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Employer Mandate - Monthly Measurement Method


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Employer X offers its employees group medical coverage. For purposes of the employer mandate, it has elected the monthly measurement method. Let's say an employee has satisfied the waiting period and is eligible for coverage as of July 1, 2016. Because the employee is actively working during July, and it cannot accurately predict whether the employee would be credited with at least 120 hours of service in July, does the employee get coverage regardless of whether the employee is credited with the minimum number of hours in July? In that case, would the employee then lose coverage for August? Or, does the employer provide the employee with provisional coverage during July and if s/he fails to be credited with at least 120 hours of service during July, does the employer then slip the July 2016 medical coverage rug out from under the employee at the end of July? What if the employee has incurred claims in the month of July?

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The issue you are describing is the exact reason the government created the look back measurement method. If an employer elects to use the monthly measurement method and an employee accumulates 130 or more hours of service in a month, the employee will be counted as a full-time employee for that month and typically need to be offered coverage or the employer will risk paying a section 4980H penalty. An employer is only considered to have offered coverage to an employee if the employee was eligible to participate in coverage for each day of the calendar month. Please note this does not account for the first three calendar month limited non-assessment period an employer using the monthly measurement method may be able to utilize one time per employment period for each employee.



In your example the question as to whether the employee needs to be offered coverage in July is solely based on the number of hours the employee accumulated in July and the employer will not know that until July 31. Similarly, the question as to whether the employee needs to be offered coverage in August is solely based on the number of hours the employee accumulated in August. If an employer is going to have employees with hours of service that fluctuate from month to month it has to adopt a look back measurement method policy or it is going to be at risk of a section 4980H penalty.



Don’t take this the wrong way but I would highly recommend tracking down somebody that can assist you with this process as we are 18 months into the ACA having an active 4980H provision and you seem to be struggling to apply the basic rules for the 4980H penalty. While it will be difficult if not impossible to correct any errors you have made in the past that may lead to a section 4980H penalty, you can correctly apply the law moving forward. Email me if you want additional guidance rmoulder@healthcare-attorneys.com.



Ryan

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Supporting what Ryan said, the monthly measurement method is never an appropriate method of determining who is eligible for coverage, it's only use is in determining who has to be reported as a FT employee on the 1095-C.

Accordingly, it should only be employed where the employer is sure no employee who is not being offered coverage can possibly work 130 hours in any calendar month (or is willing to risk a penalty for the limited/rare instances where it might occur).

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