By - April 30, 2021

4 Tips to Reduce Your 2021 ACA Penalty Risk Due to Premium Tax Credits

4 Tips Reduce 2021 ACA Penalty Risk

Earlier this year, the Biden administration opened a special enrollment period for the marketplaces giving people more time to sign up for health insurance and potentially increasing organizations’ 2021 ACA penalty risk.  The marketplace was initially reopened earlier this year until May 15, allowing people in 36 states to sign up or change their health insurance plan outside of the annual open enrollment period or a qualifying life change. Now, the special enrollment period will remain open until August 15th. An estimated 1.3 million new signups are expected and thus far over 500,000 Americans have enrolled since signups reopened on February 15th.

The 2021 ACA penalty risk to employers is not just the opportunity for more Americans to sign up but the expansion of Premium Tax Credit availability. Those who make up to 400% of the Federal Poverty Level are now eligible when previously the cap was at 100%. While these credits only apply in 2021 going forward, employers must pay special attention to any Full Time employee who is not offered coverage, even if it’s for a month.

Tips to manage your 2021 ACA penalty risk

The following are tips we use with our clients to help them effectively manage ACA penalty risk:

  • Review your MEC Risk Monthly: In addition to reviewing results of measurement period and affordability reports, ensure you pull a report of all full-time employees who are not showing an offer of coverage. The easiest way to do this is by just reviewing those with Code 1H for Line 14 and no code for Line 16. At Tango, we call these MEC Risk Employees.
  • Separate Employees likely Medicare-eligible: Splitting your MEC Risk Employees into two groups based on age can speed your review. Active employees who are age 65 and older are likely eligible for Medicare. This is not a blanket statement, however, since many workers will delay their enrollment in Medicare until they retire to retain access to your competitive insurance premiums. But this context can emphasize the risk review on those under age 65.
  • Sort Employees based on Income: Now that more Americans can qualify for a Premium Tax Credit, the cap remains at 400% of the Federal Poverty Level. It’s unlikely that an employee making more than this would still qualify (or not be offered coverage), extra scrutiny on data errors or issues with lower-income employees can help avoid mistaken penalty letters in the future. For example, an employee can now receive a Premium Tax Credit while making up to between $51,520 (1 household member) and $87,840 (3 household members).
  • Check for other coverage: While data may not be readily available, in your review attempt to identify employees who may have coverage elsewhere, making them likely ineligible for the Premium Tax Credit. This could be spousal coverage due to marital status, TRICARE enrollment, or retiree benefits from a previous employer.

Tango clients benefit from our built-in MEC Risk reporting feature and ongoing monthly reviews with  their own ACA Client Manager. If you’re struggling with your current ACA vendor and want help reducing your 2021 ACA penalty risk, here are 6 Reasons Why It’s Time To Look for A New ACA Vendor.

Tango ACA Compliance & Reporting Solution

We help our clients navigate the changing landscape of the ACA and achieve a higher standard of reporting accuracy. Our goals are to make ACA compliance easier and reduce client exposure to penalties. Learn more about how we can help with ACA compliance.

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