6 Things CPAs Should Know About the ACA

Filed under: The Advisor's Blog


Medical Costs

Due to the passage of the Affordable Care Act, we’ve seen the biggest changes in the health insurance  and health care industries since the 1960s. Since CPAs play a vital role in helping businesses make the best possible insurance decisions under the new law, there are six important things you should know about the ACA:


1. Small businesses may see large premium increases in the future. Currently, small group insurance is available to businesses with 50 or fewer full-time employees through the Small Business Health Options Program (SHOP), but starting in 2016 will be available to businesses with 100 or fewer employees. Since costs tend to be higher and benefits lower in the small group market than in the large group market, this could mean higher insurance costs in the future for employers with 51-100 employees. Many states may also choose to later merge the small group market with the individual market, in order to widen the risk pool. This could mean even higher prices for the small group market, because individual policies tend to carry more risk and therefore come at a higher premium.

2.Penalties for failing to provide insurance coverage to employees begin in 2015 or 2016, depending on the size of the business.  In 2015, businesses with 100 or more full-time employees will incur a penalty for failing to provide at least a Bronze-level health insurance plan to employees. In 2016, this rule will expand to employers of at least 50 full-time workers.

3.Small businesses are not required to use the exchanges to shop for insurance. The SHOP exchange is a terrific tools for comparing plans, options, and pricing, but small businesses are not required to purchase insurance through it. In fact, it’s likely that most policies will be purchased outside the exchange, through independent insurance brokers. However, if a business wishes to take advantage of the Sec. 45R small insurers’ health insurance premium tax credit, they will need to use the exchange.

4.Private exchanges are becoming more popular, and may be a better option for many businesses. Much like the trend toward 401(k) retirement contributions rather than pension plans, employers are increasingly choosing a defined-contribution approach to health insurance benefits. Businesses are able to allocate a pre-determined amount toward insurance benefits, and employees are given a choice of plans. This plan gives employers greater control over expenditures on employee benefits, and employees appreciate the ability to choose a plan that is right for them.

5.Changes in underwriting translate to changes in rates. New underwriting requirements compressed age bands and removed risk adjustment from premium calculations, leading to a break in rates for older and high-risk groups and an increase in rates for younger and low-risk groups. CPAs need to be aware of these changes in order to assist individuals and companies in managing the change in premiums. If the changes in underwriting will provide a break in premiums, the changes should be implemented quickly. On the other hand, if the change will be a negative one for the individual or organization, strategies may be implemented to delay or avoid it.

6.Employer reporting requirements have changed. Secs. 6055 and 6056 of the ACA require businesses to complete reporting which is intended to aid in the enforcement of the individual mandate and employer mandate, respectively. Since reporting will be required for the 2015 calendar year, employers need to begin preparing for data collection now.

Source: http://www.journalofaccountancy.com/Issues/2014/Jul/health-care-reform-20149648.htm



Investment Advisory Services offered through John P. Dubots Capital Management, LLC, CA License # 0822926