Navigating the intricate regulations of the Affordable Care Act (ACA) can be challenging for companies, especially those with over 50 full-time equivalent employees. Compliance is essential to avoid costly penalties, and Liferaft offers a solution that not only averts the most expensive penalties but also ensures preventative health coverage for employees.
A Liferaft client with over 50 full-time equivalent (FTE) employees faced a significant challenge when offering minimum essential coverage (MEC) to their employees, and the employer was fearful of having to pay the costly Schedule A penalty.
Schedule A Penalty
The ACA requires companies with over 50 FTE employees to extend minimum essential coverage to at least 95% of their full-time workforce and dependents. Failure to meet this obligation will result in a Schedule A penalty. This penalty, set at $2,970 per full-time employee (with the first 30 exempted) in 2024, becomes a substantial financial burden. The penalty applies even if an employee doesn't utilize a premium tax credit to purchase Marketplace coverage.
Schedule B Penalty
While the Schedule A penalty signifies a substantial financial burden for non-compliant companies, the Schedule B penalty, triggered when the coverage offered by an employer fails to meet affordability or minimum value standards, poses a comparatively less severe consequence. Unlike Schedule A, the Schedule B penalty arises when an employee qualifies for a premium tax credit due to unaffordable employer-provided coverage or not meeting minimum value thresholds.
Notably, Liferaft’s MEC plan helps companies avoid the Schedule A penalty, offering an effective and compliant solution for extending minimum essential coverage. For particularly cost-conscious employers, choosing to pay the Schedule B penalty while still complying with the Schedule A penalty through the MEC Plan may be a more financially viable approach than providing major medical coverage to all eligible employees. This strategic approach enables companies to stay partially compliant while effectively managing their costs.
The Liferaft Solution
By partnering with Liferaft, the client was able to provide an innovative MEC plan that offers a comprehensive, self-funded solution tailored to meet ACA Schedule A requirements and offers a cost-effective, compliant coverage option. This plan is designed to be one of the most affordable in the market while covering 100% of preventative services.
The strength of the Liferaft MEC plan lies in its ability to address the essential elements of compliance while ensuring access to preventative healthcare for its employees. It’s not just about meeting the criteria to sidestep penalties; it’s a solution that supports the workforce's well-being. Employees can select their healthcare providers for preventative care services, giving them autonomy in their healthcare choices.
Furthermore, Liferaft went a step further by assisting this company in pairing its self-funded MEC plans with Liferaft’s Hospital Supplemental coverage. This additional layer of protection caters to the needs of employees requiring hospitalization or emergency room visits, providing comprehensive healthcare security.
How it Works
The Liferaft MEC plan is the simplest and most cost-effective way for your business to begin offering health coverage.
- With the Liferaft MEC plan, your employees can get preventative care covered at 100% with the providers of their choice.
- As an employer, use the Liferaft MEC plan to meet your requirements under the ACA.
- Employees accept the MEC plan through the Liferaft portal and add bank accounts to enable automated direct deposits for reimbursements.
- Each month, the employer contributes a set amount for each employee into a separate account to cover expected expenses.
Frequently Asked Questions
What constitutes Minimum Essential Coverage (MEC) under the Affordable Care Act (ACA)?
Minimum Essential Coverage (MEC) refers to a level of health insurance coverage that meets the ACA's requirements, providing essential health benefits, including preventive care, emergency services, and hospitalization, ensuring compliance with the law.
Are small businesses with fewer than 50 full-time employees exempt from ACA requirements?
Small businesses with fewer than 50 full-time employees are generally not mandated by the ACA to offer health insurance. However, they may choose to provide coverage and might be eligible for tax credits if they purchase coverage through the Small Business Health Options Program (SHOP) Marketplace.
How does the ACA define full-time employees and their equivalents (FTE) for compliance purposes?
The ACA defines full-time employees as those who work an average of at least 30 hours per week or 130 hours per month. For compliance purposes, part-time employees' hours are combined to calculate full-time equivalents (FTE) by dividing the total hours worked by part-time employees by 30. When added to the total full-time employees, this sum determines the company's status for ACA compliance.
What are the significant differences between ACA compliance and state-specific healthcare regulations or mandates?
The ACA sets federal standards for health insurance, ensuring essential benefits and prohibiting certain practices. State-specific regulations can add additional requirements or limitations, providing a more comprehensive or tailored approach to healthcare that might go beyond the minimum federal standards. State laws can introduce specific coverage mandates or eligibility criteria that exceed federal regulations.
Do seasonal workers count towards the total employee count for ACA compliance?
Seasonal workers' status depends on the duration of their employment. Those employed for more extended periods are included in the employee count for ACA compliance, while those employed for shorter, clearly defined seasons, such as holiday staffing, might be exempt.
Book your consult with Liferaft
Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.
During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.