$100-a-day penalties: ACA non-compliance can be expensive

While a lot of employers are focused on the penalties associated with not offering appropriate coverage (the $2,000 penalty) or not offering affordable coverage (the $3,000 penalty), what can get overlooked is the myriad of daily penalties that come with non-compliance. Take the Oct. 1 exchange notice requirement as an example. While the regulations do not identify a specific penalty for failing to comply with the notice requirement, the Affordable Care Act has a $100-a-day general non-compliance penalty.

This general penalty requires employers to correct compliance failures within 30 days of discovery or self report a $100-a-day penalty for failing to comply on IRS Form 8928 for each day the employer failed to comply with an ACA mandate. .

Some other things that can result in $100-a-day penalties:

1. Violating the non-discrimination rules (when they are finally written for insured plans)
2. Violating the limits restrictions
3. Failing to extend coverage to dependents to age 26
4. Having retroactive rescission of benefits
5. Failing to cover preventative care
6. Failing to have a revised appeal process (including external appeals)
7. Failing to provide timely notices
8. Violating the restrictions on emergency room visits
9. Violating restrictions on designation of primary care physicians
10. Improper pre-existing condition exclusions
11. Having excessive out-of-pocket costs
12. Violations of the 90-day waiting period limit

Employers who simply assume that an insured plan complies with these requirements, or who assume that their self-funded plan already complies, could find themselves in a sticky (and costly) situation if an audit reveals they have failed to comply. This is particularly important now that employers are required to self-report penalties. Both the internal Revenue Service and U.S. Department of Labor could become involved.
The solution is to sit down with your plan and go line by line, requirement by requirement, to make sure there are no violations. Even though there is an extension on the employer mandate, there is no extension on offering a compliant plan.

So get with your professionals and get the answers. Don’t let the $100-a-day penalties catch you by surprise.

Keith R. McMurdy is a partner with Fox Rothshild focusing on labor and employment issues; he can be reached at kmcmurdy@foxrothschild.com or 212-878-7919.

The information in this Legal Alert is for educational purposes only and should not be taken as specific legal advice.