November 17, 2016

Employer Penalties for Health Insurance Mandate Expected to Reach $31B for 2016, Accenture Finds

Penalties on U.S. employers that misreport employees’ coverage could reach $10B, increasing potential penalties 50 percent over original estimates

CHICAGO; Nov. 17, 2016 – New research from Accenture estimates that total employer penalties related to the health insurance mandates from the Patient Protection and Affordable Care Act (PPACA) are expected to reach $31 billion for 2016, nearly 50 percent above original estimates.

Under the PPACA’s “employer mandate,” employers that fail to offer health coverage to their employees are subject to financial penalties. The Congressional Budget Office (CBO) has projected that non-compliant employers – i.e., those not offering coverage – could face $21 billion in penalties for the 2016 tax-reporting period.

However, an Accenture analysis has identified a new segment of employers, deemed “unintentionally non-compliant,” whose penalty exposure could amount to an additional $10 billion during the 2016 tax period. This group represents employers that offer compliant health coverage yet fail to meet IRS reporting requirements needed to demonstrate compliance under the law. In total, employer penalty exposure could reach $31 billion for 2016, compared with an estimated $11 billion for 2015.

“The challenge is that limited awareness exists on the magnitude of potential penalties,” said Scott Brown, managing director of payer consulting, Accenture. “This is further compounded by an increase in coverage requirements despite that many employers are unaware of penalties incurred from last year.”

Under the PPACA’s mandate, employers with more than 50 full-time employees must provide health insurance benefits to avoid two potential penalties. For the 2016 benefit year, to avoid incurring the “part A” penalty, employers must offer minimum essential coverage (MEC) to 95 percent of employees and dependents under 26 years-old. Employers that meet the MEC threshold could still face the “part B” penalty if they fail to meet either the minimum value or affordability requirements included in the law.

“It’s critical that employers understand the details and reporting requirements of the law to avoid unexpected penalties,” Brown said. “Not only do employers need to offer compliant health coverage, they need to meet the reporting requirements to demonstrate compliance.”

Accenture conducted an analysis of anonymized employer data from Tango Health to assess the penalty exposure under the Patient Protection and Affordable Care Act resulting from shifts in the minimum essential coverage threshold. Penalty exposure was then compared to U.S. census data on total establishments and employer sizes. The estimate was modified to account for overlap with employers included in the original estimate by the Congressional Budget Office. In this analysis and otherwise, Accenture does not intend to provide legal advice or recommendations to ensure compliance with laws or regulations.

About Accenture
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Jenn Francis
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