5 Costly Group Health Insurance Mistakes To Avoid

 In Blog, Health Insurance

The primary reason an employer offers a group health plan is to attract and retain quality employees. Unfortunately, many employers are not paying attention to compliance requirements of The Affordable Care Act (ACA). While denial can be a strategy, it’s not one that will work for most employers in the long run. Here are 5 costly group health insurance mistakes to avoid.

Employers Need To Know The Basics of ACA Compliance

If you want to ensure you are not making any expensive compliance mistakes you need to be somewhat familiar with what the law requires. At the same time, if the IRS or Department of Labor ever comes knocking at your door you need to understand and address compliance issues quickly to avoid costly fees during an audit.

Many employers think they don’t need to know the compliance requirements of The Affordable Care Act (ACA), so they rely on outside consultants or payroll services to make sure their company stays compliant. Since no one knows your business like you do, leaving compliance solely to outside sources could cost your company dearly.

5 Costly Group Health Insurance Mistakes You Probably Don’t Know Your Making

1. No Plan Documents

All benefit plans fall under the jurisdiction of ERISA (Employee Retirement Income Security Act) including your company sponsored group health plan. Benefit plans must be by law, administered in accordance with a written Plan Document. Plan Documents are formal, legal documents that define the explanation of the benefit program and contain certain specified conditions.
Regardless if you offer a health insurance plan or retirement plan such as a 401k, a formal Plan Document is required and needs to be accessible to your employees.

ACA Fine For not supplying a formal plan Document = $1.000

2. Highly Compensated Discrimination

The IRS requires that a benefit plan must offer the same benefits for both highly compensated and non‐highly compensated employees. In other words, an employer cannot discriminate in favor of highly compensated individuals with respect to eligibility of participants in the plan or benefits provided under the plan. The IRS defines a highly compensated employee as a highly paid officer of the firm, a shareholder who owns 10% in value of stock of the employer and an employee who is among the highest paid 25% of all employees.

The penalties can be steep for those who discriminate. $100 per day per employee. Maximum fine: $500,000

3. No Summary of Plan Description (SPD)

As an employer who offers a group health plan you are also required to have a Summary Plan Description (SPD) and copies of the SPD must be distributed to each employee that participates in the plan. Annual health plan changes or revisions require new Plan Descriptions must be updated and given to employees each year.

ACA Fine for Not Supplying a Summary or Plan Description = $1,000.00 per day

4. HIPAA Medical Privacy Negligence

HIPAA (Health Insurance Portability and Accountability Act) governs group health benefit plans and protects the medical privacy or health plan participants. The HIPAA Privacy regulations require health care providers and organizations, develop and follow procedures that ensure the confidentiality and security of protected health information (PHI) when it is transferred, received, or shared. Employees must sign a HIPAA form and be notified when their medical information is being shared and who will be using this information.

Fine for failure to notify an Employee of HIPPA Rights: $100 minimum, $50,000 Maximum

5. Failure to Notify Plan Participants of Plan Changes or Eligibility

There are several communication requirements that must be provided to your employees when you change your plan or modify plan eligibility requirements? A Summary of Benefits and Coverage (SBC) must be provided within 90 days to all plan participants and their beneficiaries prior to enrollment of the new plan. This includes annual plan renewals. If a plan is changed or modified prior to renewal, A Summary of Material Modification (SMM) must be provided to each participant notifying them of plan changes.

ACA Fine for Not Notifying Participants of Plan Changes: $1,000 per day

It Won’t Happen To Me

If you think an audit won’t happen to you, then you are probably going to be in for a big surprise. The IRS has already hired thousands of additional employees to carry out these audits, mainly in part, because the penalties collected from employers like you will help fund ACA.

The real shocker for many employers is going to come when employers don’t even realize they were in violation of the law until they have been violating it for 2 years. Some employers will have to pay thousands of dollars in penalties. Will you?


It is not our intention to offer legal or compliance advice. You should always consult your CPA or Compliance Specialist to adhere to the rules and regulations of The Affordable Care Act. If you would like a free consultation with one of our compliance experts, call: 800-234-3702 or Contact us.

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