When using the Monthly Measurement Method to track eligibility, may we offer coverage after the month has been processed? Are we responsible to offer coverage the same month even though we’re unsure of the hours worked by variable hour employees? Are we responsible for a type of “retro-eligibility,” is there an ACA Guideline, and if so, where can I find this specific guideline?
Wondering How to Account for the Monthly Measurement Method in Watsonville
Dear WHAMMM in Watsonville,
The Monthly Measurement Method (“MMM”) is the default way in which employers may track employees’ hours of service under the Patient Protection and Affordable Care Act (“ACA” or “Health Care Reform”). The MMM, unfortunately, is less of a yard stick that an employer may use to make eligibility decisions but rather more akin to a switch the Internal Revenue Service (IRS) will use to smack you with tax penalties.
To avoid tax penalties, large employers in 2015 (with 100 or more full-time employees and equivalents; in 2016 employers with 50 or more are subject to the mandate too) must make an affordable offer of minimum essential coverage that meets minimum value at least once per year to substantially all full-time employees and dependents. An employer need not offer coverage at all or in the alternative may make an offer that does not meet all of the law’s requirements (e.g., is unaffordable). This risk-taking employer may be saddled with substantial tax penalties if a full-time employee goes to a health insurance exchange and receives subsidized health benefits coverage because no coverage is offered or the coverage offered doesn’t meet the law’s requirements.
Under the ACA, a full-time employee is one who works at least 30 hours a week or 130 hours a month. These individuals may be subject to a maximum 90-day waiting period (plus an optional bona fide one month orientation period) prior to being offered coverage. Under the MMM, full-time employee status is assessed on a month-to-month basis. If the employee is working full-time (30 hours/week or 130/month) after 90 days he or she will be owed an offer of coverage.
With the above information in mind, let’s tackle your question. You asked if you:
• Must offer coverage after the month’s hours of service have been processed?
• Are responsible to offer coverage the same month even though you’re unsure about hours worked by variable hour employees?
• Are responsible for a type of retro-eligibility, whether there are any guidelines and if so, where are they?
Taking your question a bit out of order: The term variable hour employee is used to describe an employee whose hours of service fluctuate to such a degree that an employer cannot reasonably determine whether or not the individual will work full-time at his date of hire. This term; however, is not relevant when using the MMM. It is relevant only when using ACA’s other full-time employee determination method: the look-back rule. The look-back rules allow an employer to measure variable hour, part-time and seasonal employees over specific durations of time known as measurement periods in order to determine whether the individual qualifies as full-time.
For employers using the default rule (the rule that applies unless an employer affirmatively adopts and implements the look-back rules), the MMM will not use measurement periods. Generally, under the MMM anyone working full-time for a large employer will be owed an offer of coverage after 90 days or may subject a large employer to a tax penalty if they receive subsidized coverage at a health insurance exchange.
You also asked whether there is a retroactive aspect to the MMM. The employer must know on the first of the month whether the individual in question will qualify as full-time. You may not make the decision to offer coverage at the end of the month. If an individual is hired to work on a full-time basis and completes a waiting period, s/he will be owed an offer of coverage (assuming the employer is offering a plan to full-time employees). The MMM is not a planning tool like the look-back rules. To avoid potential tax penalties, an employer is required to offer coverage to full-time employees after a 90-day waiting period. If you are waiting until the end of the month or “after the month’s hours have been processed” to make an offer, you may have failed to make a timely offer. You may be subject to a tax penalty if a full-time employee who you failed to offer coverage goes to a health insurance exchange and enrolls in subsidized coverage.
The final regulations governing the MMM, the look-back rules and waiting periods can be found in the Code Federal Regulations (CFR) at 26 CFR Parts 1, 54, and 301 (MMM and look-back rules) and 45 CFR Parts 144, 146, and 147 (waiting period rules), respectively. Additional information about how the MMM compares to the look-back rules is described in the Ag Employer’s Guide to Health Care Reform which can be downloaded by all members from the Western Growers Association store at http://bitly.com/aghcrguide.
For more information about this article or if you have other questions about health care reform, contact our Health Care Reform team today at [email protected] or 800-333-4WGA. Write to Dear Jon at [email protected]. For more information and resources on Health Care Reform, visit www.wgat.com/health-care-reform.