Are you doing your due diligence on ACA compliance?

In its 14th year of existence, the Affordable Care Act (ACA) is firmly established as an integral part of the U.S. healthcare system. Yet, many employers required to comply with the law find it a struggle to stay on top of its many intricacies. 

Our research shows that nearly 70% of organizations find ACA compliance burdensome. The cost of non-compliance can be exorbitant, with some IRS penalties surpassing $1 million and larger organizations (500-plus employees) being at least six times more likely than smaller ones to be fined. 

If you are the broker of record (BOR) for one of these organizations, the risk of non-compliance falls to you. Employers purchasing a health insurance policy in the ACA era expect the BOR to have a solution or vetted resources to assist with compliance. 

If an organization is hit with an IRS penalty letter, they will turn to you for answers. Are you prepared? 

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Given the depth of requirements involved with ACA compliance, very few organizations have an in-house team dedicated to staying on top of it. Thus, there's an expectation brokers are looking out for their clients when it comes to complying with the law.

Brokers who don't have ACA compliance rolled into their services or a vetted provider to whom they can refer their client are at a higher risk of experiencing unhappy customers that have been caught off guard by an IRS penalty.  

While it is ultimately the employer that will be responsible for paying any IRS penalties, such as a Letter 226J penalty assessment, there are serious repercussions for brokers. Facing non-compliance and corresponding penalties that result in added cost for the business will cause them to lose faith in their broker's knowledge of the healthcare and related compliance landscape. This could lead the organization to seek alternative providers and replace you as their broker. 

This means your hard-earned annuity will fall by the wayside as your soon-to-be former client shops for other providers.  

If you fall into the category of a broker who doesn't currently offer ACA compliance as part of your employee health benefits package, you might be inclined to take on the responsibility yourself. While this is certainly a step in the right direction, it's also rife with risk. 

The various nuances of the healthcare law can lead to significant gaps in ACA compliance, and when an employer is faced with harsh penalties, it will question why you weren't able to prevent it from happening.  

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If you have clients with variable hour, part-time and seasonal employees, they will need to track ACA coverage on a monthly basis in addition to end-of-year reporting requirements. Some common ACA friction points in this scenario include missing employment classifications statuses, hire and term dates, pay basis, leave of absence data, hours of service, and different Social Security numbers in different systems.

Clients that have a predominantly full-time workforce don't require a look-back measurement method, but come with their own ACA compliance challenges. These include eligibility and enrollment data incorrectly transformed; missing line 16 code; incorrect premium listed in line 15; incorrect affordability safe harbors; self-funded enrollment data consolidation; and lack of ACA penalty exposure visibility. 

This is an arduous and burdensome process to undertake. Finding a way to provide the requisite employee health benefits plan to differentiate yourself in the marketplace, while also helping your client avoid ACA penalty risk, is paramount to maintaining your BOR status. 

The IRS continues to ramp up enforcement and is doing so at a higher efficiency. The agency just recently started sending Letter 5699 penalty notices for the 2022 tax year. There is no statute of limitations, and the agency can use levy power to collect, including putting liens on your clients' business. 

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The complexities of ACA reporting continue to confound many organizations. If you are a broker currently handling ACA compliance, you are confronted with a thorny process that is difficult to manage and is often fraught with potential for error. 

In addition to federal ACA compliance, if your client has employees in one of the various states with its own ACA filing requirements and associated penalties for non-compliance, such as California, Massachusetts, New Jersey, Rhode Island or Washington, D.C., these challenges are amplified even further.  

The compliance burden can be eased by engaging with a solutions provider that offers both ACA reporting software and expert support. Look for tools that can ensure data quality and regulatory compliance through analytics and monthly monitoring. Full visibility into ACA penalty risk and a monthly accounting of potential penalty exposure can help your client identify small errors before they compound. 

It's clear that the IRS is continuing with its efforts to enforce the ACA, with penalties continuing to increase. Staying on top of the monthly compliance process of ensuring offers of coverage are made to eligible employees is time-consuming and requires a meticulous approach. Any missteps can result in costly penalties for your client, which reflects poorly on you. 

The insurance market is hyper-competitive, and the best brokers partner with a trusted third-party ACA compliance provider to prevent their clients from ever receiving a costly penalty.

Having a comprehensive ACA compliance solution for your clients will further ensure you maintain your BOR status. What's more, it will enhance your offering to prospective clients whose existing providers could be falling short in this department.