Content updated June 11, 2018

By now most employers understand that they must comply with the Affordable Care Act. They also realize that there are potentially serious penalties for:

  • Offers of health insurance that should have been made at a certain time but were not.
  • Offers of health insurance that were made, but did not meet ACA standards for quality or affordability.

One of the ways to avoid these penalties is to ensure that you are offering coverage to ALL full-time eligible employees by using one of two measurement methods allowed by the IRS. If you have selected a measurement method, you may still have questions as to whether you have selected the best method OR perhaps you are considering changing methods.

To help all employers, not just our clients, sort through what is allowable for the very first step in ACA compliance – identification of full-time employees – we are sharing answers to two of those questions here:

Q: Once I have selected either the monthly or the look-back measurement method for determining eligibility for coverage; can I change my choice from year to year – or do I have to stay with the chosen method forever?

ACA eligibility-testing methods_Integrity Data ACA Compliance Solution

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A: No, you can actually change your measurement method – cautiously.

From the monthly measurement method to the look-back measurement method, the change can be made anytime. If you make this change, you cannot discontinue coverage for employees who were eligible under the monthly method but now are ineligible after the look-back measurement test. For those individuals, you must see whether, in prior three months going into the stability period, they had worked 130 hours in any of those months. If so, they will have to remain covered until they have consecutive months where they do not reach 130 hours.

In going from the look-back measurement method to the monthly measurement method, a concern arises when you had tested people that you know to be in a stability period – that were eligible during a stability period. When you go to the monthly method, their hours do not go away. If someone is in their stability period, you cannot change their coverage eligibility until after that stability period is exhausted.

On the month that the change is made from the monthly method to a look-back measurement, you must have determined eligibility effective that month.

Q: Are there disadvantages to changing from the look-back measurement method to the monthly measurement method?

A: Yes

Using the monthly measurement method means that you will have to analyze hours of service per calendar month to determine employee’s eligibility. If an employee works at least 30 hours of service per week, you are required to offer them coverage. This employee must be treated as full-time employee for any month in which they average at least 30 hours per week.

The monthly measurement method may cause practical difficulties for employers who manage varying hours or work schedules. Administering coverage using this method can be challenging and overwhelming, as employees frequently change from being eligible to not eligible. The look-back method is the preferred choice for most employers.

Need ACA tracking software that supports variable-hour tracking?

Integrity Data is well-versed in variable-hour tracking. Our ACA solution assists employers in determining employee’s eligibility for an offer of health insurance. Please review our other blogs on tracking eligibility: