Important Information for Employers:
In 2010, the federal government passed The Patient Protection and Affordable Care Act
(PPACA) known as the Affordable Care Act (ACA) or commonly referred to as “Health
Care Reform” or “Obamacare”. ACA created new rules and regulations for group and
individual healthcare plans and also the Health Insurance Marketplace known as “the
exchange.” The passage of the law also ushered in new taxes, fees, and compliance
requirements for employers, insurance companies, and third party administrators.
Changes in the industry started six months after passage and will continue until 2018,
with the pivotal year being 2014/15. Below is information designed to give you a high
level overview of the elements of the law with a focus on the years 2013, 2014 and
What Employers Should Be Doing Right Now
· Build your team: the ACA is the largest social welfare legislation since Social
Security. This should not be taken lightly or handled off the corner of your desk. Get
help and Build Your Team! The team should be made up of the your:
• Licensed Employee Benefits Advisor
· Each of these professionals should be well versed in benefits, tax, and regulation
surrounding thereof for individuals and employees. Like physicians, licensed
professionals specialize in their perspective field of expertise. Be sure your insurance
advisor is focused on employee benefits and has a good grasp of the Affordable Care
· Plan the work and work the plan. The keystone of developing a plan is to know
what needs doing. Understand the new compliance and notification requirements
brought about by the ACA. BCI offers a compliance checklist to our clients as a part of
our service. This checklist may be used to delegate tasks to members of your ACA
team or other employees at your company.
· Determine your group size: Employer penalties do not kick in until a group has 50
or more full time and full time equivalent employees. There are certain ways to count
your employees. Know what they are and test your company for the correct size. You
may be surprised. BCI is prepared to help you with this effort and any required testing.
· Plan a strategy for the future. This isn’t a one year issue. The Affordable Care
Act will change the current offering of employee benefits permanently. Have a strategy
and an action plan that will see you not only through the transition, but into your long
term employee benefit policies and procedures. Understand the ramifications and
opportunities under community rating, minimum essential benefits, actuarial value and
funding. With your growth in mind, BCI is adept at working with our clients to develop
strategies and goals to address all of these areas and more.
Comparative Effectiveness Fee (2012)
This fee is charged to insurance carriers and Third Party Administrators (TPAs) and is
designed to fund research to determine the effectiveness of various forms of medical
treatment. The original fee of $1 per participant per year will increase to $2 per
participant per year in 2013 and will remain in force through 2019.
It is expected that the carriers and TPAs will pass these fees to their customers as a
part of the overall premiums or plan costs.
Uniform Explanation of Coverage (2012)
Employers must provide a uniform Summary of Benefits and Coverage (SBC) to all
participants at the initial time of enrollment and during each subsequent annual
enrollment. This must be done in a timely fashion, and penalties for non-compliance are
steep. The structure of the SBC is defined in the law.
In a fully insured environment, carriers will develop the SBCs and deliver them to the
employer. The employer has a shared responsibility to distribute them on a timely basis
to the employees. In a self-funded environment, the employer has the final responsibility
to develop and distribute the SBC. Most self-funded groups will utilize a third party to
generate the SBCs on their behalf.
Sixty day Notice of Material Modification (2013)
Employers must provide notice of any material modification in coverage at least 60 days
prior to the effective date of modification other than the renewal. This is a part of the
Uniform Explanation of Coverage and is in addition to the Employee Retirement Income
Security Act (ERISA) Summary Plan Description.
BCI recommends the development of an ERISA Wrap Document to assure full
Form W2 Reporting of Value of Benefits (2013)
Employers are responsible for reporting the total cost incurred for providing healthcare
to employees. This is for reporting purposes only, and no taxes are associated with this
report. This requirement begins in 2013 for the 2012 tax year and is only for employers
who distributed 250 or more W2s in the prior taxable year.
Keep in mind, this requirement is based on W2 count and not on covered employees.
Employers should check with their payroll services to verify that this requirement is
Cap on Health Flexible Spending Account Contributions (2013)
Employee contributions to employer sponsored healthcare Flexible Spending Accounts
(FSAs) are limited to $2,500 in a calendar year.
Employer Notification Regarding Exchanges (2013)
Employers must provide existing employees and new hires with information about the
existence of a state or federal exchange. The plans in the exchange will include
minimum essential benefits and be categorized by reimbursement levels. The levels will
be designated as metallic plans: bronze, silver, gold, and platinum.
Model notification has not yet been released.
Minimum Essential Benefits (2014)
States must choose one of four methods of determining the minimum essential benefits
plan. A plan must meet the minimum essential benefits for each state to be considered
a qualified plan.
Texas has declined to establish a minimum essential benefit plan and will default to the
privately offered benefit plan with the largest enrollment.
Insurance Exchanges (2014)
Every state is encouraged to set up a state based health insurance exchange. If the
state fails to set up an exchange, the federal government will set one up for the state as
a federal exchange. Initially, the exchanges will be made available to individuals and
small groups with fewer than 100 employees as part of two different exchanges;
Individual and Small Business Health Options Program Exchanges (SHOP). Plans will
be offered according to the metallic plan categories. Premium Subsidies and Small
Business Tax Credits are only available in the state and federal exchanges.
Premium Subsidies (2014)
Subsidies are available in the exchange for individuals or families earning less than
400% of the Federal Poverty Level (FPL) who do not have access to health insurance at
their workplace or where their employer does not offer an affordable health plan.
Small Business Tax Credit (2010/2014)
This tax credit is for groups with fewer than 25 employees with average annual wages
of less than $50,000. This tax credit has been in place for all groups since 2010, but it
will only be available to groups in the exchange in 2014.
Free Rider Penalty (2015)
Employers with more than 50 employees will be required to offer minimum essential
benefits to all full-time employees who work 30 or more hours per week. If an employer
does not offer this coverage and at least one full-time employee receives coverage
through the exchange, the employer will be assessed a penalty of $2,000 for each full-
time employee (minus the first 30).
If an employer provides coverage but the coverage is deemed to be unaffordable, the
employer will be assessed a $3,000 penalty for each employee who obtains a subsidy
through the exchange to a maximum of $2,000 for all full-time employees in the group.
No Pre-existing Condition Exclusions (2014)
Group health plans and individual insurance policies are required to eliminate pre-existing condition exclusions completely.
Note: Pre-existing condition exclusions were eliminated for individuals who are younger
than 19 years of age in 2010 and will be abolished for all others in 2014.
Limit on Employee Out-of-pocket Expenses (2014)
Group health plans, both fully insured and self funded regardless of size, must limit the
out-of-pocket expenses to $5,950 for individuals and $11,900 for families. For small
groups, deductibles cannot be greater than $2,000 for individuals and $4,000 for family
Individual Mandates (2014)
The ACA requires individuals to obtain minimum essential benefits for themselves and
their dependents or face penalties.
No Annual Limits (2014)
Group health plans may no longer include annual limits on essential benefits for
Ninety day Limit on Waiting Periods (2014)
Group health plans may not impose a waiting period longer than 90 days for healthcare
Nondiscrimination Rule (2014)
Health reform will adopt Health Insurance Portability and Accountability Act’s (HIPAA’s)
rules, in which group health plans may not discriminate as to benefits or coverage
based on health status.
Community Rating (2014)
Health insurance carriers providing individual or small group policies covering 100 or
fewer individuals must abide by strict community rating rules with premium variation
only for age, tobacco use, levels of coverage (single and family), and geographic rating
areas. Experience or rates based upon medical costs of a group or individual will be
prohibited. This policy is also applicable to large group policies offered through the
Transitional Reinsurance Program Fee (2014)
This fee will only be assessed from 2014 through 2016 and is imposed upon carriers
and third party administrators. This fee is intended to stabilize premiums in the
individual marketplace. The exact amount of the fee is not yet known; however, it is
estimated to be $50-$100 per member each year.
Health Insurance Tax (2014)
This tax is a fixed dollar amount to be distributed across all carriers based upon the
carrier net premium. The tax will begin at $8 billion in 2014, rise to $14.3 billion in 2018,
and increase according to an index based on net premium growth thereafter.
Automatic Enrollment (2014)
Employers with more than 200 employees who maintain one or more group health plans
must automatically enroll Full Time Employees (FTE) whom perform 30+ work hours
per week, as they become eligible for coverage (subject to any waiting period). The
employer must give affected employees notice of the automatic enrollment procedure
and offer an opportunity to opt out.