Guest Blog Post from IDC: How to Avoid the Increasing Complexity of the Affordable Care Act (ACA)

This blog, authored by Lisa Rowan, VP of Modern HR Strategies at IDC, discusses strategies for addressing the complexities of complying with the Affordable Care Act (ACA). 


How to Avoid the Increasing Complexity of the Affordable Care Act (ACA)

Date: August  2022

Guest IDC Blogger: Lisa Rowan, VP Modern HR Strategies

Sponsored By: SAP

The Patient Protection and Affordable Care Act was signed into law by President Obama on March 23, 2010. More commonly known as the ACA, the legislation was originally intended to ensure that more people had health insurance coverage in the United States. It also had goals to improve healthcare quality and insurance quality, to regulate the health insurance industry, and to reduce healthcare-related spending in the U.S.

Since 2010, many changes have been made to the original legislation including elimination of taxpayer penalties associated with lack of coverage, shortening of the enrollment period, the state option to initiate work requirements to qualify for Medicaid, and an ongoing expansion of subsidies for individuals to use in securing affordable coverage.  As a result, the ACA’s already complex set of requirements have become even more complicated for businesses to manage.

Most organizations would benefit from having assistance while navigating the compliance labyrinth associated with the ACA. It is important to note that complying with the law isn’t just about printing forms out at the end of the year – it’s about navigating an ongoing set of requirements. Specific challenges that hinder an HR organization’s ability to fulfill their ACA obligations include:

  • Inconsistent and siloed data stored in disparate systems (e.g., payroll, benefits, and COBRA).
  • Constantly changing IRS reporting codes
  • Calculations need to be run monthly
  • Many data and employer nuances make calculations difficult.

What kinds of penalties can employers incur as the result of noncompliance with the ACA requirements? There are numerous penalties that vary depending upon the size of the employer, the types of plans offered, and the jurisdiction in which the employer operates. It requires diligence to keep up with all the changes related to such penalties in addition to keeping up with the regulations associated with the ACA itself. The Society for Human Resource Management (SHRM) offers a compendium of penalties. For example:

  • Employers that must file 250 or more Forms W-2 for the preceding calendar year and that sponsor a group health plan are required to report the cost of coverage provided to each employee on the Form W-2 (provided to employees in January), with certain exceptions. Failure to provide correct information to employees or the IRS in a timely manner may lead to fines ranging from $50-$280 per return.
  • Plans that offer dependent coverage must continue to make the coverage available until a child reaches age 26, regardless of other coverage options. Penalties for noncompliance: $100 excise tax (refers to a penalty tax, imposed on employers under the Internal Revenue Code IRC); ERISA penalties (refers to a civil action by the U.S. Department of Labor (DOL) or plan participants or beneficiaries to compel the plan or sponsor to comply with Employee Retirement Income Security Act (ERISA).
  • Employers with 50 or more full-time employees, including full-time equivalents, are required to report certain information to the IRS and to their employees regarding compliance with the “pay or play” provisions and the health care coverage they have offered. General reporting penalty provisions for failure to file correct or timely information returns and employee statements may apply, ranging from $50-$280 per return.

Given the complexity, ever-changing regulations, and very real threat of penalties, employers should consider engaging with an expert partner to help them manage ACA. When searching for a partner, it is important to find a provider that:

  • Offers a designated client services manager who specifically provides expert ACA guidance and support.
  • Delivers information in an intuitive way for measurement periods, affordability, and data quality tracking.
  • Oversees integration with other systems to aggregate relevant data for compliance reporting monthly.
  • Generates 1095-C and 1094-C forms and automatically files to meet federal and state mandates.

The benefits of a soundly managed ACA program are numerous and include:

  • Achieving a higher standard of data accuracy and visibility
  • Improving administrative efficiencies and streamlining processes
  • Mitigating the risk of penalties for noncompliance
  • Gaining peace of mind with comprehensive ACA management

Message from the Sponsor

To learn more about how SAP SuccessFactors can help you achieve accurate reporting and mitigate penalty risk associated with the Affordable Care Act, please read our brochure.

About Lisa

Lisa Rowan is Research Vice President for IDC responsible for global research on human capital and talent management software and services. Ms. Rowan provides expert analysis focused on both the business services and software used to address HR and talent-related dimensions. Her research addresses developments in human capital and talent management applications, human resources consulting, and HR outsourcing services.