to respond or ask for an extension as quickly as possible.
If you are required to pay a shared responsibility payment be sure to consult a lawyer to ensure your reporting is accurate. At SBMA, we want to ensure you remain compliant with all ACA requirements. If you receive a letter from the IRS in 1094/1095 filing that we completed, we will refile your forms, free of charge.
Contact us today to learn more.
The Families First Coronavirus Response Act is an Act of Congress meant to respond to the economic impacts of the ongoing 2019–20 coronavirus pandemic. The act will provide funding for free coronavirus testing, 14-day paid leave for American workers affected by the pandemic, and increased funding for food stamps. So, how does the FFCRA affect my employee’s coverage?
As the effects of Coronavirus continue to unfold, we have seen many changes to how companies have to adjust their benefits. Here are some strategies that employers can utilize to prepare for the changes:
Employer-provided health coverage: The Families First Coronavirus Response Act ensures that group health plans cover COVID-19 screenings without cost-sharing. The law, however, does not require coverage for treatment without cost-sharing; treatment costs will be based on the terms of the benefits plan.
The IRS states that employees who have coverage with a high-deductible health plan are able to get COVID-19 testing and treatment without additional expenses.
Paid leave and short-term/ long-term disability coverage: Employees with less than 500 employees must provide up to 12 weeks of leave related to child care with the expansion of the Family and Medical Leave Act, and up to 80 hours of emergency paid sick leave to employees who are full-time.
Families first does not address employees who were on disability or leave before the outbreak.
Employer tax credits for paid leave: The FFRCA has provided multiple tax credits to aid employers as they attempt to meet the new requirements. These tax credits are equivalent to 100% of the qualifying leave wages against the employer’s portion of Social Security tax.
Continuing health coverage during furloughs and mandated leaves of absence. During unpaid leaves of absences that are extended, like a temporary layoff of furlough, health benefits are typically halted.
Review your insurance contracts and stop-loss policies to determine how to regard employees who lose eligibility due to an extended leave of absence.Group health brokers can help you navigate extended leave coverage for W-2 employees.
(COBRA), where furloughed employees can choose to remain on the group health coverage the employer must collect the amount of the employees premium. If an employee is receiving payments from accrued time-off, it is possible to collect premiums from those payments.
Employer inquiries, screenings, and disclosures for infected employees: Asking employees about their health condition is not a HIPAA violation. Other laws, like the ADA, don’t allow confidential information to be disclosed that concerns employees. If employers screen employees onsite, test results are not associated with a health plan.
Telemedicine programs: The use of virtual medicine gives employees the ability to remain home while being cared for medically, which helps halt the spread of COVID-19.
Employer expenses with a quarantine employee: Some expenses incurred while an employee is quarantined can be considered deductible.
As we continue to navigate through COVID-19 we will likely see more changes to benefits that are being offered to employees. Check back for updates
Due to the Coronavirus outbreak, the IRS has pushed back the tax filing deadline to June 15, 2020, for individuals, but there have been no specific details into filing for 1094/1095. The only information they gave was that the 30-day extension that can be filed past March 2 can be extended an additional 30 days. Here’s what you need to know about 2020 1094/1095 filing.
Form 1095-C, which is filed to any full-time employee of an Applicable Large Employers member (employers with 50 or more full-time employees), who is full-time for one or more months of the tax year. These members report information regarding each employee for all 12 months of the year.
The information that is reported from both 1094-C and 1095-C is used to determine employer liability for payment under the employer’s shared responsibility provision, section 4980H, and the amount, if any, that is owed.
Employers that are subject to the ACA must distribute 1095 reporting forms to employees and transmit copies to the IRS, with a few exceptions:
Form 1095 B, Health Coverage
- . Transmittal Form 1094-B to accompany Form 1095-B
- Instructions for Forms 1094-B and 1095-B
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
- Transmittal Form 1094-C to accompany Form 1095-C
- Instructions for Forms 1094-C and 1095-C
Forms 1094-B/ 1094-B
Information in form 1095 B is reported to the IRS and taxpayers regarding employees who are covered by minimum essential coverage (which includes government-sponsored programs, eligible employer-sponsored plans, individual market plans, other Department of Health and Human Services coverage). Eligibility for this coverage may affect a taxpayer’s eligibility for the premium tax credit.
Everyone who provides minimum essential coverage to employees during a year must file an information return that reports the coverage, using forms 1094-B and 1095-B.
There is an automatic 30-day extension for both forms 1094-B and 1095-B, which you can receive by completing Form 8809 and filing it with the IRS on or before the due date. There is no need for a signature or explanation to receive the extension, but form 8809 must be filed before the due date of the returns. You may also apply for an additional 30-day extension under certain hardship conditions.
At SBMA, we take the complexity of 1094/ 1095 filing off your plate. Our team will take care of all of the filings and, in the event the IRS sends a letter saying the filing was incorrect, we will take care of the refiling on your company’s behalf.
What You Need to Know About Penalty A and B Compliance
If you are a business owner and qualify as a “large employer” — any company with 50 or more full-time or full-time equivalent employees (employees who average 30 hours per week) — there a few things you need to know regarding employee coverage. If you don’t comply with the regulations set for you, you will face significant penalties, which can quickly add up.
ALE employers must offer affordable or minimum value medical coverage to their full-time employees and their dependents until the age of 26. This minimum essential coverage includes various programs that comply with ACA’s provisions to employer health care.
Any employer who does not offer minimum essential coverage to at least 95% of their full-time employees and their dependents is subject to penalty, and at least one employee obtains coverage through the Marketplace Exchange. This penalty includes a $2,320 fine per full-time employee after the first 30 employees. If you have 150 employees, this penalty would be $308,400.
If employers offer coverage, but the coverage is not affordable or does not meet a minimum value, they may still receive a penalty. If your employee’s share of the premium for the coverage you provide is more then 9.78% of their household income, the coverage is deemed unaffordable.
The penalty includes either a $3,480 fine per full-time employee receiving a federal subsidy for coverage purchased on the Marketplace or a $2,320 per full-time employee, not including the first 30, depending on which is the lower cost for the company.
As you can see, these penalties can add up to a lot of expenses for your business. At SBMA, we want to help you avoid any potential penalties for lack of proper insurance. Contact us for more information regarding your employer benefit needs.
Employee benefit programs have been mandatory for all applicable large employers (ALE) since the Affordable Care Act, enacted in 2010. This Act requires employers to offer minimum essential coverage to all employees who work in a company with a staff of 50 or more. Failure to comply with this requirement will cause penalties for these companies and will likely lead to an IRS Audit down the road. Here is more information regarding the importance of Penalty A and Penalty B compliance.
The ACA ensures that ALEs offer coverage to more than 95% of their full-time workforce (who work 30 hours or more a week) and their dependents. If they fail to do this, the Employer Shared Responsibility Payment (Penalty A) will be issued. As of 2020, the cost for this violation is $2,750 for each full-time employee. Each month an eligible employee is not offered coverage; the penalty enforces, which comes to $214.19 per month for one employee.
If an employer has 500 employees, and they do not offer benefits to 95% of their full-time workforce, they could face at least a million dollars in violation fees. (See graphic.)
In addition to the minimum essential coverage ALE employees must provide, they also have to ensure that the coverage they offer their full-time employees is affordable. For coverage to be accessible, the employee must pay less than 9.78% of their household income. So coverage should cover more than 60% of medical service expenses. Noncompliance with this requirement could result in a $3,860 fine per employee who receives and exchanges tax credit.
If 100 of an employer’s employees receive a premium tax credit or subsidy on the Marketplace exchange, the employer’s fine is $3,860 per employee, which results in a $386,000 fine. Like Penalty A, Penalty B requires monthly assessments, for each employee not offered coverage that is a $321.67 fine.
Other Compliance Issues
Other penalties that may incur:
The delivery of Forms 1095-C to every recipient by January 31. Every form that is not delivered will incur a $280 fine.
All Forms 1094 and 1095 must be filed electronically by March 31. For every form, there will be a $280 fine failure with intentional disregard will increase the fine to $560.
At SBMA, we want to help your company avoid any potential penalties. Our team will take care of all of your 1095/1094 filings, and, in the event the IRS sends a letter saying the filing was incorrect, we will take care of the refiling on your company’s behalf.
Minimum Essential Coverage was created when the Affordable Care Act was enacted. Before the Affordable Care Act began, people who already had medical conditions or had used too much medical care in the past were able to be denied coverage by insurers. Minimum Essential Coverage ensures that all ACA-compliant health care plans offer insurance to all enrollees regardless of health status or which plan they select. What exactly does minimum essential coverage entail?
To be considered minimum essential coverage, all health plans must cover ten necessary benefits. The amount of those benefits that they cover depends on the actuarial value. This number is determined by metal tiers, which depend on how much you pay per month. The more you pay the more is covered.
So what are the essential benefits that will be covered under minimum essential coverage?
Every plan must include these necessary benefits to ensure affordable health care for all. This saves people from spending ungodly amounts of money on health care services. These benefits include:
- Laboratory Services: This includes diagnostic lab tests and preventive screening tests, like diabetes and cholesterol screenings.
- Emergency Services: Any emergency care at a hospital or a facility out of network is covered with your insurer.
- Prescription Drugs: The medications are categorized by tiers, each tier contains at least one drug that your insurance will assists payment for. However, not all medications are within the tier, so similar medications to the ones included will not be covered under insurance.
- Mental health and substance abuse related services: All plans include some kind of coverage for emotional and psychological well-being. These services include counseling, psychotherapy, mental health inpatient services, and treatment for substance abuse.
- Maternity and newborn care: All plans include multiple services that care for you and your baby during all stages of your pregnancy, the delivery, and after delivery.
- Pediatric Services: For children who are included in your health plan your insurance will cover services that keep them healthy, including oral, vision care, vaccinations, and well-child visits.
- Rehabilitation and habilitative services and devices: These services and devices that are designed for people with injuries, chronic conditions, and disabilities. It also includes physical, occupational, and speech therapy visits.
- Ambulatory patient services: Services included in outpatient care when a medical facility does not keep you the night after a procedure are covered.
- Preventive/ wellness services and chronic disease management: Any services that assist you in staying healthy are covered by all insurance plans. This includes cancer screenings, annual checkups, and other preventative measures.
- Hospitalization: If you have to go to the hospital for inpatient care, all plans are required to help with medical bills. This may only be more a certain period of time, but they are required to assist with the cost.
In addition to these 10 essential benefits for each plan, COVID-19 testing is also considered an essential health benefit. You must meet the CDC testing criteria to receive the test. If you live outside of California, New York, and Washington you will be required to pay any deductibles, copay, or coinsurance.
At SBMA, we are committed to providing top-of-the-line ACA compliant solutions to your insurance needs. Contact us for more information.