Vital Signs Blog

Companies still struggling to comply with ACA's employer mandate

Most companies do not feel fully prepared to comply with Obamacare's employer mandate even though it went into effect at the start of January, according to a study recently conducted by ADP (PDF), a benefits consulting firm.

Among the areas of concern expressed are tracking hours to gauge whether an employee is entitled to healthcare coverage and reporting compliance to the federal government. For example, 60% of large companies, those with at least 1,000 employees, indicated that they aren't prepared for “penalty management” under the Patient Protection and Affordable Care Act.

“These regulations are just now coming into play,” said David Marini, ADP's vice president for strategic advisory services. “There are things that they haven't had to deal with before.”

Under the ACA, most employees that average 30 hours a week must be offered coverage or their employer will face a fine. The mandate applies to companies with at least 100 workers starting this year. Next year, it will be extended to companies with 50 or more workers.

The ADP study found disparate trends in terms of providing healthcare coverage among different types of employers. For large employers with primarily full-time workforces, they were more likely to extend benefits beyond the population of workers mandated by the Affordable Care Act. Three out of five companies with more than 1,000 workers indicated that they intend to expand coverage beyond what's required under the employer mandate.

But at the same time, roughly a quarter of mid-sized employers (50 to 999 workers) and two out of five large companies indicated that they have limited worker hours, or plan to do so, to avoid the coverage mandate. Those companies are disproportionately represented by low-wage employers such as retail establishments or restaurants, according to Marini.

“You have things happening on both ends of the spectrum,” Marini said. “It really depends on the industry.”

Employers also appear ill-prepared to deal with the ACA's tax on “Cadillac” plans, which doesn't take effect until 2018. Under that provision, benefits that exceed $10,200 for individuals or $27,500 for families, will be taxed at 40% for every dollar in benefits above those limits. Only about a third of employers surveyed by ADP indicated that they felt they had the ability to adequately manage their benefits in order to avoid the Cadillac tax.

The financial stakes are potentially significant for employers if they run afoul of the benefit guidelines. For example, an employer with 500 workers whose individual benefits exceed the limit by an average of $350 would face a fine of $70,000.

The ADP study was conducted in August and September of last year. It included human resources officials at more than 800 companies with at least 50 employees.

Follow Paul Demko on Twitter: @MHpdemko


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