Tango Health Data, Accenture Analysis Identify $31 Billion Penalty Exposure to Employer Mandate
Historical and anonymized sample data provided by Tango Health and analyzed by Accenture shows that employers could face penalty exposure of up to $31 billion for non-compliance with health insurance coverage requirements of the Affordable Care Act (ACA) in 2016.
Tango’s data was crucial in uncovering a previously unknown penalty exposure of $10 billion for “unintentionally non-compliant” employers – in addition to $21 billion in penalties projected by the Congressional Budget Office for a segment of employers who fail to offer health coverage as required by the ACA. The combined employer penalty exposure for the upcoming 2016 tax reporting period could reach $31 billion – 50 percent greater than originally estimated by the CBO.
The ACA Employer Mandate Penalties for 2016
“We know the compliance challenge that companies across the country continue to face with these regulations because we work with many of them every day, however, we were still concerned by what this analysis and the potential financial exposure indicated for businesses that assumed their offerings were compliant,” said Todd Praisner, CEO of Tango Health. “It’s clear to us that, more than ever, companies will benefit from outsourcing regulatory compliance to experts who can provide interpretation and guidance to ensure compliance with these evolving laws.”
The ACA includes an employer mandate requiring all employers with over 50 full-time employees to offer affordable health benefit coverage to those employees. The threshold level of full-time employees that must be offered health insurance coverage has increased from 70 percent in the 2015 tax reporting period to 95 percent in 2016 – leaving little room for error.
To determine the potential penalty exposure for employers, Tango provided anonymized historical sample data from its current employer population to Accenture, which analyzed the data by theoretically moving the “minimal essential coverage” threshold from 70 percent to 95 percent. Accenture then projected the penalty exposure for national impact based on U.S. census data of total establishments and employer sizes.
Accenture’s analysis did not in any way predict actual compliance status. It did point out that at the higher threshold of 95% —when projected nationally— many employers could face penalty exposure because while they offer compliant coverage, they still fail to meet IRS reporting requirements for reporting accurate offers of qualifying coverage.
The process of determining full-time eligibility is extremely complicated for employers, and many organizations struggled to meet the 2015 requirements, even with deadline extensions offered by the IRS. Employers face a penalty of up to $3,120 annually for each full-time employee who is offered health coverage that does not meet IRS requirements and obtains subsidized coverage from a public health insurance exchange.
“We are pleased that the experts at Accenture were able to use Tango’s representative data as a source for their analysis of the employer mandate requirement and to provide additional insights into this issue,” Praisner said. “With the end of the tax year approaching, now is the time for CEOs and CFOs to take stock of the reality that this analysis presents and either plan for immediate compliance or budget for the alternative.”
Read Accenture’s analysis based on Tango Health’s anonymized data.
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Categorized in: ACA