The Affordable Care Act During The COVID-19 Pandemic

Throughout the United States and the world, Coronavirus (COVID-19) has changed daily life in many ways.   From a health standpoint, COVID-19 is one of the most horrific and puzzling pandemics humanity has ever faced.  Globally, over 4.3 million cases have officially been reported (with some sources predicting the actual number of cases may be as many as 10 times higher than reported due to testing availability).  Some 290,000 people have died from this terrible virus, with over 83,000 of those deaths occurring in the USA. 

During these uncertain times when health insurance is so critical, The Patient Protection and Affordable Care Act (“ACA”) is front and center in the political arena.  Lately, there have been some wins and losses in the ACA column.  While the Trump Administration is still trying to abolish this critical law that is now that backbone of the nation’s healthcare system without any alternative in place, many Democratic and even GOP politicians have argued that at least part of the law should be preserved (particularly during a pandemic when millions of Americans depend on the ACA for their insurance coverage).  The ACA faces another challenge in front of the Supreme Court, who will hear a lawsuit later this fall from the GOP-led states that argue that the ACA was rendered unconstitutional after Congress eliminated the Individual Mandate tax penalty for not having health insurance.  Although the Supreme Court will not likely issue a decision until 2021, the fight now to preserve the ACA is more dire than ever.  The House Democrats filed a brief with the Supreme Court on May 6, 2020, stating that “…. the nation’s current public-health emergency has made it impossible to deny that broad access to affordable health care is not just a life-or-death matter for millions of Americans, but an indispensable precondition to the social intercourse on which our security, welfare, and liberty ultimately depend.” 

In addition to providing insurance to millions of Americans through the Medicaid expansion program and the ACA marketplace, the law also has a very popular provision that bans insurers from denying coverage to individuals with preexisting medical conditions.  In the “win” column for the ACA currently is the fact that without it, COVID-19 could be stamped as a preexisting condition in medical records, which could make it difficult for the over one million Americans who have already tested positive for Coronavirus to obtain insurance.  With unemployment through the roof, many Americans will be faced with no health insurance until they can find another job or enroll in the ACA marketplace insurance during an open enrollment period.  Already, 11 states/districts have created special open enrollment periods due to COVID-19, symbolizing how essential this law is to the fabric of our healthcare system.

While COVID-19 has had devastating effects on human lives, there have also been rippling effects throughout our economy, with many states still imposing closures of non-essential businesses.  Unemployment rates are at levels not seen since the Great Depression.  Many companies have furloughed employees with hopes to hire them back once the economy begins to open up again.  Even those who still have their jobs have faced pay cuts across the board.  Sadly, many businesses may never be able to reopen.

Applicable Large Employers (“ALEs”), defined as employers with 50 or more full-time and full-time equivalent (“FTE”) employees, are starting to wonder how COVID-19 will impact their reporting obligations in 2020 and into the future.  With the Supreme Court decision pushed out until at least 2021 and with the added burden of the Coronavirus pandemic on the healthcare system, it seems unlikely that any significant changes to the ACA will occur in 2020 and beyond, particularly as it relates to ALEs.  The IRS has been stepping up its enforcement efforts for ACA compliance, including expansive auditing and issuance of penalties to ALEs on a steadily increasing basis.  With a strong need for more revenue now, those enforcement efforts are not likely to curtail.  Reporting obligations for ALEs, including the mailing and filing of Form 1095-C and the filing of the Form 1094-C, are expected to stay the same in 2020 regardless of the pandemic.

ALEs with a large variable hour workforce (such as the restaurant, hospitality, and healthcare industries with many shift workers) will have the added burden of complicated employee measurement due to the mass layoffs and furloughs occurring during this current economic climate.  Many of the furloughed workers may ultimately be rehired, creating additional confusion and complex measurement scenarios. 

During a healthy economy, the measurement for the ACA variable workforce is cumbersome and typically requires the expertise of professionals and sophisticated software platforms.  With the COVID-19 pandemic, measurement scenarios will be much more complicated and challenging.  Classifying employees properly in the IRS filings is critical. Incorrect classifications of full-time and FTE employees can lead to significant ACA penalties from the IRS. While Monthly Measurement and Look-Back Measurement Methods are both acceptable under the ACA, the Look-Back Method is highly recommended with the current layoff and furlough rates.  The Rule of Parity within the ACA allows an employer to classify a returning employee as a rehire if their absence was less than 13 consecutive weeks (26 weeks for educational organization employers), providing that they had previously worked at least 4 consecutive weeks and their absence from work was greater than the period of employment immediately before their termination. 

It is critical to note that measurement of ALE status (50 or full time or FTE employees) and employee eligibility for benefits (average of 130 hours worked per month during a measurement period) are determined in the PRIOR year.  Thus, companies that had 50+ employees in 2019 will be considered ALEs for the 2020 reporting year, regardless of current headcount.  Also, employees who worked an average of 130+ hours per month in 2019 should continue to receive benefits in 2020 for the months they are employed.  The 2020 measurement ­­­­­­­­­­­period will determine ALE status for 2021.  If employers fall below 50 or more average full-time employees in 2020, then they will not need to report in 2021.  The calculation of FTE employees involves taking the total hours worked of all non-full-time employees for each month and dividing this number by 120.  The quotient is added to the respective monthly headcount for the full-time employees.  All months are added together and divided by 12 to determine the average monthly headcount for ALE determinate purposes.

Sound complicated? It is!   Now more than ever, it is prudent for ALEs to utilize certified professionals and robust solutions for their ACA reporting needs.

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