Question: Our company sponsors a self-insured group health plan, and historically we haven’t conducted an annual open enrollment period. We have hundreds of employees and are considering compliance with the Affordable Care Act’s (ACA’s) shared-responsibility provision. Would our plan design subject us to penalties?
Answer: Because you appear to be a large employer as defined under the ACA — that is, you employ an average of at least 50 full-time employees or the equivalent — your current plan design may indeed put you at risk for penalties under the ACA’s shared-responsibility, or “play or pay,” requirements.
As background, here’s a look at two types of employer penalties effective in 2015:
- Section 4980H(a). This penalty may apply when eligible employer-sponsored coverage isn’t offered to at least 95% of full-time employees (70% for the 2015 plan year) and their dependents (defined as an employee’s children under 26 but excluding stepchildren and foster children).
- Section 4980H(b). Applicability here can be triggered when the coverage offered to full-time employees doesn’t meet affordability and minimum-value standards.
A penalty generally applies only if a full-time employee is certified to the employer as having received a premium tax credit for coverage bought via a Health Insurance Marketplace.
Generally, under the Employee Retirement Income Security Act, the sponsor of a self-insured health plan has broad discretion to establish enrollment periods — so long as special enrollment rights under the Health Insurance Portability and Accountability Act are provided. But the play-or-pay provision imposes additional requirements, and your plan design may prove problematic under those rules.
According to the IRS, a large employer won’t be treated as having “offered” coverage unless employees and dependents are given at least an annual opportunity to accept or decline coverage. Because your plan doesn’t offer an annual opportunity for full-time employees and their dependents to accept or decline coverage, you would be treated as not having “offered” coverage to them — which could trigger play-or-pay penalties.
Notably, however, the dependent definition doesn’t include individuals other than the employee’s children (such as the employee’s spouse). So your plan may continue to not make an annual offer of coverage to spouses — and, in fact, may entirely exclude nonemployee spouses from coverage — without putting you at risk for penalties.