ACA large employer compliance white paper

Controlling Costs Under the Affordable Care Act: A Guide For Large Employers

Large companies subject to the ACA requirements have been working on compliance with the Act since its passage and seeking to improve their employee offerings. Companies with fifty or more full-time employees or full-time equivalents must meet the standards for coverage and affordability. In addition, ALEs (applicable large employers) must offer compliant coverage to at least 95 percent of their workers, plus employees’ children who are not yet 26 years old.

Coverage meets the affordability requirement for 2023 if the employee contribution for individual coverage costs less than 9.12 percent of their household income. The employer does not have to meet the affordability standard for dependents. Still, new legislation allows dependents to obtain coverage through a marketplace plan using premium tax credits if they can’t get affordable policies through the employer.

Depending on your business’s size and financial structure, you may want to consider these strategies to reduce the financial strain of providing benefits under the Affordable Care Act.

1. Some large companies are successfully shifting to self-funded plans to offer affordable coverage to their employees. To ensure compliance with the affordability provisions, employers can use the safe harbor examples the ACA allows. There are three ways to employ the safe harbor qualifications for affordability:

• Form W-2 wages safe harbor
• Rate of pay safe harbor
• Federal poverty line safe harbor

Companies like self-funding because it offers an opportunity to save money and improve cash flow. The company pays directly for the medical claims that workers submit, usually through a third-party administrator.

2. Some companies are implementing progressive premium charges. Under this paradigm, higher-paid workers pay more for coverage than lower-paid employees. In each case, the premium complies with the ACA’s affordability stipulations but allows the company to reduce its responsibility by charging some workers more.
3. Companies may provide employees with a choice between plans if at least one of the selections meets the affordability and coverage requirements. That means the policy must pay for at least 60 percent of the anticipated costs for a typical subscriber and incorporate the ACA’s ten essential benefit areas. For example, a company could offer a bronze-designated plan that falls under the premium allowed as a percentage of income but give workers an option to pay a higher premium for a more comprehensive policy.