They say the more things change, the more they remain the same. Case in point: the reformation of the U.S. healthcare system under the banner of the Affordable Care Act.
When the new laws were first implemented, confusion abounded. Thousands of pages of legislation were written, leaving employers, their workforces and even some benefits professionals unsure of how to proceed. Today, most companies have adapted to the reality of reform, and millions of additional Americans now have access to health insurance.
Still, confusion persists when it comes to certain aspects of healthcare reform — most specifically, Internal Revenue Service reporting requirements and the 2020 implementation of the “Cadillac tax,” a 40 percent excise tax on high-cost health insurance plans.
New IRS reporting requirements: Cutting things close
First, let’s take a look at what the 2016 Aflac WorkForces Report revealed about new IRS reporting requirements. While nearly half of the 1,500 employers surveyed as part of Aflac’s study said they were well-prepared to comply with the reporting requirements, the majority — 52 percent — said they were just somewhat or not very well-prepared.
What’s most concerning about these figures is that the Aflac survey was conducted in January and February of this year. Companies with 50 or more full-time equivalent employees were required to provide information about their health care coverage to employees by March 16, and to the IRS no later than June 30. Talk about cutting things close!
SOS: Private health exchanges, third-party administrators and insurance experts
Given the lack of understanding surrounding IRS reporting, perhaps it’s no surprise that many companies are looking to private health exchanges and multiline platforms to ease their burdens. By doing so, they can relieve themselves of much of the hard work of benefits administration, such as paperwork and coordinating between multiple insurance carriers.
Just 6 percent of employers moved their health insurance benefits to private exchanges in 2014 and 2015, but the number jumped to 16 percent this year. What’s more, the report found that few employers currently outsource benefits information, but interest is high: 68 percent are interested in outsourcing at least one service.
Employers also have insurance agents and brokers on speed dial, with 70 percent of companies using a broker or benefits consultant to help determine their benefits options. Large companies and employers in metropolitan areas are more likely to use brokers or benefits consultants than small companies with fewer than 50 employees or those located in rural areas.
Behind the wheel of the Cadillac tax
Winston Churchill once said, “Let our advance worrying become advance thinking and planning.” That’s exactly what insurance experts should be helping employers do with respect to the Cadillac tax.
Although implementation of the tax has been delayed until 2020, many employers are confused and concerned about how it works and how it will affect them. According to the study, well over half of companies (60 percent) say they are either somewhat or very concerned about the excise tax on high-value medical plans. That’s why it’s so important to help alleviate their worries about exactly what the tax is, who pays it and how it works.
Here are some things employers should know:
They should delay making changes to their benefits in anticipation of the Cadillac tax. Implementation is still four years away, and regulations are likely to evolve. So it’s OK — smart, even — to wait before taking action.
In most cases, the insurance provider — not the employer — will be responsible for paying the tax. That’s because most businesses are fully insured, meaning their insurance providers set the policy premiums. The employer or plan administrator will be responsible for paying the tax only when a company is self-insured, meaning it sets the premiums, or when the coverage offered is a health savings account (HSA) or an Archer medical savings account (MSA).
Almost all voluntary insurance products are defined as excepted benefits and are excluded from the Affordable Care Act’s market reforms. Two types of coverage, specified disease and hospital indemnity, are taxed only if they’re paid for with pretax dollars, such as through a cafeteria plan or with excludable employer contributions.
The majority of U.S. workers are not satisfied with their benefits packages. Voluntary insurance products can make a big difference because they can be used to enhance benefits packages at no direct costs to companies. That’s because premiums are paid entirely by employees who elect to enroll. There are a wide variety of voluntary plans, so companies can allow workers to pick and choose from among the options that best suit their needs and their budgets. For example, a roster of voluntary insurance options may include dental, vision, accident, hospitalization, disability, critical care, specified disease and more.
This material is intended to provide general information about an evolving topic and does not constitute legal, tax or accounting advice regarding any specific situation. Aflac cannot anticipate all the facts that a particular employer or individual will have to consider in their benefits decision-making process. We strongly encourage readers to discuss their HCR situations with their advisors to determine the actions they need to take or to visit healthcare.gov (which may also be contacted at 1-800-318-2596) for additional information.
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