ObamaCare Regulations Create Market Niche

There’s at least one point supporters and opponents of ObamaCare can agree on: it’s a complicated law that involves lots of new regulations and paperwork. For Financial Independence Co. Insurance Services, a Woodland Hills insurance agency run by a husband and wife team, that has meant a business opportunity. The law stipulates that every person must have health insurance and provides incentives for employers to offer insurance to their workers. What’s more, starting in January, employers with more than 50 full-time workers will need to track the health insurance status of employees. To do this, in addition to giving each employee a W2 form reporting earnings for taxes, companies now must give them another form, 1095-C, explaining the worker’s insurance status. The same information must be sent to the IRS. To assist companies in meeting the mandate – often called “6056 reporting” after the section of the law that requires it –Financial Independence has developed a software program in partnership with Houston firm Entrust Inc. that will pull information from multiple employee databases and prepare it for electronic filing with the IRS. The program is called EASI. Sheila Hartman, chief executive of Financial Independence, said many companies aren’t even aware of the approaching start date for the reporting mandate. “We specialize in helping companies with bilingual employees – manufacturers, hotels and restaurants,” she said. “We are really worried that these employers will not be prepared for the new requirements.” But Entrust isn’t the only solution for companies. For example, WorXsiteHR, a company in Calabasas, has added health care reform compliance to its HR management software for small companies. Other companies are tweaking their existing software or outsourcing the compliance issue to payroll service vendors or accounting firms. Michael Weiskirch, principal at HR consulting firm EmployeeTech in Chicago, said corporate giants are busy building in-house data systems to comply with ACA. Mid-sized and small companies have a number of options: some will try to adapt their HR software, such as Oracle Corp.’s PeopleSoft, while others may try to work with payroll services such as Paychex Inc. or ADP LLC. “Your payroll companies and HR systems are scrambling to make sure they can make compliance, but at this point it’s all over the map,” Weiskirch said. ‘New normal’ That kind of confusion prompted Financial Independence to enter into a partnership with Entrust, which created the program. Under the partnership, Entrust will service and maintain the software on its website, while Financial Independence is in charge of selling it. Robyn Jacobson, chief operating officer at Entrust, said although companies don’t have to file reports or give forms to employees until January 2016, they need to start compiling information for the year 2015. “The ACA has introduced a new normal for employers,” she said. “No longer do they just have to work on regulatory compliance with their offered health plans, but they have to report on the compliance of all employees. The consequence of not reporting can be significant penalties.” Specifically, the penalties can be $100 per day per employee. Howard Hartman, chairman of Financial Independence, said the companies most affected under the new regime are hotels, restaurants and retailers that have a small number of managers who traditionally were offered health insurance, and many hourly employees who weren’t included under health plans. Financial Independence specializes in those sectors. Confidentiality agreements preclude it from naming customers, but past clients include Wyndam Hotels & Resorts LLC. “The companies from 100 employees up to 2,500 are the real market,” he said. “They don’t have full-time HR people, and they are the ones stuck with penalties that could put them out of business.” Hartman, whose company has only three full-time employees but maintains a national network of independent contract salespeople, plans to market EASI through other insurance agents, accounting firms, staff leasing services and professional employer organizations. The price of the system will run between $15 and $25 per employee per month, depending on the size of the payroll. To comply, most companies will need to get some information from their payroll database, some from the employee benefits database, and some that will need to be collected manually just for ACA. Finally, it all must be filed electronically with the government. Employee benefits firm WorXsiteHR has a proprietary HR management program called HRX that has expanded to include ACA compliance. Chief Executive John Zabasky said it’s popular with small companies because in many cases it’s free if the company buys insurance through his company. Barry Cohn, chief executive of health insurance brokerage RGEB Employee Benefits in Woodland Hills, said some of his clients will work with their payroll service by paying an extra monthly fee to track the data. But many simply plan a home-made solution. “Right now, the employers I’ve talked to with over 50 employees are talking about an Excel spreadsheet. I don’t know why they would want special software,” he said. Cohn added that companies such as Financial Independence that provide a program or service “may be onto something, but it’s just premature” because most companies haven’t thought about the requirements yet. But Weiskirch, the consultant, pointed out that do-it-yourselfers may run into trouble because the required data is fairly complex. In addition to the basics – name, address, Social Security number – the law requires that employers report whether they offer health insurance to employees and record whether they accept or waive it. The offered insurance must be “affordable,” based on specified calculations. Also, the rule applies to full-time employees, but the definition of “full-time” under the law is 30 hours or “hour equivalents” per week, so figuring out the hour-equivalent status for workers can get complicated. “It’s a lot more information than just X or no X on a spreadsheet,” he said. Not going away Cohn said the government wants the insurance data so it can sort out who is getting insurance at work rather than buying it individually through online exchanges, often with government subsidies. Also, he said that at this point “there are a few questions still unanswered” about how 6056 reporting will work. Weiskirch agreed that there could be changes, given that the IRS released draft forms of the reporting sheet only in July, and the electronic filing protocol is still being developed, but he said the most important point is that companies start gathering the information. “If you are collecting data at this point, that’s a huge step, and you are most of the way toward compliance,” he added. Howard Hartman also expects the law will change over time, as occurred with the earlier rollout of health reform. But he doesn’t feel his business model is threatened by a regulatory reversal of the reporting mandate. “It will change, but it will not go away,” he said. “There are too many people without insurance, and too many companies that have created plans for the executives and forgotten about the hourly workers. This is a plan that was designed with fairness in mind