ACA Reporting Starts Long Before Filing Forms 1094 and 1095

February 13, 2026/in ACA Compliance, Employer Resources, News

For many employers, ACA reporting feels like a once-a-year obligation. Forms are generated, deadlines approach, and the focus turns to getting Forms 1094 and 1095 filed correctly and on time.

But those forms are not where ACA compliance begins. They are simply the final output of decisions, data, and processes that occur all year long.

When ACA reporting issues arise, the problem is rarely the forms themselves. The issue almost always traces back to how employee data, eligibility, and enrollment were handled months earlier.

ACA Reporting Is a Reflection of Your Year, Not a Snapshot

Forms 1094 and 1095 do not ask employers to make judgment calls at filing time. They report what has already happened.

The IRS uses these forms to confirm whether an employer:

Offered coverage to eligible employees
Offered coverage on time
Offered coverage that met Minimum Essential Coverage requirements
Offered coverage that met affordability standards
Tracked eligibility consistently across the year

If the data behind those answers is incomplete or inconsistent, reporting errors follow.

This is why ACA compliance should be viewed as a year-round operational process, not a year-end administrative task.

Eligibility Tracking Drives Reporting Accuracy

One of the most common ACA reporting issues stems from eligibility misalignment.

Applicable Large Employers must track:

Hours worked
Measurement periods
Stability periods
Changes in employee status

When this tracking is done manually or inconsistently, it becomes difficult to determine when coverage should have been offered and to whom.

Errors in eligibility tracking often lead to:

Missed offers of coverage
Incorrect Line 14 and Line 16 codes
Increased exposure to Penalty B assessments

Accurate reporting depends on knowing exactly when an employee became eligible and whether an offer was made at the correct time.

Enrollment Decisions Affect Reporting Outcomes

Another frequent breakdown occurs when enrollment data is disconnected from eligibility and payroll data.

Enrollment changes throughout the year matter. New hires, terminations, leaves of absence, and status changes all impact how offers of coverage are reported.

If enrollment records are incomplete or not updated in real time, reporting becomes a cleanup exercise instead of a confirmation process.

Common challenges include:

Offers made but not documented correctly
Employees waiving coverage without proper records
Delays between eligibility and enrollment processing
Conflicting data between payroll and benefits systems

When enrollment accuracy suffers, reporting accuracy suffers with it.

Payroll and Benefits Data Must Stay Aligned

ACA reporting relies heavily on payroll data, especially for affordability testing and eligibility determination.

When payroll and benefits systems are not aligned, discrepancies appear in:

Hours worked
Employee classifications
Offer dates
Coverage tiers

Trying to reconcile these differences at filing time is risky and time-consuming. It also increases the likelihood of errors that can trigger IRS notices later.

Ongoing data alignment throughout the year reduces the need for corrections and minimizes compliance exposure.

Reporting Errors Are Usually Process Failures

Most ACA reporting issues are not caused by a misunderstanding of the forms. They are caused by gaps in the process.

These gaps often include:

Manual tracking of hours and eligibility
Delayed updates to employee status
Disconnected payroll and benefits systems
Limited visibility into ACA measurement periods
Reactive rather than proactive compliance management

By the time Forms 1094 and 1095 are generated, it is often too late to correct these issues without amendments or increased risk.

Why a Year-Round Administrative Approach Matters

A strong ACA compliance strategy focuses on prevention rather than correction.

Year-round administration supports:

Continuous eligibility monitoring
Timely and documented offers of coverage
Accurate enrollment records
Reliable reporting data at year-end

This approach reduces administrative burden, lowers compliance risk, and gives employers confidence that their reporting reflects reality.

Turning Reporting Season Into a Review Opportunity

February is an ideal time for employers to assess what worked and what did not during the most recent reporting cycle.

Questions worth asking include:

Were eligibility determinations clear and consistent?
Did enrollment records align with payroll data?
Were reporting issues identified late or early?
Did the process rely too heavily on manual work?

Using reporting season as a diagnostic tool helps employers strengthen systems before the next compliance year begins.

ACA Compliance Is Built Throughout the Year

Forms 1094 and 1095 are important, but they are not the foundation of ACA compliance. They are the result of months of data tracking, monitoring, and administration.

Employers who treat ACA compliance as an ongoing process rather than an annual filing obligation are better positioned to reduce risk, avoid penalties, and simplify reporting year after year.

The work starts long before the forms are filed.

2026 Health Benefits Planning for CHROs: Compliance, Cost Control and Smarter Administration

January 30, 2026/in Employer Resources, News

Providing Affordable Benefits with Gold Standard Administration in 2026

Large and mid-market employers cannot afford to settle for “just a health plan” As we enter 2026, employers face a changing benefits landscape. Rising costs, evolving regulatory demands and workforce complexity mean that the traditional health-plan model no longer suffices. For CHROs, CFOs and brokers working with large or mid-market employer groups, the question is no longer whether you should offer benefits, but how you can offer meaningful benefits in an affordable way and administer them with precision.

Here at SBMA, we believe there is a better path: benefits that deliver value to employees, backed by gold-standard administration for HR teams.

The challenge: Traditional group health plans are under pressure

Historically, large employers have used fully insured or self-funded group medical plans to provide comprehensive coverage. Yet, for many organizations today this model presents significant friction:

Premiums continue to rise faster than budgets.
High deductibles and complex networks reduce employee utilization and satisfaction.
Administrative complexity grows as the workforce becomes more variable: part-time, seasonal, hybrid, remote, distributed.
Regulatory burdens (reporting, ACA employer mandate compliance, data transparency) are increasing.
HR and finance teams are spending more time managing vendor integrations, enrollment issues and compliance tracking—leaving less time for strategic work.

In short: The benefits market demands more cost-effective models, and HR demands simpler administration.

2026 regulatory and compliance priorities

Large and mid-market employers (especially those qualifying as an “Applicable Large Employer” or ALE) must pay particular attention to key 2026 updates under the Affordable Care Act (ACA) and related rules.

Affordability threshold increases

For plan years beginning in 2026, the affordability percentage under the employer mandate climbs to 9.96% of employee household income for self-only coverage, up from 9.02% in 2025. This change gives employers slightly more flexibility in structuring employee contributions—but it also demands careful planning so you don’t inadvertently trigger non-compliance.

Employer shared-responsibility penalties rise

Penalties under Code § 4980H for employers that fail to offer minimum essential coverage (MEC) to substantially all full-time employees or that offer unaffordable or non-minimum value coverage are increasing for 2026. For example:

The annualized Section 4980H(a) penalty rises to $3,340 per full-time employee (minus the first 30) for 2026.
The Section 4980H(b) penalty rises to $5,010 per full-time employee who receives a premium tax credit and whose employer coverage was unaffordable or lacked minimum value.

With such increases, the cost of getting plan design or compliance wrong grows significantly.

Reporting deadlines and out-of-pocket (OOP) maximum updates

Employers must also take note of:

The furnishing deadline for Forms 1095-C (for 2025 calendar year) is March 2, 2026 for individuals (with alternate online-notice options) and the electronic filing deadline to the IRS for Forms 1094-C/1095-C is March 31, 2026.
Out-of-pocket maximums for non-grandfathered group health plans for 2026 will rise (for example, individual OOP max projected at approx. $10,600).
Safe harbor rules for affordability (FPL safe harbor, Rate of Pay safe harbor, W-2 safe harbor) remain in place, and employers must document their approach.

Why the administration matters—especially in 2026

Regulatory compliance is only one pillar of the challenge. The second pillar is operational excellence. Even the best-designed benefits plan will under-perform without smooth administration. For HR teams of large and mid-market employers, the administrative burden becomes a strategic risk unless managed well.

Here is what “gold-standard administration” looks like in practice:

Real-time onboarding/offboarding of employees to ensure benefits eligibility and avoid delays or errors.
Instant ID-card generation and delivery so employees have coverage proof when they need it.
Integrated claims tracking and reporting, enabling employer data visibility and actionability.
Consolidated billing and payment management to remove billing fragmentation and manual reconciliation.
Mobile/digital access for employees so they can view benefits, access providers, see ID cards and track usage via a single app.
Live U.S.–based support for both HR teams and employees, ensuring questions get resolved quickly.

Without these features, the true cost of benefits is not just the premium—it’s hidden in administrative time, employee service issues, vendor hand-offs and compliance risk.

How SBMA delivers meaningful value in 2026

At SBMA we combine two elements: affordable, high-utility benefits design and gold-standard administration. For employers grappling with rising benefits costs, workforce variability and the 2026 regulatory uptick, here’s how that combination pays off:

1. Plan design built for value

Rather than simply replicating traditional group health models, SBMA helps employers design benefits that reflect what employees actually use and what the business can sustain. These include: preventive care, telehealth, dental, vision, diagnostic labs, hospitalization or limited inpatient support and integrated PHM services. By focusing on high-utility services and streamlined networks, we help reduce premium spend while maintaining meaningful coverage.

2. Compliance built-in

Our consulting and administration model ensures that crucial thresholds and mandates are met: affordability tests under the 9.96% threshold, minimum value standards, reporting obligations (Forms 1094/1095), OOP maximum compliance, and safe harbor documentation. We proactively monitor regulatory shifts so your HR team doesn’t become the compliance bottleneck.

3. Administration that scales

With our platform, we eliminate many of the traditional pain points: slow ID card delivery, delayed eligibility updates, fragmented vendor ecosystems and manual billing reconciliation. Employees gain access through our mobile app, HR teams get live dashboards and analytics, and broker/consultant partners have confidence that their employer groups are well served.

4. Cost control meets transparency

By shifting to a model where the employer retains visibility and control rather than handing full risk and profit margin to a carrier, SBMA helps align benefit spend with outcomes. Combined with transparent analytics and employer-level reporting, you get real insight into usage, enrollment trends, cost drivers—and the ability to act.

5. Exceptional employee experience

Ultimately, the value of a benefits plan lies in what the employee perceives and uses. When employees receive prompt ID cards, have access through digital tools, can easily access telehealth, and understand their coverage, participation and satisfaction improve. That reduces HR tickets, improves retention, and ties benefits into your broader talent strategy.

2026 benefits cost-control strategy

As you plan for 2026, here are key action items to ensure you are aligned with both the regulatory environment and operational excellence:

Review your employee contribution structure under the new 9.96% affordability threshold and assess whether your lowest-cost, minimum-value plan meets safe-harbor requirements.
Evaluate your full-time employee (FTE) counts and full-time-equivalent (FTE) staffing to confirm ALE status and reporting obligations. IRS+1
Check your administrative vendor ecosystem: time to issue ID cards, onboarding/off-boarding process, digital access for employees, claims data visibility.
Confirm your reporting processes: forms, deadlines, alternative furnishing options (such as online notice for 1095-C statements) for 2026. Newfront+1
Conduct usage and enrollment analytics: identify high-utilization services, opportunities to optimize benefits spend, and manufacturer adoptions (telehealth, digital tools, etc.).
Partner with a benefits administrator that offers both design consult and operational execution—not simply off-the-shelf.

How SBMA Removes Administrative Friction

When you combine regulatory complexity, cost pressure and workforce dynamics, the margin for error in benefits strategy gets smaller. Choosing a partner like SBMA offers:

A single point of accountability for design, compliance and administration.
A modern, integrated technology platform that automates key workflows and delivers scalability.
A team with deep experience in large and mid-market employer groups, understanding the unique needs of CHROs, CFOs and benefits brokers.
Transparent cost models and outcome-oriented analytics—so you don’t just buy a “plan,” you buy value.
Flexibility to adapt as your workforce evolves—whether remote/hybrid, part-time, variable schedule or location-based.

Fewer administrative burdens = smarter benefits management for 2026 and beyond

2026 is not just another year in benefits. With the affordability threshold rising, penalties increasing and workforce models shifting faster than ever, employers who rely on “business as usual” are exposing themselves to risk and inefficiency. By contrast, organizations that adopt an approach built around affordability, value and operational excellence will succeed both financially and strategically.

At SBMA, we are committed to enabling that success. Our model helps you deliver benefits employees value, while giving your HR team the tools and processes they need to operate at peak efficiency. If you are ready to build a benefits program that meets today’s realities and is future-ready, reach out to us for pricing and plan options.

What CHROs Should Expect Beyond 2026

The regulatory landscape around employer-sponsored benefits is not stabilizing. Indicators from federal rulemaking, industry trends and enforcement patterns point to continued shifts affecting cost, compliance and operational complexity.

Below is what large and mid-market employers should anticipate in late 2026 and into 2027.

1. Increased Enforcement of ACA Reporting Accuracy

Over the past three filing cycles, the IRS has increased automated detection of discrepancies between coverage, affordability data and reported FTE counts. Employers should expect:

Faster assessment of 4980H penalties
Less leniency for appeal delays
More scrutiny of affordability safe harbor calculations

This places greater importance on clean data and accurate administration.

2. Push Toward Real-Time Eligibility and Digital Verification

Regulators and carriers are signaling movement toward faster verification systems that reduce coverage gaps and accidental termination delays. Employers with outdated systems will face:

More employee disputes
Greater compliance exposure
Higher administrative burden

SBMA’s real-time eligibility tools directly align with where regulations are moving.

3. Continued Growth of Alternative Benefits Models

Restricted medical plans paired with MEC are gaining widespread adoption across industries with variable workforces. The trend is expected to expand due to:

Cost pressures on major medical
Increased telehealth reliance
Demand for modular benefits
Shrinking participation minimums in modern benefit structures

2026 will likely be the year when more CHROs move away from “one-size-fits-all” benefit models.

4. Expansion of Telehealth Requirements

Federal agencies continue considering rules that may:

Require clearer telehealth cost-share limits
Increase network transparency
Mandate certain digital access standards

Employers already offering integrated telehealth have a structural advantage.

5. Expect Rising Penalties for Non-Coverage of Part-Time Populations

Part-time and variable employees remain under federal scrutiny due to insurance gaps. Predicted regulatory direction includes:

Higher penalties tied to misclassification
Stricter enforcement of monthly measurement methods
More guidance on coverage for hybrid or gig-style labor models

SBMA’s low-threshold and no-minimum plans position employers to avoid risk as rules tighten.

Health Benefits Cost Control Options FAQs:

What are the biggest benefits compliance changes employers need to prepare for in 2026?

The primary changes include the ACA affordability threshold increasing to 9.96 percent, rising 4980H penalties, updated out-of-pocket maximums and continued IRS emphasis on accurate 1094-C and 1095-C reporting. Employers must also prepare for stricter enforcement of coverage accuracy and eligibility documentation.

How can CHROs reduce the cost of health benefits in 2026?

CHROs can reduce costs by pairing MEC with restricted medical benefits, adopting modular plans, integrating telehealth, analyzing usage data and eliminating administrative waste. SBMA provides ACA-compliant benefits structures designed to lower premium spend while maintaining high utility.

Why is benefits administration as important as plan design in 2026?

Without strong administration, even well-priced plans fail. Real-time onboarding, instant ID cards, accurate eligibility files, consolidated billing and digital employee access prevent delays, compliance mistakes and unnecessary HR workload. SBMA’s administration eliminates bottlenecks and ensures clean data.

Can employers offer benefits without a traditional major medical plan?

Yes. Employers can provide MEC plus restricted medical plans that include telehealth, preventive care, diagnostic services, dental, vision and limited inpatient benefits. These options meet ACA requirements while reducing cost and complexity.

What ACA penalties will increase in 2026?

The Section 4980H(a) penalty increases to 3,340 dollars per full-time employee and the Section 4980H(b) penalty rises to 5,010 dollars per affected employee. These increases make accuracy, affordability and proper eligibility tracking more important than ever.

How does SBMA help employers stay ACA compliant?

SBMA ensures correct affordability calculations, documentation of safe harbors, accurate eligibility files, complete MEC coverage and timely 1094-C and 1095-C reporting. Our platform reduces the administrative risk that leads to costly penalties.

What makes SBMA’s Gold Standard administration different from other benefits administrators?

SBMA provides real-time eligibility updates, instant digital ID cards, consolidated billing, live U.S.-based support, integrated telehealth, usage reporting and the HealthWallet App. These tools eliminate manual processes and give CHROs and CFOs complete visibility.

How does the HealthWallet App improve the employee experience?

Employees use HealthWallet to access ID cards, find providers, view benefits, schedule telehealth visits and reference plan documents. This reduces HR questions and increases adoption of covered services.

Are SBMA plans effective for large, multi-location employers?

Yes. SBMA’s digital infrastructure supports high-volume onboarding, variable scheduling, multiple worksites and remote or hybrid teams. Plans can be deployed quickly across national footprints.

What types of companies benefit most from restricted medical plans?

Industries with part-time, hourly or high-turnover workers benefit the most, including hospitality, agriculture, logistics, cleaning, food service and retail. These employers gain predictable cost control and strong employee utilization.

Mastering ACA Jargon: ALE Term Guide

January 2, 2026/in ACA Compliance, Employer Resources, MEC, News

Navigating the intricacies of the Affordable Care Act (ACA) can often feel like deciphering a complex code. One of the key aspects that businesses need to understand is the concept of Applicable Large Employers (ALEs) and the associated terms.

In this guide, we break down these ALE terms to help you make sense of your ACA compliance responsibilities and avoid costly penalties.

First, What Is an ALE?

At the heart of ACA compliance lies the distinction between small and large employers. An ALE, or Applicable Large Employer, is an employer that meets specific criteria regarding the size of its workforce. Under the ACA, an ALE is defined as an employer that employed, on average, at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year.

Minimum Essential Coverage (MEC) Terms

Minimum Essential Coverage refers to health coverage that meets the minimum requirements set by the ACA. If your plan qualifies as MEC, it satisfies the basic ACA coverage criteria.

Minimal Value Coverage refers to an employer-sponsored health plan that covers at least 60 percent of the total allowed cost of benefits under the plan. In practical terms, it ensures that your plan offers substantial coverage to your employees.

Essential Health Benefits apply to individual and small group plans. Large group and self-funded MEC plans do not have to cover Essential Health Benefits, although many include a broad range of services.

Additional ALE Terms

Minimum Value Standard: This is the benchmark used to determine if an employer-sponsored plan offers sufficient coverage. A plan must cover at least 60 percent of the total allowed cost of benefits to meet the minimum value standard.

Safe Harbor Methods: These are simplified approaches employers can use to determine whether their health coverage meets the affordability requirement. The three common safe harbor methods are the Form W-2, Rate of Pay, and Federal Poverty Line safe harbors. For 2026, the affordability threshold is 9.96 percent.

Full-Time Equivalent (FTE) Calculation: Employers use this calculation to determine how many full-time equivalent employees they have when factoring in part-time and variable-hour employees. It is essential for determining ALE status.

Affordable Care Act Reporting: This term encompasses the process of reporting compliance with the ACA to the IRS and providing employees with relevant information about their coverage through forms 1094 C and 1095 C.

Dependent Coverage: The ACA requires ALEs to offer affordable coverage to full-time employees and their dependents. Employers should understand who qualifies as a dependent under the ACA.

Minimum Essential Coverage Offer: ALEs must offer MEC to at least 95 percent of their full-time employees to meet ACA requirements.

Affordability Safe Harbors: These methods allow employers to determine if the coverage they offer is affordable for employees by using the Form W 2, Rate of Pay, or Federal Poverty Line safe harbors.

Full-Time Employee Look Back Measurement Periods: Employers can use these periods to determine the full-time status of employees for ACA compliance. The standard measurement period, stability period, and administrative period are essential components of this calculation.

Premium Tax Credits: These are subsidies provided to eligible individuals and families to help them afford health coverage purchased through the Health Insurance Marketplace. Employees who qualify for premium tax credits can trigger employer penalties if the employer coverage offered is not affordable or does not provide minimum value.

Minimum Value Calculator: This is a tool employers can use to determine if their health plans meet the minimum value requirement. It helps ensure that the plan covers at least 60 percent of allowed costs.

Reporting Entity: Employers may need to determine which entity within their organization is responsible for ACA reporting. This can vary depending on the structure of the company.

Grandfathered Plans: Some plans that existed before the ACA was enacted may be considered grandfathered and exempt from certain ACA requirements, though these plans are less common today.

Frequently Asked Questions About ACA Compliance

What is the ACA, and how does it impact employers?
The Affordable Care Act is a federal law designed to make healthcare more accessible and affordable for Americans. For employers, it introduces regulations related to employee health insurance coverage. It defines Applicable Large Employers and mandates that they provide affordable health coverage to their full-time employees.

How is an Applicable Large Employer determined?
An ALE is an employer that, on average, employed at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year. Full-time employees work, on average, at least 30 hours per week or 130 hours per month.

What is Minimum Essential Coverage, and why is it important?
MEC refers to health coverage that meets the minimum requirements set by the ACA. It is crucial because ALEs must offer MEC to at least 95 percent of their full-time employees to meet ACA requirements.

How can I determine if my health plan meets the Minimum Value Standard?
The Minimum Value Standard requires an employer-sponsored plan to cover at least 60 percent of the total allowed cost of benefits. The Minimum Value Calculator can be used to assess whether your plan meets this requirement.

What are Safe Harbor Methods, and how can they help with affordability calculations?
Safe Harbor Methods allow employers to determine whether their health coverage meets affordability requirements without needing to calculate each employee’s exact household income. Common safe harbors include the Form W 2, Rate of Pay, and Federal Poverty Line safe harbors.

What penalties could my business face for non-compliance with ACA regulations?
Penalties may apply if you fail to offer MEC, the coverage offered is not affordable, or if at least one full-time employee receives premium tax credits through the Health Insurance Marketplace.

Are there any exemptions or special provisions for small businesses?
Small businesses with fewer than 50 full-time employees are generally exempt from the ACA employer mandate requirements.

How can I ensure accurate ACA reporting?
Employers must use forms 1094 C and 1095 C to report compliance. Maintain accurate records and ensure that the information submitted to the IRS is timely and complete.

What should I know about Premium Tax Credits and their impact on ACA compliance?
Premium Tax Credits help eligible individuals and families afford coverage through the Health Insurance Marketplace. Employers should be aware that employees receiving these credits can affect ACA compliance if the employer coverage is not affordable or does not meet minimum value.

How often do ACA regulations change, and how can I stay updated?
ACA regulations can evolve. Employers should regularly check IRS resources or consider working with ACA compliance experts who monitor updates and provide guidance.

Any Questions?

We serve employers who want to offer their employees affordable benefits. We simplify the complexity of providing those benefits and ensure compliance with the Affordable Care Act. We provide affordable benefits for the everyday person. We are different because of our personal service, speed of implementation, and innovative approach to providing benefits coverage.

Learn more about us and our services, here.

Fully Insured vs. Level Funded Plans: A Guide for Qualified ALEs

October 26, 2025/in ACA Compliance, Employee Engagement, Employee Retention, Employer Resources, News

As a Qualified Applicable Large Employer (ALE), choosing the right employee health insurance plan is crucial for your organization’s financial health and employee satisfaction. Two popular options for providing healthcare coverage to your employees are Fully Insured Plans and Level Funded Plans. In this comprehensive guide, we will delve into the differences, advantages, and considerations of both options to help you make an informed decision for your company’s healthcare benefits.

Evolving Market Trends in 2025: What Employers Should Consider

As healthcare costs continue to rise in 2025, many Qualified Applicable Large Employers (ALEs) are reevaluating their healthcare options. Employer-sponsored health plans are projected to increase by 5.8% to 8% this year, driven by higher utilization, rising prescription drug costs, and inflationary pressures in the healthcare sector. In this environment, understanding the key differences between Fully Insured and Level Funded Plans is more critical than ever.

Additionally, regulatory updates such as the 2025 ACA affordability threshold increase to 9.02% of household income impact how ALEs structure employee contributions. Employers choosing Level Funded Plans may need to carefully balance cost-sharing with compliance requirements to ensure affordability while maintaining financial sustainability.

Stop-Loss Insurance: A Must for Managing Risk

While Level Funded Plans offer cost savings and flexibility, employers must be mindful of high-claim risks. In 2025, the rising costs of specialty medications, chronic disease treatments, and emergency care mean that a single large claim could create unexpected financial burdens. To protect against this, employers should consider integrating stop-loss insurance, which caps the employer’s financial exposure and helps manage unpredictable healthcare expenses.

When selecting a Level Funded Plan, it is crucial to evaluate the stop-loss coverage options available and ensure they align with your company’s risk tolerance. This safeguard can provide greater budget stability while still allowing employers to take advantage of the cost-saving benefits of self-insurance.

Employee Satisfaction: A Key Factor in Plan Selection

Beyond cost and compliance, employee engagement and retention are critical factors in choosing the right healthcare plan. Recent workforce trends show that competitive healthcare benefits play a major role in employee retention, especially as hiring challenges continue in 2025.

Fully Insured Plans may be ideal for companies with diverse or multi-state workforces, offering consistent, predictable benefits with minimal administrative burden.

Level Funded Plans work well for healthier employee populations looking for customized benefits and potential cost savings but require a strong risk management strategy.

By aligning healthcare benefits with workforce needs, ALEs can enhance employee loyalty, reduce turnover, and create a healthier, more engaged workforce.

Understanding Fully Insured Plans: Exploring Benefits and Limitations

Fully Insured Plans are a type of employee health insurance where employers pay fixed premiums to an insurance carrier. In return, the carrier assumes the responsibility for covering employees’ healthcare costs, transferring the financial risk from the employer to the insurer.

Advantages of Fully Insured Plans

Cost Predictability: Fixed premiums allow accurate budgeting for healthcare expenses without unexpected fluctuations. Employers can plan their finances more effectively, knowing the exact cost of providing health insurance.

Simplified Administration: Insurance carriers handle plan administration, including claims processing and customer service, reducing administrative burden for employers. This allows HR teams to focus on other strategic initiatives.

Regulatory Compliance: Fully Insured Plans often come with pre-packaged ACA-mandated benefits, ensuring compliance with regulatory requirements. This helps employers avoid penalties and stay in line with federal healthcare laws.

Limitations of Fully Insured Plans

Limited Customization: Employers have less flexibility to tailor the plan to their workforce’s specific needs. The insurance carrier offers pre-determined benefit packages, which may not align perfectly with the preferences of your employees.

Cost Control: Employers may have less control over healthcare premiums as the insurer assumes financial risk. Premium increases may occur, leading to higher costs for employers without additional benefits.

Understanding these aspects of Fully Insured Plans is crucial for employers in making informed decisions while choosing the most suitable health insurance option for their workforce.

Unveiling Level Funded Plans: A Hybrid Approach to Employee Health Insurance

Level Funded Plans represent a unique approach to employee health insurance, combining elements of self-insurance and traditional insurance. In this arrangement, employers pay fixed monthly premiums to a third-party administrator (TPA), which holds the funds in a claims account. The TPA then uses these funds to cover employees’ healthcare expenses. If claims are lower than expected, the surplus is often returned to the employer at the end of the year, making it a potentially cost-saving option.

Advantages of Level Funded Plans

Cost Savings: Level Funded Plans offer potential cost savings compared to Fully Insured Plans. Unused claims funds may be returned to the employer, reducing overall healthcare expenses. This can be particularly beneficial for organizations with healthier employee populations.

Customization: Employers have more flexibility to tailor plan design and benefits to meet the specific needs of their workforce. This customization can lead to higher employee satisfaction and better alignment with your company’s unique culture and values.

Risks and Considerations of Level Funded Plans

Financial Risk: Although Level Funded Plans provide cost-saving potential, they also carry a higher level of financial risk compared to Fully Insured Plans. Employers are responsible for any claims exceeding the funds in the claims account. It is essential to assess your company’s financial stability and risk tolerance before opting for self-insurance.

Cash Flow Management: Employers must ensure they have sufficient cash flow to cover unexpected high claim costs since they are responsible for funding the claims account. Planning for potential fluctuations in claim expenses is critical to avoiding cash flow issues.

Key Differences: Fully Insured vs. Level Funded Plans

To better understand the distinctions between Fully Insured and Level Funded Plans, let’s explore their key differences in several areas:

Premiums and Payments

Fully Insured Plans: Fixed premiums are paid to the insurance carrier, and the insurer assumes the financial risk. Premiums may be subject to annual adjustments based on claims experience and other factors.

Level Funded Plans: Fixed premiums are paid to a third-party administrator, with the employer assuming the financial risk for claims. The TPA holds the claims funds and manages the claims payment process.

Financial Risk

Fully Insured Plans: The insurance carrier bears the financial risk of employees’ healthcare expenses. Employers pay fixed premiums and have no direct financial responsibility for claims costs.

Level Funded Plans: Employers partially self-insure by funding the claims account, assuming a portion of the financial risk. Stop-loss insurance may be used to limit financial exposure for high claim costs.

Regulatory Compliance

Fully Insured Plans: Often come with pre-packaged ACA-mandated benefits, ensuring compliance with federal regulations. Insurance carriers handle compliance-related administrative tasks.

Level Funded Plans: Allow more customization, but employers must ensure they comply with applicable federal and state regulations. HR teams and TPAs share the responsibility of compliance-related tasks.

Understanding these distinctions empowers employers to make well-informed decisions about employee health coverage, considering cost, risk, and regulatory requirements. By choosing the most suitable plan, employers can provide their workforce with comprehensive healthcare while optimizing budget allocation.

Plan Flexibility and Customization: Tailoring Benefits to Meet Your Employees’ Needs

Fully Insured Plans: Fully Insured Plans typically come with standardized benefit packages provided by the insurance carrier. While this offers simplicity and convenience, it may limit the ability to tailor the plan to the specific needs of your employees. Employers have less control over plan design, benefit levels, and cost-sharing arrangements.

Level Funded Plans: One of the primary advantages of Level Funded Plans is the increased flexibility and customization they offer. With Level Funded Plans, employers can work closely with the third-party administrator (TPA) to design a plan that aligns with their employees’ unique healthcare needs. This flexibility extends to benefit design, network selection, and even wellness programs. By having more control over plan features, employers can cater to the preferences of their workforce, leading to higher employee satisfaction and engagement.

Any Questions?

We are in the business of providing healthcare to everyday people, ensuring peace of mind through trust and transparency.

Our customer service is what sets us apart. We work when you work. Our carrier partners have given us exclusive offerings to complement our medical plans, giving you the best possible price. Our speed of implementation and innovative approach to benefit coverage is second to none.
Learn more about us and our services, here.

HMO, PPO, EPO, Captive, MVP, and Restricted Benefits

October 6, 2025/in Employer Resources, News

The Employers Guide to Health Benefits

Choosing the right health coverage for your business is more than a compliance requirement. It’s a strategic decision that impacts cost management, employee satisfaction, and workforce stability. Today’s employers have a range of plan types to consider, each with distinct structures, cost profiles, and administrative requirements.

This article offers a clear, structured comparison of six major coverage options—HMO, PPO, EPO, Captive Plans, Minimum Value Plans (MVP), and Restricted Medical Coverage—designed to help employers navigate their options and select the approach that best aligns with their workforce needs and business goals.

Understanding the Plan Types

What Is an HMO?

A Health Maintenance Organization (HMO) plan emphasizes cost containment and network coordination. Employees must select a primary care physician (PCP) and obtain referrals to see specialists. Services are limited to in-network providers, except in emergencies.

Key Characteristics

Requires referrals for specialist care
Services limited to in-network providers
Typically lower premiums and out-of-pocket costs

What Is a PPO?

A Preferred Provider Organization (PPO) provides employees with more flexibility in provider selection. It allows both in- and out-of-network care and does not require PCP referrals for specialist access.

Key Characteristics

Broad provider network
No referral required for specialists
Higher premiums and more flexibility

What Is an EPO?

An Exclusive Provider Organization (EPO) blends aspects of HMO and PPO structures. It offers network-based care without requiring referrals but does not cover out-of-network services except in emergencies.

Key Characteristics

In-network only coverage
No referral required for specialists
Balanced cost and access

What Is a Captive Plan?

A Captive Plan is a form of self-funding in which a group of employers pools their resources to form a private insurance entity. Captive arrangements provide transparency, shared risk, and customizable design.

Key Characteristics

Offers long-term cost control through pooled risk
Enhanced data transparency for claims management
Requires stable claims experience and long-term commitment

What Is an MVP Plan?

Minimum Value Plans (MVPs) are designed to meet the Affordable Care Act’s definition of minimum essential coverage. MVPs typically cover at least 60 percent of the total allowed cost of benefits and include substantial inpatient and physician services.

Key Characteristics

ACA-compliant
Lower monthly premiums
Ideal for meeting mandate requirements

What Is Restricted Medical Coverage?

Restricted Medical Coverage offers essential, high-utility healthcare benefits at a lower cost. These plans often include preventive services, office visits, urgent care, basic labs, and limited prescription drug coverage.

Key Characteristics

Focused on everyday care needs
Lower premiums compared to major medical
Ideal for part-time, hourly, or high-turnover workforces
Scalable across industries and sizes

SBMA supports Restricted Medical Coverage with a comprehensive administrative platform that enables simple onboarding, ID card delivery, claims management, payment tracking, and employee support. This makes offering coverage efficient and compliant for employers of all sizes.

Plan Comparison: Key Differences

Feature	HMO	PPO	EPO	Captive	MVP	Restricted
Network Type	In-network only	In- and out-of-network	In-network only	Custom network	In-network focus	In-network, focused scope
Referrals Required	Yes	No	No	Varies	No	No
Employer Cost	Lower	Higher	Moderate	Varies based on structure	Lower monthly premiums	Lower premiums with practical coverage
Administrative Complexity	Low	Moderate	Moderate	High	Low	Low with SBMA platform

Minimum Enrollment Requirements and Administrative Efficiency

Traditional group health plans often require a minimum number or percentage of eligible employees to enroll in order to activate coverage. This can present challenges for employers with part-time or seasonal staff, high turnover, or lean operations.

SBMA offers health coverage solutions with very low or no minimum enrollment requirements, which provides significant flexibility for employers across industries. Paired with an efficient administrative system—covering onboarding, ID cards, offboarding, claims, and billing—this makes implementation and management more predictable and less resource-intensive.

Affordability: Legal Definition and Practical Impact

Under the Affordable Care Act (ACA), an employer’s offer of coverage is considered affordable if the employee’s share of the premium for self-only coverage does not exceed 8.39 percent of their household income in 2025.

This is a compliance benchmark, but practical affordability depends on more than just premium cost. Deductibles, out-of-pocket maximums, and access to everyday care all influence whether a plan is truly usable.

Plans like Restricted Medical Coverage are designed with real-world application in mind, often avoiding high deductibles in favor of more accessible first-dollar coverage for preventive and routine care.

Which Plan Is Right for Your Business?

There is no universal solution. The right health plan depends on your workforce, your cost structure, and your long-term strategy. Use the following as a guide:

Choose an HMO if your team values structure, and you want predictable, lower-cost premiums.

Choose a PPO if your employees want the freedom to choose providers and access out-of-network care.

Choose an EPO if you want in-network coverage with fewer restrictions but lower cost than a PPO.

Choose a Captive Plan if you have a stable, benefits-engaged workforce and want long-term control over healthcare spending.

Choose an MVP Plan if your goal is to meet ACA compliance with lower monthly premiums and minimal disruption to payroll.

Choose Restricted Medical Coverage if your workforce includes hourly, part-time, or high-turnover employees who benefit from simple, everyday care access at an affordable rate. With SBMA’s platform, employers can scale this coverage with confidence and efficiency.

Choosing The Right Coverage For Your Business

Employers are navigating a more complex benefits environment than ever before. With rising healthcare costs and shifting workforce expectations, plan selection must go beyond compliance and base premiums. It requires clarity, structure, and a system that supports both your business operations and your employees’ health.

SBMA provides the tools, support, and plan options that help employers lead with confidence. When the structure is clear and the delivery is efficient, health benefits become a competitive advantage—not a cost center.

2025 Employers Guide to COBRA

July 26, 2025/in COBRA, Employer Resources, Machine-Readable Compliance FIles, News, No Surprises Act

As we move into 2025, it’s important for employers to know about the Consolidated Omnibus Budget Reconciliation Act (COBRA). This law gives employees and their families the chance to keep their health insurance after certain life events. This guide will explain what COBRA is, what employers need to do, and how to make the process easier for everyone.

What is COBRA?

COBRA is a federal law that lets employees keep their group health insurance for a limited time after specific events. It applies to businesses with 20 or more employees and covers group health plans from private companies and local or state governments.

COBRA is there for employees and their families after they go through a qualifying event, like:

Losing their job (unless they were fired for bad behavior)
Having their work hours cut
Getting divorced
The death of the employee
Losing dependent status (like a child turning 26)

Why is COBRA Important?

COBRA is really important because it helps people keep their health insurance during tough times. Losing your job or going through a big life change can be stressful, and having health insurance can help ease some of that worry. COBRA gives people the time they need to find new jobs or other insurance options.

What Do Employers Need to Do?

If you’re an employer, it’s crucial to understand your responsibilities under COBRA to stay compliant and avoid fines. Here are the main things you need to know:

1. Notify Employees of Their COBRA Rights

When an employee becomes eligible for COBRA, you must inform them. This means sending a notice within 14 days of a qualifying event. The notice should include:

Information about their right to continue health coverage
How long can they keep the coverage
How much will it cost them
Instructions on how to enroll in COBRA coverage

2. Provide Coverage Options

If an employee chooses COBRA, you need to offer the same health benefits they had when they were employed. This means they should still have access to medical, dental, and vision insurance if those were part of their original plan.

3. Handle COBRA Premium Payments

You can charge employees up to 102% of the premium for COBRA coverage. This includes the total cost of the coverage plus a 2% fee for administration. Make sure to communicate clearly about when payments are due and how employees can pay.

4. Keep Records

It’s essential to keep records of all COBRA notifications, elections, and payments. Good record-keeping helps with compliance and can be useful if there are any disputes later.

5. Understand Reporting Requirements

If your business is required to file Form 5500, you must report COBRA enrollment and compliance. This form gives the Department of Labor (DOL) information about your employee benefits plan, including COBRA.

How Long Does COBRA Coverage Last?

COBRA coverage doesn’t last forever. The duration of coverage depends on the qualifying event:

18 months: For employees who lose their jobs or have their hours reduced.

29 months: If a person is disabled (this must be determined within the first 60 days of COBRA coverage).

36 months: For dependents who lose coverage due to the employee’s death, divorce, or legal separation.

Employers should notify former employees when their COBRA coverage is about to end, so they have time to find other options.

Best Practices for Employers

To stay compliant and help employees during transitions, consider these best practices:

1. Create a COBRA Compliance Plan

Make a clear plan that outlines how you will notify employees, manage elections, and handle payments. Assign specific roles to ensure everyone knows what they are responsible for.

2. Use a Third-Party Administrator (TPA)

Think about hiring a TPA that specializes in COBRA administration. They can help manage notifications, elections, and payments, making the process easier for your HR team.

3. Communicate Clearly with Employees

Make sure your communication about COBRA coverage is simple and easy to understand. Provide employees with written materials that explain their rights and responsibilities. Designate HR representatives who can help answer questions.

4. Stay Updated on Changes in the Law

Keep an eye on any changes in COBRA regulations, as laws can change. Regularly review your policies and practices to ensure they are up-to-date.

5. Provide Resources for Alternative Coverage

Help employees transition from COBRA to other health insurance options. Share information about state health insurance marketplaces, Medicaid, or private insurance plans they can consider.

Common Misconceptions about COBRA

Let’s clear up some common misunderstandings about COBRA:

Myth 1: COBRA is Free: COBRA allows employees to keep their health coverage, but they have to pay for it. The cost may be higher than what they paid while employed.

Myth 2: Employers Can Deny COBRA Coverage: Employers must offer COBRA coverage unless the employee was fired for serious misconduct.

Myth 3: COBRA Coverage is Indefinite: COBRA coverage is temporary and has set time limits based on the qualifying event.

Final Notes

Understanding COBRA is essential for employers as we head into 2025. By meeting your obligations to notify employees, provide coverage, and keep accurate records, you can help ensure compliance and support your employees during their transitions.

COBRA provides important health insurance continuity for employees facing significant life changes, allowing them to access necessary healthcare services. By proactively managing COBRA responsibilities, you create a supportive workplace that helps employees feel valued and cared for.

For personalized help with COBRA regulations and compliance, consider reaching out to a healthcare benefits expert or legal advisor. They can offer guidance tailored to your organization’s needs and help you implement effective strategies for managing COBRA.

7 Key Strategies to Ensure ACA Compliance and Prevent Penalties

March 2, 2025/in ACA Compliance, Employer Resources, News

The Affordable Care Act (ACA) has been a game-changer for employee health care benefits since it was introduced. It’s opened up new opportunities but has also brought along some tricky challenges, especially when it comes to federal reporting compliance. With the IRS becoming more aggressive in enforcing these regulations, it’s crucial for HR and benefits leaders to stay on top of their game.

In this article, we’ll cover why accurate data is essential for ACA compliance and share seven strategies to help you keep your data accurate and complete.

Why Accurate Data is Critical for ACA Compliance

To comply with the ACA, you need to report detailed information about your employees and their health care coverage. This includes data such as names, Social Security numbers, hours worked, and the health benefits offered. Accurate and complete data is not just a formality; it’s essential for staying compliant and avoiding costly penalties.

Penalties for non-compliance can be severe. For example:

4980H(a) Penalty: If your company fails to offer affordable health coverage to at least 95% of full-time employees and one employee receives a Premium Tax Credit (PTC) through the ACA marketplace, the penalty is $247.50 per month per employee. This could add up to over $800,000 annually for a company with 300 employees.
4980H(b) Penalty: This penalty applies if your coverage is either unaffordable or does not meet the Minimum Value standard. In 2024, the penalty is $372 per month, or $4,460 per year, per employee.
Failure to File Penalty: Missing the deadline for filing 1095-C forms can result in fines of $310 per return in 2024, increasing to $630 for intentional disregard.
Failure to Furnish Penalty: Similar to the failure to file penalty, this can be $310 per return, rising to $630 for intentional disregard.

Keeping accurate records of employee demographics and medical coverage information is crucial for avoiding these penalties.

What Data You Need for ACA Compliance

1. Demographic Data

Full Names and Social Security Numbers: Ensure you have the correct information for all employees.
Employment Status: Track whether employees are full-time, part-time, or seasonal. Also, record any changes in employment status throughout the year.
Dates of Employment: Keep records of when employees are hired and when they leave.
Hours Worked: This is important for determining full-time status under the ACA. Full-time status is based on hours worked, not the type of payment.

2. Medical Coverage Information

Coverage Dates: Know when each employee’s coverage starts and ends.
Coverage Tiers: Record whether employees are covered alone, with a spouse, or with their family.
Coverage Offered and Declined: Document what health benefits were offered to employees and whether they accepted or waived them.

7 Strategies to Keep Your ACA Data Accurate

1. Conduct Regular Audits

Regular audits help you catch and fix errors or missing information. Verify Social Security numbers, hours worked, and the health benefits offered. Regular checks will help you stay compliant and avoid last-minute stress.

2. Continuously Track Employee Status

Maintain accurate records of employee status changes—whether full-time, part-time, or seasonal. This includes tracking hiring and termination dates, status changes, and leaves of absence. Keep your system updated in real time to ensure accuracy.

3. Make Technology Your Ally

Invest in HR technology such as HRIS (Human Resource Information System), HRMS (Human Resource Management System), or a benefits administration system. These systems can automate data verification, reduce errors, and ensure accuracy. Look for technology partners with ACA validation features to streamline the reporting process.

4. Track Compliance Benchmarks Efficiently

An advanced HR system can track compliance benchmarks and alert you to important deadlines. This reduces the risk of missing crucial tasks and ensures you stay on top of your compliance requirements.

5. Educate Employees

Educate your employees about the importance of accurate data. This includes initial onboarding and ongoing training about ACA requirements. Keep communication channels open so employees understand how their data impacts compliance.

6. Collaborate with IT

Work closely with your IT department to ensure data integration systems are running smoothly. While benefits and HR focus on data accuracy, IT ensures that systems integrate and function properly.

7. Integrate and Verify All ACA Data

Ensure data accuracy across all platforms. Use automated data integration to reduce human error and conduct regular audits to verify the correctness of integrated data. Centralizing data management makes it easier to access, manage, and verify information.

Making ACA Compliance Simpler

Staying compliant with the ACA can be complex, but it doesn’t have to be overwhelming. Here’s a simplified plan to get started:

Robust Onboarding: Collect all necessary data during the new-employee onboarding process.
Regular Data Audits: Schedule audits to keep ACA-related employee information up-to-date and accurate.
Leverage Technology: Use HR technology to streamline data management and integrate all systems handling employee data.

By implementing these strategies, you can make ACA compliance more manageable and avoid hefty penalties. Start by seeking advice from ACA and benefits administration experts to refine your data practices and stay compliant with ACA regulations.

Still Have Questions?

Learn more about us and our services, here.

How MEC Coverage Supports Preventive Healthcare and Employee Wellness

February 21, 2025/in Employer Resources, Machine-Readable Compliance FIles, MEC, News, No Surprises Act

Preventive healthcare has become a cornerstone of modern medicine, emphasizing the importance of stopping illnesses before they start. For employers, offering health benefits that support this approach isn’t just a nice-to-have—it’s essential for cultivating a healthy, productive workforce. One effective way to achieve this is through Minimum Essential Coverage (MEC). MEC plans ensure employees have access to preventive healthcare services while aligning with Affordable Care Act (ACA) requirements.

In this blog, we’ll explore how MEC coverage supports preventive care and employee wellness, and why it’s a smart choice for businesses and their teams.

What Is MEC Coverage?

MEC, or Minimum Essential Coverage, refers to health insurance plans that meet ACA requirements by covering a set of basic health benefits. These include preventive care services, such as vaccinations, screenings, and annual check-ups, at no cost to the insured individual.

MEC plans are designed to provide employees with access to essential preventive services without imposing the high premiums associated with traditional health insurance. These plans can be a cost-effective solution for businesses, especially those looking to provide ACA-compliant coverage while maintaining budgetary flexibility.

The Role of Preventive Healthcare

Preventive care focuses on identifying and addressing health risks early, often before symptoms arise. Common preventive services include:

Vaccinations: Protect against diseases like influenza, measles, and hepatitis.
Screenings: Detect conditions such as diabetes, high cholesterol, and certain cancers early.
Routine Check-Ups: Help monitor overall health and catch potential issues.

By encouraging preventive care, employers can help their teams avoid the physical, emotional, and financial strain associated with chronic illnesses or untreated health conditions.

How MEC Coverage Promotes Preventive Healthcare

MEC plans prioritize preventive care by offering 100% coverage for a wide range of ACA-mandated services. Here’s how MEC plans specifically support preventive healthcare:

Cost-Free Access to Preventive Services
Under MEC coverage, employees can access a variety of services without paying co-pays, deductibles, or out-of-pocket costs. This removes financial barriers that might otherwise deter individuals from seeking preventive care.
Focus on Early Detection
MEC plans provide coverage for essential screenings, such as blood pressure tests and mammograms. These screenings allow healthcare providers to identify issues early, leading to better outcomes and reduced treatment costs.
Encouraging Healthier Lifestyles
Regular health check-ups and preventive services empower employees to take charge of their health. By knowing their numbers—like cholesterol levels or BMI—they can make informed decisions about diet, exercise, and other lifestyle factors.

Benefits of MEC Coverage for Employees

For employees, MEC coverage is more than just an insurance plan; it’s a pathway to better health. Key benefits include:

Accessible Preventive Care: Employees can prioritize their well-being without worrying about upfront costs.
Reduced Risk of Chronic Illness: Preventive services help mitigate long-term health risks.
Improved Quality of Life: Healthier employees are happier, more energetic, and more productive.

When employees feel supported in their health journey, they’re likely to bring their best selves to work—a win-win for both the individual and the organization.

Benefits of MEC Coverage for Employers

Employers also stand to gain significantly from offering MEC coverage. Here’s how:

ACA Compliance
Offering MEC plans helps businesses meet ACA requirements and avoid penalties. This is particularly relevant for employers with 50 or more full-time equivalent employees.
Cost-Effective Coverage
MEC plans are typically more affordable than traditional health insurance, making them an attractive option for small and mid-sized businesses.
Enhanced Employee Retention
Employees value benefits that prioritize their health. By offering MEC coverage, businesses demonstrate their commitment to employee wellness, fostering loyalty and reducing turnover.
Improved Productivity
Healthy employees are less likely to take sick days and more likely to be engaged at work. Preventive care ensures fewer disruptions caused by unexpected illnesses.

Building a Culture of Wellness with MEC

While offering MEC coverage is a great starting point, businesses can amplify its benefits by integrating it into a broader wellness strategy. Here’s how:

Promote Awareness
Educate employees about the preventive services covered under their MEC plan. Distribute materials, hold informational sessions, and ensure easy access to plan details.
Encourage Regular Health Check-Ups
Create a workplace culture that normalizes taking time for routine check-ups. For instance, offer flexible scheduling or health-focused incentives.
Combine with Wellness Initiatives
Pair MEC plans with workplace wellness programs, such as fitness challenges, mental health resources, or healthy snack options in the office.
Monitor and Adapt
Gather feedback from employees to identify gaps or areas for improvement in your wellness offerings.

Choosing the Right MEC Plan for Your Team

Not all MEC plans are created equal. When selecting a plan for your employees, consider:

Coverage Scope: Ensure the plan covers all ACA-mandated preventive services.
Affordability: Balance cost-effectiveness with comprehensive benefits.
Provider Network: Choose a plan with a wide network of healthcare providers.
Ease of Use: Look for plans that offer straightforward enrollment and administration processes.

Partnering with a knowledgeable benefits advisor can help you navigate these choices and find the best fit for your organization.

Final Thoughts

MEC coverage is more than a compliance tool; it’s a strategic investment in preventive healthcare and employee wellness. By offering MEC plans, businesses can support their teams’ health, foster a positive workplace culture, and enjoy the long-term benefits of a healthier, more engaged workforce.

In an era where health and wellness are top priorities for employees, MEC coverage is a simple yet effective way for employers to make a meaningful impact. Whether you’re a small business or a large organization, embracing MEC coverage is a step toward a healthier future for everyone involved.

For more information about MEC, check out our comprehensive guide to MEC and what it covers, here.

How to Manage Your Formulary: The Employers Guide to RX Drug Coverage

February 9, 2025/in Employer Resources, Machine-Readable Compliance FIles, News, No Surprises Act

Prescription drug coverage is a key part of any employer-sponsored health plan, but rising costs and complex systems can make it challenging to manage. This guide will help you take control of your formulary, aligning it with your goals and budget while keeping employees satisfied.

What Is a Formulary?

A formulary is a list of prescription drugs covered by a health plan. It typically includes generic drugs, brand-name drugs, and specialty medications, categorized into tiers that determine how much employees pay out-of-pocket.

Understanding your formulary is the first step toward effective management. Formularies are typically structured as:

Tier 1: Low-cost generic drugs
Tier 2: Preferred brand-name drugs
Tier 3: Non-preferred brand-name drugs
Tier 4: Specialty drugs

Each tier comes with different costs for the employer and employee, impacting the overall affordability of your plan.

Why Effective Formulary Management Matters

Poorly managed prescription drug plans can result in:

Rising Costs: High utilization of expensive drugs can lead to unsustainable premiums.
Employee Dissatisfaction: Lack of access to necessary medications can cause frustration.
Compliance Risks: Mismanaging a formulary can lead to legal and regulatory issues.

Effective management ensures cost control, enhances employee satisfaction, and reduces administrative headaches.

Steps to Manage Your Formulary

1. Evaluate Your Current Plan

Start by analyzing your current prescription drug coverage. Look at utilization trends, costs, and employee feedback.

Key Questions to Ask:
- Are employees satisfied with their prescription drug options?
- Are high-cost specialty drugs driving up expenses?
- Are there frequent requests for drugs not included in your formulary?

An annual review with your benefits consultant or pharmacy benefits manager (PBM) can uncover gaps and inefficiencies.

2. Partner with a PBM

Pharmacy Benefit Managers (PBMs) play a critical role in formulary management. They negotiate drug prices with manufacturers, decide which drugs are included in your formulary, and determine employee cost-sharing.

What to Look for in a PBM:
- Transparent pricing structures
- A robust network of pharmacies
- Proactive cost-management strategies

A good PBM can help you strike a balance between affordability and access.

3. Prioritize Cost-Effective Medications

Generic drugs and biosimilars are often just as effective as their brand-name counterparts but at a fraction of the cost. Work with your PBM to encourage employees to choose cost-effective options.

Strategies to Promote Savings:
- Highlight generic alternatives in employee education materials.
- Implement step therapy programs, requiring employees to try lower-cost options first.
- Offer tiered pricing to incentivize cost-saving choices.

4. Monitor Specialty Drug Costs

Specialty drugs treat complex conditions but often come with exorbitant price tags. According to industry reports, these medications account for a small percentage of prescriptions but a significant portion of drug spending.

Ways to Manage Specialty Drug Costs:
- Require prior authorization to ensure appropriate use.
- Partner with specialty pharmacies for better pricing.
- Explore co-pay assistance programs offered by drug manufacturers.

Educating Employees on the Formulary

Clear communication is essential for effective formulary management. Employees need to understand their options and the rationale behind the plan’s structure.

What to Include in Employee Education:

How the Formulary Works: Explain the tiers and out-of-pocket costs.
How to Find Covered Medications: Share links to online formulary lists or apps.
Cost-Saving Tips: Highlight the benefits of generics, mail-order pharmacies, and preventive drug programs.
Contact Information: Provide clear instructions on how to get help with prescription questions.

Use newsletters, webinars, and one-on-one meetings to keep employees informed and engaged.

Leveraging Technology

Digital tools can simplify formulary management and improve the employee experience.

Mobile Apps: Many PBMs offer apps that allow employees to check drug coverage, compare prices, and find nearby pharmacies.
Telehealth: Virtual visits can help employees get prescriptions faster and often at a lower cost.
Analytics Tools: Use data dashboards to monitor trends and identify areas for improvement.

Addressing Common Challenges

1. Managing Plan Costs

Prescription drug prices are rising faster than inflation. To combat this, consider:

Utilization Reviews: Analyze whether high-cost drugs are being overprescribed.
Rebates: Work with your PBM to maximize manufacturer rebates.
Alternative Funding Programs: Explore options like international sourcing for non-critical medications.

2. Handling Employee Complaints

Employees may express frustration if a drug they need isn’t covered or is too expensive. Be prepared to address these concerns.

Offer Flexible Options: Allow employees to appeal for coverage of non-formulary drugs when medically necessary.
Communicate Changes Early: If you’re updating your formulary, give employees ample notice.

3. Staying Compliant

Regulations like the Affordable Care Act and the Consolidated Appropriations Act require transparency and fairness in drug coverage. Partner with legal experts or consultants to ensure compliance.

Formulary Management Best Practices

Review Your Formulary Annually: Adjust coverage to account for new drugs, pricing changes, and employee needs.
Incentivize Preventive Care: Cover preventive medications at no cost to reduce long-term health expenses.
Focus on Employee Engagement: Solicit feedback and use it to refine your plan.

The Bottom Line

Managing your formulary doesn’t have to be overwhelming. By partnering with a trusted PBM, prioritizing cost-effective options, educating employees, and leveraging technology, you can create a prescription drug plan that balances cost, compliance, and care.

Remember, a well-managed formulary benefits everyone—employers control costs, employees access the medications they need, and your organization builds a reputation as a supportive and forward-thinking workplace.

For more insights on health benefits management, reach out to your benefits consultant or explore resources from your PBM. A proactive approach today can lead to a healthier, more cost-effective tomorrow.

Any questions? We have answers. Learn more about us and our services, here.

2025 Employers Guide to COBRA

January 26, 2025/in COBRA, Employer Resources, Machine-Readable Compliance FIles, News, No Surprises Act

What is COBRA?

COBRA is there for employees and their families after they go through a qualifying event, like:

Losing their job (unless they were fired for bad behavior)
Having their work hours cut
Getting divorced
The death of the employee
Losing dependent status (like a child turning 26)

Why is COBRA Important?

What Do Employers Need to Do?

If you’re an employer, it’s crucial to understand your responsibilities under COBRA to stay compliant and avoid fines. Here are the main things you need to know:

1. Notify Employees of Their COBRA Rights

When an employee becomes eligible for COBRA, you must inform them. This means sending a notice within 14 days of a qualifying event. The notice should include:

Information about their right to continue health coverage
How long they can keep the coverage
How much it will cost them
Instructions on how to enroll in COBRA coverage

2. Provide Coverage Options

3. Handle COBRA Premium Payments

4. Keep Records

It’s essential to keep records of all COBRA notifications, elections, and payments. Good record-keeping helps with compliance and can be useful if there are any disputes later.

5. Understand Reporting Requirements

How Long Does COBRA Coverage Last?

COBRA coverage doesn’t last forever. The duration of coverage depends on the qualifying event:

18 months: For employees who lose their jobs or have their hours reduced.

29 months: If a person is disabled (this must be determined within the first 60 days of COBRA coverage).

36 months: For dependents who lose coverage due to the employee’s death, divorce, or legal separation.

Employers should notify former employees when their COBRA coverage is about to end, so they have time to find other options.

Best Practices for Employers

To stay compliant and help employees during transitions, consider these best practices:

1. Create a COBRA Compliance Plan

Make a clear plan that outlines how you will notify employees, manage elections, and handle payments. Assign specific roles to ensure everyone knows what they are responsible for.

2. Use a Third-Party Administrator (TPA)

Think about hiring a TPA that specializes in COBRA administration. They can help manage notifications, elections, and payments, making the process easier for your HR team.

3. Communicate Clearly with Employees

4. Stay Updated on Changes in the Law

Keep an eye on any changes in COBRA regulations, as laws can change. Regularly review your policies and practices to ensure they are up-to-date.

5. Provide Resources for Alternative Coverage

Help employees transition from COBRA to other health insurance options. Share information about state health insurance marketplaces, Medicaid, or private insurance plans they can consider.

Common Misconceptions about COBRA

Let’s clear up some common misunderstandings about COBRA:

Myth 1: COBRA is Free: COBRA allows employees to keep their health coverage, but they have to pay for it. The cost may be higher than what they paid while employed.

Myth 2: Employers Can Deny COBRA Coverage: Employers must offer COBRA coverage unless the employee was fired for serious misconduct.

Myth 3: COBRA Coverage is Indefinite: COBRA coverage is temporary and has set time limits based on the qualifying event.