The Affordable Care Act – What Every Employer Should Know!    






 What is the Affordable Care Act of 2010?   

ACA passed March 23, 2010 and was effective   September 23, 2010

Plans existing before March 23, 2010 had the option   to choose a “grandfathered” status when reform was enacted.

Certain provisions were applied to plans whether or   not a plan held grandfathered status.

Select small businesses became eligible for phase   one of the small business premium tax credit.

Employers that provided a Medicare Part D subsidy to   retirees had to account for the future loss of the deductibility of this   subsidy beginning in 2010 on liability and income statements. 

The Pre-Existing Condition Insurance Plan (PCIP) or   temporary high-risk pool program, for people who could not obtain individual   health insurance coverage due to pre-existing conditions began.  This program ends January 1, 2014.

The federal web health insurance information portage was created.

Non-grandfathered insured groups were required to   comply with IRS Section 105(h) that prohibits discrimination in favor of   highly compensated individuals.    However, the IRS announced it would not enforce this provision until   release or further guidance about how these provisions would apply to insured   groups.  Guidance has still not been   issued.

Lifetime limits on the dollar value of benefits for   fully insurance and self-funded groups were prohibited.

Annual limits are only allowed through plan years   beginning prior to January 1, 2014 and only on the HHS defined non-essential   benefits.

All plans had to begin coverage for dependents to   age 26 (can be married and also be eligible for group health insurance).  However, through 2014, grandfathered plans   will only have to provide coverage to those dependents that do not have   another source of employer-sponsored coverage.

All plans had to begin covering pre-existing   conditions for children 19 and under.

Health coverage rescissions were prohibited for all   health insurance except for fraud or intentional misrepresentation.

Plans covering emergency services in a hospital must   also cover out-of-network emergency services as if they were in-network   services.  Plans must also allow   enrollees to designate any in-network doctor as their PCP and have a coverage   appeal process.

All plans without grandfathering had to begin   covering specific preventive care services with no cost-sharing.




Fully insured plans were subject to the medical loss   ratio requirements.  Individual &   small groups must adhere to an 80% MLR and large groups to an 85% MLR.  If plans do not meet this requirement, each   year insurers have to pay policyholders rebates by August of the following   year.  Effective January 2013, the   rebate is due by September.

Tax penalty on distributions from Health Savings   Accounts (H.S.A.’s) that are not used for qualified medical expenses increase   from 10% to 20%.

Reimbursement for over-the-counter drugs under   H.S.A.’s, medical F.S.A.’s, H.R.A.’s and Archer M.S.A.’s were prohibited   without a prescription.

Small employers were allowed to adopt new “simple   cafeteria plans”.

The Class Act public long term care program was   found to be fiscally unsustainable and repealed December 2012.

HSS & DOL began a study on the large group   market by collecting data from Form 5500.




Employers filing 250 or more W-2 forms in 2012 are   required to report the cost of the employer-sponsored health coverage.

Health insurers are required to provide a Summary of   Benefits & Coverage to employers.    Employers are required to provide all enrollees and applicants with a   copy at Initial Enrollment, Open Enrollment or when a material change is made   to the coverage

Group insurers and self-funded plans have to begin   submitting quality reports to HHS.    Report must state whether or not the benefits provided under the plan   meets criteria established by HHS.

All non-grandfathered plans and individual health   insurance must provide coverage for specified women’s preventive care service   without cost-sharing requirements including contraceptives.




Premium tax on fully insured and self-funded group   health plans to fund comparative effectiveness research program begins.

FSA contributions for medical expenses are limited   to $2,500 per year (cap to be annually indexed for inflation).

Medicare payroll tax increase of 0.9% (total 2.35%) goes   into effect for individual filers with incomes over $200,000 and joint filers   with incomes over $250,000.  In   addition, there is a new 3.8% Medicare contribution on certain unearned   income from high-income individuals.

For those itemizing their federal income taxes, the   threshold for deducting unreimbursed medical expenses increases from 7.5% of   AGI to 10% of AGI.  The increase is waived   for those 65 years or older through 2016.

All employers are required to provide notices to   their employees of the upcoming state exchange.  This was to be done by March 31, 2013   however the DOL has not released a template letter and so has been delayed   pending further guidance from the DOL.




Individual Mandate tax penalties take effect. 

States are required to have health benefit exchanges   up and running to service individuals and small-employers.  California’s exchange called “Covered   California” is in full swing and has been approved by the HHS.

For individual and fully insured groups, all plans   must be offered on a guaranteed issue basis, preexisting condition   limitations will be prohibited, annual and lifetime limits will be fully   prohibited (including grandfathered plans).

Size of small-employer group will be redefined as 1   to 100 employees (although states may elect to keep the size of a small group   at 50 employees until 2016) California defines small group at 50 for now.

Individual and small group plans will have to abide   by strict modified community rating standards with premium variations only   allowed for age (3:1), tobacco use (1:5.1), family composition and geographic   region.  Experience rating will be   prohibited.

Individual and small group plans (in and out of the   exchange) must include the Essential Health Benefits and must cover mandated   benefits, cost sharing requirements, out-of-pocket limits and minimum   actuarial value of 60%.

Premium assistance tax credits for individuals and   families making between 100% to 400% of the federal poverty level (FPL)   begin.  This is available only to those   who qualify and purchase individual coverage through the state exchange.

Expansion of the Medicaid program for all   individuals, including childless adults who make up to 133% of the FPL   begin.  States can also create a   separate non-Medicaid plan, called the Basic Health Plan, for those with   incomes between 133% and 200% FPL that do not have access to   employer-sponsored coverage.   Basic   Health Plan rules have not been issued as yet.

2014 cont.

Employer responsibility requirements take effect for   companies that employ more than 50 full-time equivalents.  Calculation of the number of full-time   equivalent employees is complicated.    Coverage must meet a minimum value standard in order to be considered   compliant.  Employers who do not offer   coverage to full-time employees and their dependent children or do not offer   them coverage that meets the minimum requirements or have employees that are   subsidized by the exchange will be fined.

Employers with waiting periods for coverage for new   employees will be prohibited from having a waiting period that is more than   90-days.

Employers with 200+ employees have to auto-enroll   all new employees into any available employer-sponsored health plan.  This was to be effective January 1, 2014   however the DOL will not enforce until regulations are issued and this is not   expected until after 2014

A   national premium tax on most private health insurers based on premium volume   takes effect, which can be passed directly to fully insured plan consumers   (employers).

Employer-sponsored   wellness program rules for all employer group plans under HIPAA improve and   employers can increase the value of workplace wellness incentives.  




The federal Children’s Health Insurance Program must   be reauthorized.




States may elect to allow large employers to   purchase coverage through exchanges.    If so, the same market place reform regulations will apply (community   rating etc).

The Cadillac tax, a 40% excise tax on high-cost   plans, goes into effect for all group plans.    The tax is paid by the insurer in the case of a fully insured group or   the TPA in a self-funded arrangement but is passed on directly to the   employer.  The value of stand-alone   vision and dental are excluded and the tax does not apply to accident,   disability, long-term care, and after-tax indemnity or specified disease   coverage.  The excise tax will apply to   plans with values that exceed $10,200 for individual coverage and $27,500 for   family coverage with higher thresholds for retirees over age 55 and employees   in certain high-risk professions.




Part   D “donut hole” is filled.





What should   employers be doing now, early 2013?



Every   employer should determine whether they are a group with fewer than 50   full-time and full-time equivalent employees or a group with 50 or more   full-time and full-time equivalent employees.



Full-time   employees are those that work 30 or more hours a week. (130 hours for a   calendar month)



To determine   the number of full-time equivalent employees, count the total hours worked   per week (plus paid time off) b non full-time employees (not more than 120   hours for any one employee) then divide by 120 to come up with a number of   full-time equivalent employees (FTE) round the result down if a fraction.



Adding   full-time and full-time equivalents determines an employer’s group size.