Let’s paint a picture of the ACA
Posted on October 19th, 2016
By Chris Hadden, CPP
Technical Sales Manager
A picture is worth a thousand words.
We’ve all heard this before, right?
While this may be true, after working with the Affordable Care Act law the past couple of years, I’m not sure this statement applies to the ACA. Instead, an ACA picture may be worth closer to ten thousand words. Throw in a real world example, and it may be worth one hundred thousand words.
While this concept may seem logical and natural, it was not something I ever put much thought into until recently.
While talking with an employer a couple of weeks ago regarding some of the specifics of the ACA intricacies, we both found ourselves just talking in circles. No matter how many definitions I could provide, or how many previously written blogs I shared, we just could not seem to make things click.
Everything changed when they said, “Okay. Let me give you some complicated scenarios.” I thought “Oh boy, this discussion may never come to a conclusion.” What I actually discovered surprised me. Once we started discussing actual scenarios, everything began clicking. We topped it off with some visual references. At that moment, we were golden.
The ACA is an incredibly difficult and complicated thing. Even though I’ve been dealing with the ACA day in, and day out, for years, I still manage to learn something new almost every day.
So, back to the point of the blog. Let’s paint a picture of the ACA.
Let’s put some paint on the canvas by first asking, “What’s a Measurement Period?” This has been defined so many times before, but let’s take a different approach.
Measurement Periods are used for determining an employee’s ACA full-time status, for a future Stability Period.
They can be anywhere between 3 and 12 months, which is determined by the employer and typically covers all groups of employees at the same time.
My fictitious company is Cindy’s Tree Service. Cindy’s Tree Service has grown into a thriving company that on average has about 150 employees (most employed full-time) spread out over 10 cities and 2 different states. Due to the size of the Cindy’s Tree Service, they are considered an Applicable Large Employer (ALE) under the ACA guidelines.
For a number of different reasons, Cindy’s Tree Service has decided to use a six-month Measurement Period.
So, what date range should their Measurement Period actually cover? Well, that’s really up to them as long as they are consistent.
In Cindy’s case, they’ve elected to use a 6-month Measurement Period so their Stability Period can be no greater than 6 months.
Now, let’s say Cindy decides to run their Measurement Period from January 1, 2015, to June 30, 2015.
Jump forward in the future a little bit and it’s July 1, 2015. The Measurement Period has ended. Now, what?
Well, now we enter the Administrative Period. The Administrative Period is the period of time a business has to respond to the full-time status results found within the Measurement Period. You can think of this as an open enrollment period, of sorts.
The Administrative Period can be no more than 90 days beyond the last day of the Measurement Period.
So if Cindy takes up the full 90 days, this would leave Cindy’s Administrative Period running from July 1, 2015 – September 28, 2015.
What takes place during this period? Well, during the Administrative Period, Cindy’s Tree Service must analyze the employee’s hours collected over the course of the Measurement Period, and identify those who averaged more than 30 hours of service per week.
The status found (full-time, or non-full-time, will apply for the entire Stability Period.
The actual length of the Stability Period is flexible – however, Stability Periods applying to ‘non-full time’ employees can be no longer than the length of the Measurement Period. In most cases, the length of the Stability Period is going to match the length of the Measurement Period. So in Cindy’s case, the Stability Period will be six months long.
So the Stability Period will run from September 29, 2015 – March 28, 2016.
Here is a visual representation of Cindy’s first 2 Measurement Periods, and subsequent Administrative and Stability Periods.
|Measurement Period||Administrative Period||Full Time Stability Period||Non-Full-Time Stability Period|
A couple of things to note here, which is a consistent cycle. Measurement Periods are not a one and done thing. There is always a Measurement Period running. If you have a 6-month Measurement Period, you’ll have 2 per year. if you have a 12 month, you’ll have 1 per year. This cycle with continue to repeat itself.
There is one other critical component we don’t want to forget about. What happens if Cindy’s Tree Service has a new employee start working after the Measurement Period has started? For example, what if an employee begins working March 1, 2015?
When a new employee is brought on board, a business must make a reasonable determination as to whether or not they believe this employee will be a full-time employee under the ACA guidelines (more than 30 hours of service per week). If the answer is yes, this employee must be offered coverage no later than the first of the month, following 90 days of hire. This grace Period is referred to as the Limited Non-Assessment Period.
If their full-time status is unknown, however, they will enter what is referred to as an Initial Measurement Period. This is similar to an ongoing Measurement Period; however, the date ranges are unique to each new hire.
So Cindy’s Tree Service hires two new employees on March 1, 2015. One employee, Mark, is hired as a full-time employee. The other, Sara, is hired on a part-time basis.
Since Mark is hired as a full-time employee, he must be offered insurance coverage no later than June 1, 2015. The Period running from March 1, 2015 – May 31, 2015, is the Limited Non-Assessment Period. As of June 1, 2015, Mark must be offered insurance meeting at least the minimum ACA requirements. Since Mark was not hired on or before the Measurement Period which began January 1, 2015, Mark’s first Measurement Period he will be included in, is the Measurement Period beginning on July 1, 2015. From there on, Mark’s Measurement Period, Administrative Period, and Stability Period will align with the rest of the organization.
Sara, who is hired as a part-time worker, is quite different. On the first full month following her hire date, which would be April 1, 2015, Sara will begin her Initial Measurement Period. The Initial Measurement Period is very similar to ongoing Measurement Periods, except for a few key differences – the most important one being that the date is unique to the employee’s hire date.
Assuming we go with a 6-month Initial Measurement Period, Sara’s Initial Measurement Period will run from April 1, 2015 – September 30, 2015. Sara’s Administrative Period will run from October 1, 2015 – December 29th, and her Stability Period runs from December 30th, 2015 – June 28th, 2016. Note, if using a longer Measurement Period, such as a 12-month Measurement Period – the law states that the combined length of pre- and post-initial Measurement Period Administrative Periods, and the initial Measurement Period itself, cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the start date.
So, if Sara is found to be full-time at the end of her Initial Measurement Period, she must be offered coverage no later than December 30th, 2015.
Here’s a visual breakdown. One very important thing to note here – while Sara is still completing her Initial Measurement Period, her hours will also be counting towards the next ongoing Measurement Period following her hire date, which begins July 1, 2015.
The ACA is tough and never ending. Much like the strokes of a painting, each part brings together the bigger picture.
While this may not be a pretty picture, I do hope it’s a helpful picture.