Why ACA Measurement Periods Matter for Small Business Owners

ACA Measurement Periods: ACA compliance requires tracking and evaluating each employee’s hours worked over months, called a measurement or stability period. 

For instance, if Johnny averages 130 hours during his initial measurement period, the pizzeria would be required to offer him health coverage for 12 months (known as the stability period). This is a significant requirement and can hurt your business.

4 Points Why ACA Measurement Periods Matter for Small Business Owners

ACA Measurement Periods

1) Costs Have Remained Stable

Most employers subject to the ACA’s employer mandate have gotten the message that they need to offer qualifying health coverage to their full-time employees or face penalties. This includes many small businesses, which comprise the bulk of America’s employers.

Moreover, the ACA’s marketplaces have helped millions of small-business and self-employed workers get affordable coverage. In early 2017, a Department of Treasury report found that over one-third of marketplace users were small-business owners or employees. Additionally, the ACA’s expansion of Medicaid in many states has increased access to coverage for millions of additional Americans who were previously uninsured.

While the costs of ACA-compliant health insurance have remained stable for most small-business owners, there is still room for improvement. The ACA’s marketplaces could be strengthened to support better workers’ needs like Howard and small-business owners looking for ways to provide coverage to their employees.

In addition, the ACA’s reporting requirements should be modified to ensure that small-business owners can comply with their obligations to report hours worked and other employee details accurately.

2) More Employees Are Accessing Healthcare

All significant businesses are required under the ACA to cover their workers and their families or face a fine. The ACA, however, stipulates that small enterprises have 50 or fewer full-time employees. To avoid a fine, employers must ascertain if their staff members work an average of 30 hours per week or more. If so, they can buy insurance through the state exchange or the federal market.

Determining full-time status can be complex, especially in industries that rely on variable-hour employees, such as restaurants, staffing agencies, and home healthcare facilities. The default rule, known as the monthly ACA measurement periods, measures hours over a month and determines whether an employee is full-time if they average 30 or more hours a week or complete 130 service hours a month.

The look-back measurement period, which can last up to 12 months, allows companies to track an employee’s hours over a longer period. However, it can only be used once for each employee and cannot overlap with the standard measurement period. This method can be more time-consuming for larger companies and is not recommended by the IRS. Instead, 

3) Annual Premium Increases Have Slowed

Since the ACA’s initial implementation, annual premium increases have been significantly lower than before. The average increase for a small business offering health care coverage has been just 2.5 percent. This is a significant decrease from the double-digit percentages seen years before the ACA’s enactment.

Having the right technology in place to manage your ACA compliance is essential. A good system will provide the data you need for accurate and timely compliance. It will also help you track the number of hours your employees work to ensure you always comply with the ACA.

A new hire’s ACA eligibility is determined by their total weekly average paid hours during an initial measurement period. Once the initial measurement period is complete, and if the new hire is determined to be a full-time employee, they must be offered coverage within a stable period. The employer determines the length of the stability period. Stability periods cannot be under six or more than 12 months.

When employees’ hours are below the ACA’s definition of full-time, they must be placed into a monthly look-back measurement period. During the look-back measurement period, they will need to work an average of 30 hours each week or 130 hours per month to be eligible for medical benefits. If the employee is rehired in a benefit-eligible position during stabilization, their benefits will be reinstated.

4) More Small Businesses Are Offering Coverage

The Affordable Care Act has placed new requirements on small businesses. Many small businesses have hesitated to offer their employees coverage because of the ACA’s employer mandate. The ACA requires large employers to provide healthcare coverage that meets minimum value and affordability standards for their full-time workers or face an Employer Shared Responsibility penalty.

However, with the ACA’s shortened look-back measurement periods and monthly measurement method, more small businesses can offer their employees healthcare coverage. This is particularly true for seasonal employers like golf courses and resorts. These businesses hire seasonal employees who work a set number of months each year and then return for the next season. Under the ACA, these employees are only considered full-time employees if they work an average of 30 hours or more per week over a specified period of months, called a Measurement Period.

Using the monthly measurement method or the look-back measurement method, Integrity Data can help these seasonal employers determine whether or not their employees are eligible for health benefits. In addition, we can help these seasonal employers establish an initial measurement period appropriate for their unique circumstances and track the hours worked by their employees to avoid a costly Employer Shared Responsibility penalty.

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