ACA large employer compliance white paper

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

The ACA Presents Many Challenges For Large Employers–These Are Some Strategies That Can Help

Large businesses are scrambling to get compliant with the Affordable Care Act, particularly impending increase the percentage of employees that must be offered an eligible plan. Some companies are addressing this my changing or cutting employee work hours–one such approach uses variable hour employees.

Moving forward, however, employers will need a more comprehensive strategy to keep pace with changing health care laws and to make sure they are compliant, but within budget.

Even by implementing these strategies, it can still be expensive and challenging to offer a compliant plan to virtually every worker since all employees must have equal access to coverage. Depending on the circumstances and nature of your business, there are some plans that, when properly designed, can reduce the financial strain of providing benefits under the Affordable Care Act.

Curious about the penalties for not meeting the requirements outlined in the Affordable Care Act? See this resource from CNN that explains the details of the financial penalties involved.

Under the Affordable Care Act, a qualified plan must be offered to 95% of employees as of 2016–a figure that’s going to be a challenge for many large employers to meet. According to a recent studies, more than half of large businesses are unprepared or underprepared to meet this expectation.

In the sections below, we’ll review the key elements which are part of employer-sponsored plans which work best for large employers under “Obamacare.”

Strategy #1


Incorporate An Affordable Self-funded Plan That Meets Safe Harbor Requirements

Self-funded plans are one way that large employers are providing qualified plans at minimal cost to employees. By taking advantage of safe harbor exceptions, employers can mitigate the financial risks of insuring a large employee group with this low-cost option. There are three ways the safe harbor qualification can be implemented:

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

Employee contribution limits for these plans are set at 9.5% of their income in order to meet the affordable benefits requirement. In order to meet these criteria, a low cost self-funded plan must carry an actuarial value of at least 60% and cover all 10 essential health benefits.

Benefits: High potential savings for employers in that they avoid the financial penalty by offering a qualified plan and employees avoid the individual penalty by having a plan that offers minimum essential benefits. The downside to this strategy is that it’s not always appealing to low-wage employees because of the large upfront costs associated with receiving care.

Click here  to learn more about ACA tax provisions for large employers from the IRS.

Strategy #2

Offer Low-cost Options With ACA-compliant Limited Benefit Coverage

A voluntary or employer-funded healthcare solution for large employers, this is a great way to give hourly workers a form of coverage that will take care of the most common medical issues. These types of plans must offer a self-funded option for preventive benefits in order to be ACA-compliant. These plans, which satisfy the preventive care requirement for large businesses only, are called “skinny plans” and have become a popular option for many employers. (Offering a skinny plan allows employees to avoid paying the individual mandate as it–along with a limited benefits plan–meets the minimum essential coverage standards.

Benefits: Allows you to minimize spending on employee health care costs, while giving your workers a plan that offers basic coverage so they don’t have to pay the individual mandate.

Strategy #3

Offer Non-eligible Hourly Employees Low-cost Plans With Limited Benefit Coverage

This approach involves offering non-eligible employees the same type of coverage mentioned above, which understandably might raise some questions. After all, if your goal is to minimize the cost of providing group health care to employees, why offer it to those that you don’t have to?

Here’s the answer: Many of these employees are unable to afford coverage, so it’s a great way to stand out as a quality employment option. Additionally, if an employee has coverage through a spouse, it may either be too expensive, or may not qualify as a compliant plan. According to a survey done by, a good healthcare plan is at the top of the list of benefits that most matter to employees.

Benefit: Hourly employers and workers that aren’t full-time enjoy affordable, qualified benefits, while employers pay minimal costs. (This is basically an extension of the strategy outlined above in the second section.) Allows you to attract and keep better workers, thus reducing employee turnover.

Strategy #4

A Customized Solution For Executives & Top-level Employees

Highly compensated and upper level employees may be offered a customized benefits plan, providing it does not conflict with the nondiscriminatory aspect of the Affordable Care Act. Payments toward these types of plans can be made by the employer or employee, but any payment does count toward the plan deductible.

Benefit: Your top employees don’t lose any benefits that would come with an overall change in your health care offerings or strategy.

Strategy #5

Like the tailored solution mentioned above for top-level workers, the same can be applied to skilled labor and management by providing excepted benefits as part of a package to reduce overall health costs. This is a versatile strategy that can be easily applied to any portion of your business or employee group.

Benefit: Decreased likelihood of lost benefits when plan changes are made  and improved job satisfaction for middle management and skilled workers.


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