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The ACA: What You Need to Know in 2015

Matt Zdroik
Matt Zdroik - Business Suite Product Manager

The Patient Protection and Affordable Care Act is frequently referred to as the Affordable Care Act, PPACA, ACA, or ObamaCare. The Affordable Care Act was enacted by the 111th U.S. Congress and signed into law on March 23, 2010, by President Barack Obama.

The statute is known as one of the most significant policy changes to our country’s healthcare system since the 1965 passing of Medicare and Medicaid. Its purpose was to increase the quality and affordability of health insurance for individuals through the implementation of mandates, subsidies, and insurance exchanges.

Congress, federal courts, state governments, advocacy groups, labor unions, and small business organizations have challenged the implementation of the ACA, and the law currently remains a politicized and contested issue.
 
The ACA includes several prominent provisions. It prohibits insurance companies from denying coverage to individuals because of pre-existing medical conditions and outlines minimum standards for insurance policies. Individuals who are not covered must pay a penalty unless exempted by the IRS for applicable reasons, and health insurance exchanges where consumers can compare policies and enroll during the open enrollment period have been established. Large employers will pay a tax penalty if health insurance is not offered to their full-time employees.

But how will the ACA affect school districts, specifically?


 

The ACA’s Impact on School Districts

The Affordable Care Act is responsible for changes to administrative and reporting processes for school districts across the county and has become an increasing concern. A December 2014 article in District Administration states that in 2011, only 11 percent of district leaders indicated the ACA as an issue concerning them. In 2013, that statistic increased to 54 percent according to an ASBO survey, the article states. Although there are positive provisions in the ACA for districts, such as grant opportunities for school-based health centers and community-school health partnerships, several challenges do exist.

Some obstacles districts are currently facing in efforts to comply with the ACA include allocating more money in the budget for health insurance costs, reducing part-time employees’ hours to save money, offering insurance to all employees who work more than 30 hours per week, and dealing with an increase in annual taxes – a cost often passed along to employees as employers raise insurance deductibles.

Some districts are now hiring new part-time employees to make up for the lost hours of current part-time employees due to the 30-hour per week limit. Most districts do not offer insurance plans for substitute teachers, so hour tracking will become a more critical function. However, some districts contract with outside agencies to hire substitute teachers and part-time employees like bus drivers, so budgets at these districts may not be affected as significantly as other districts by ACA regulations.


 

Key Terminology

With pages of new mandates and provisions included in the act, are you left wondering what key terms of the law are important and most applicable to your district’s functions? Don’t sweat it. Here is a list highlighting ACA terminology that district administrators should know and understand:


Employer Shared Responsibility: This is also known as the Employer Mandate portion of the act, which was not mandated until January of this year. Often referred to as the “play or pay” provision, this section of the act requires employees to abide by the employer regulations of the statute or pay a penalty fine. So what does that actually mean? Large employers are required to offer employees an affordable health insurance plan that provides minimum value to 70 percent of full-time employees in 2015 and 95 percent of full-time employees by Jan. 2016 or employers may face a penalty fine. Continue reading for more information on the mandate’s effective date.
 
Large Employer: This refers to employers that employ 50 or more full-time employees. The Employer Mandate’s effective date has been adjusted for large employers ranging from 50-99 employees and large employers with more than 100 employees.
 
Affordable: To be considered affordable, health insurance plans offered by employers must not cost more than 9.5 percent of an employee’s household income, after the employer’s contribution.
 
Minimum Value: For a healthcare plan to be qualified as minimum value, it must cover at least 60 percent of the medical services’ total cost under the plan.
 
Look-Back Measurement Method: This method is used by employers to determine whether or not a part-time employee qualifies for benefits. Have questions about administering this method? Take a look at this informative blog post that includes examples, published by Balch & Bingham LLP.
 
The Exchange: This refers to the state and federal exchanges individuals can utilize to purchase health insurance if their employers do not offer it.
 
Effective Date: The date that the Employer Mandate is scheduled to go into effect, referred to as the effective date, was pushed back from Jan. 2014 to Jan. 2015 for large employers with more than 100 employees. Now, large employers with 50-99 employees have until Jan. 2016 to comply with this mandate portion of the ACA.
 
Educational Institutions and Employment Break Periods: The ACA includes specific regulations for educational institutions including school districts. Districts are prohibited from calculating employment break periods, such as summer break, in a manner that would subtract from an employee’s average number of hours worked. Two options for calculating an employee’s average number of hours worked are included in the bill:
  1. Calculate the employee’s average number of hours worked without including the employment break period.
  2. Add the employee’s average number of hours worked from the active employment period to the employment break period.
 
Seasonal Employees: The ACA does not allow districts to record substitute teachers as “temporary” or “seasonal employees.” The law indicates individuals working for educational institutions with employment break periods as non-seasonal employees.
 
Excise or “Cadillac” Tax: Beginning in 2018 a 40 percent excise tax – often referred to as the “Cadillac tax” – will be assessed on the cost of employer health insurance plans exceeding an annual limit of $10,200 for individual plans and $27,500 for family (including self and spouse) plans.
 
For more definitions and explanations of the Affordable Care Act’s terminology, visit www.healthcare.gov/glossary.


 

ACA Penalties - Simplified

What about the penalties of the Affordable Care Act? Many districts and employers admit confusion about ACA requirements, but want to make sure they are in compliance to avoid paying in. Here is a breakdown of ACA employer penalties (for failing to comply), and what they really mean:
  1. No coverage: If employers do not offer coverage, a penalty fine of $2,000 per full-time employee – not including FTEs and after the first 30 full-time employees – will be charged if at least one employee purchases coverage at a state or federal exchange. Again, districts that offer coverage to at least 70 percent of full-time employees in 2015 and 95 percent of full-time employees in 2016 will not be penalized.

  2. Unaffordable coverage: If employers offer coverage that is deemed not affordable or does not provide minimum value, a penalty fine of $250 per month – $3,000 per year – will be charged for each full-time employee receiving a subsidy for coverage through a state or federal exchange. If your district offers healthcare insurance meeting affordable and minimum value standards and an employee still purchases coverage through a state or federal exchange, the district will not accrue a penalty fine. 


 

Looking Ahead: How to Prepare Now

In the future, districts may pay more overall for their health insurance plans as they add new employees, but also because healthcare costs continue to rise each year. Some argue that districts should not cut part-time or substitute hours, and consider what is best for students in regards to consistent classroom instruction.
 
There are two key Affordable Care Act compliance takeaways for districts:
  1. Make sure your district’s substitute teachers and part-time employees are not averaging more than 30 hours per week.

  2. If these employees are averaging more than 30 hours per week, then be sure they are extended the proper healthcare benefits mandated by the ACA.
 
To effectively prepare, district leaders should know that Affordable Care Act compliance in school districts really boils down to reporting practices. Your district requires the ability to view applicable, accurate information in real time, so correct decisions can be made based on precise reports regarding your employees’ number of hours worked.

2015 is the first year in which penalties will be in effect for non-compliance, so be sure your district’s time and attendance reporting standards are up to date. Many expect more changes to the act’s enforcement and tweaks to its requirements. Keep a close eye on news regarding the ACA, especially as we approach the 2016 election season.
 


Would you like to learn more about how the Affordable Care Act may affect your district and how to prepare?
 Get in touch with us today – we have some great ideas based on more than 30 years of helping district leaders like you stay compliant and ahead of the curve. 

 

Additional ACA Resources:

HealthCare.gov
Centers for Medicare & Medicaid Services



 

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