As the Affordable Care Act takes hold further, government agencies are stepping up their audits of health plans across the country.
With many employers still unclear over exactly what they need to do to fully comply with all of the sections of the ACA – from providing affordable insurance to reporting on their plans – the risk is great that you may be found not in compliance at least in some area.
There are a number of government entities that are responsible for auditing employer health plans, and they all have different areas of responsibility:
Department of Labor (DOL)
• ACA
• Employee Retirement Security Act (ERISA)
• Health Insurance Portability and Accountability Act (HIPAA)
Department of Health and Human Services
• HIPAA privacy, security and breach notification rules
• Medicare secondary payer
Internal Revenue Service
• ACA (also including reporting)
• Misclassification of workers as independent contractors
• COBRA issues
• Tax issues concerning employee benefits
Equal Employment Opportunity Commission
• Americans with Disabilities Act issues
• Age Discrimination in Employment Act
• Genetic Information Nondiscrimination Act
While one entity may audit an employer, all four are now cooperating with each other and sharing information. Health benefits attorneys have noted that if an auditor finds an infraction that may not be part of their agency’s auditing purview, they are passing the information on to other agencies.
For the purposes of this article we will focus on the audits that are most likely to happen, and the main triggers for these audits:
DOL audits
• Adult children – The ACA requires that group health plans allow their enrollees to keep their grown children up the age of 26 on their family coverage plans. The DOL requires a sample of the written notice describing enrollment rights for dependent children up to age 26 who have used the plan since September 23, 2010.
• Rescission of coverage – If the plan has rescinded coverage, the DOL requires a list of all affected individuals and a copy of the written notice 30 days in advance of each rescission.
• Grandfather status – Employers that are retaining grandfathered plan status must provide documentation to substantiate that status, as well as a copy of the required annual notice distributed to participants advising of the plan’s grandfather protections.
It’s been reported that the DOL seems to have a general disregard for grandfathered plans and may give them extra scrutiny.
• Waiting periods – The ACA bars employers from requiring that new hires wait more than 90 days before they are offered health insurance. Expect an audit if you are not complying with these rules.
IRS audits
• ACA reporting – Employers are required to self-report about their efforts to offer full-time employees compliant health insurance coverage. Failure to comply with the reporting requirement may result in penalties of $100 per incident up to $1.5 million.
Employers need to make sure that they comply with these reporting requirements.
Also, there are assessments exceeding $3,000 a year per worker if the coverage you are offering your employees is not affordable. Even if you are offering what you think is affordable coverage to all of your workers, because people are paid different wages, coverage may not be affordable to those who are paid the least.
• Not tracking hours ¬– The standard for discerning if an individual is a full-time employee is that they work more than 130 hours per month. If you have a number of part-time employees whose hours vary month to month, it’s going to be difficult to gauge who is full-timer.
The IRS allows employers to use a few different methods for tracking employee hours for the purposes of the ACA, but the variable-hour tracking method is the most complex and may invite additional IRS scrutiny.
The takeaway
The key is preparation for any employer that wants to pass an audit without incurring penalties.
We can work with you to ensure that you have the proper supporting documentation in place in case you are contacted for an audit.
