Our prior column focused on “to do” items for 2012 and 2013. Below we provide a checklist of ACA requirements that apply to group health plans and plan sponsors for 2014 and beyond.
Except where noted, these requirements generally apply to all group health plan coverage (insured and self-funded), including grandfathered plans. However, each requirement may have its own set of exceptions for more limited benefits, such as HIPAA excepted benefits or retiree-only coverage. Plan sponsors should review this checklist and make sure they have a strategy for completing their own “to do” lists.
- Individual Mandate – Starting 1/1/14, most US taxpayers must be enrolled in minimum essential coverage or pay a penalty. Minimum essential coverage includes Exchange coverage, individual insurance coverage, Medicare, and most employer-sponsored coverage. We are waiting on guidance as to a more specific meaning of “minimum essential coverage.”
- Exchange Coverage Begins – Starting 1/1/14, state-based Exchanges will be up and running. Where a state does not create an Exchange, HHS will create a federal Exchange. Individuals can purchase health coverage on individual basis through the Exchange (even if they are eligible for employer coverage). Individuals who fall below certain income thresholds may qualify for a premium credit under the Exchange. Small employers may be able to purchase group coverage through special Small Business Health Operations Program (SHOP) exchanges.
- Employer Mandate: Pay or Play – Beginning in 2014, employers will be required to offer “minimum essential coverage” or face a penalty. Coverage will be considered to meet this standard if it meets an affordability test where employee premiums do not exceed 9.5% of the employee’s income and a minimum value test where coverage has a value of 60% (presumably when compared to the employee cost share). We are expecting more guidance on how to interpret these requirements.
Where an employer offers no coverage and at least one employee goes to the Exchange and also is eligible for a premium credit, the employer must pay $2,000 times all full time employees (minus the first 30). Where an employer does offer coverage, but the coverage does not meet the affordability and minimum value tests, the employer must generally pay $3,000 for each full-time employee who goes to the Exchange and qualifies for the premium credit (minus the first 30).
- Waiting Periods Limited to 90 Days – For plan years starting on or after 1/1/14, waiting periods under group health plans cannot be longer than 90 days.
- Coverage for Clinical trials – For plan years starting on or after 1/1/14, group health plans must cover certain clinical trial costs and may not discriminate against individuals who participate in qualified clinical trials. We are waiting for more guidance on this provision. This requirement does not apply to grandfathered plans.
- Increased Wellness Program Incentives – For plan years starting on or after 1/1/14, the incentive amounts that group health plans may offer under health-based wellness programs governed by the HIPAA wellness rules is increased from 20% of the cost of employee coverage to 30% (and the Secretary has the discretion to increase to 50%).
- No Annual Dollar Limits on Essential Health Benefits – For plan years starting on or after 1/1/14, group health plans may no longer impose annual dollar limits on essential health benefits. Similar lifetime dollar limits were prohibited starting for plan years on or after 9/23/10. Since that time, the restrictions on annual limits have been allowed to be phased in over a three year period, but no longer will be permitted at all beginning in 2013.
- No Pre-Existing Condition Exclusions (PCEs”) – For plan years starting on or after 1/1/14, group health plans must eliminate all PCEs. PCEs for enrollees under 19 already were eliminated for plan years on or after 9/23/10.
- Cost Sharing Limits – For plan years starting on or after 1/1/14, group health plans must limit cost sharing or out-of-pocket maximums, such as on deductibles, copayments, and coinsurance, to $5,950 for individuals and $11,900 for families (current numbers, which will be adjusted for cost of living before 2014). This requirement does not apply to grandfathered plans.
- Deductible Limits - For plan years starting on or after 1/1/14, group health plans may not impose a deductible higher than $2,000 per individual or $4,000 per family (indexed). There is much debate about whether this provision applies only to the small group market or to the large group market as well (more guidance would be welcome). This requirement does not apply to grandfathered plans.
- Essential Health Benefits – Starting in 2014, insured plans in the individual and small group market must cover each of the essential benefits categories listed under the ACA. This requirement does not apply to grandfathered plans, self-funded plans, or insured plans in the large group market.
- Reinsurance Fee – HHS will assess a fee on “contributing entities” to fund a reinsurance program to help cover costs for high risk individuals in the individual market during the roll out of the Exchange. A “contributing entity” is defined as a health insurance issuer or TPA on behalf of self-insured group health plan coverage. The reinsurance fee only will be payable for three years from 2014-2016 and will be collected on a quarterly basis starting 1/15/14. The fee will be based on the number of covered lives under the plan, but HHS has not provided more specific guidance on the amount or how to calculate the fee. However, in the first year, the fee is required to total at least $10 billion on a national basis.
- Insurer Provider Fee – Starting in 2014, insurers must pay an annual fee on net written health insurance premiums. The fee is calculated by dividing the covered entity’s net premiums by the net premiums of all covered entities and then multiplying this fraction by a set annual amount. In 2014, the set annual amount is $8 billion.
- IRS Reporting for Employers (Sections 6055 & 6056 Reporting) – Starting in 2014, there will be an IRS annual reporting requirement that applies to any entity that provides "minimum essential coverage," which generally includes any "eligible employer-sponsored plan." IRC §6055. A separate reporting requirement requires large employers (generally that have at least 50 full-time employees) to report to the IRS whether they offer their full-time employees "minimum essential coverage." IRC §6056. Presumably this information will be used to administer or verify information related to the individual mandate and the employer “pay or play” mandate.
- Tax on High Cost Coverage ("Cadillac Plan Tax") – Beginning 2018, there will be a 40% tax on the value of "applicable employer-sponsored coverage" that is in excess of a minimum threshold of $10,200 for self-only or $27,500 for other than self-only.
- Auto-Enrollment Requirement for Employers – Beginning sometime after 2014, employers are required to automatically enroll employees in coverage. The agencies have indicated that guidance will not be ready by 2014, so the applicability date is uncertain.
- Nondiscrimination Based on Income – The ACA extended the current income nondiscrimination requirements under Internal Revenue Code section 105(h) (which applied only to self-funded coverage) to insured benefits as well. However, the IRS has said it will not enforce the requirement until additional guidance is issued. This requirement does not apply to grandfathered plans.
- Quality of Care Reporting – Group health plans must annually report to HHS and to enrollees at annual enrolment information related to provider reimbursement structures to improve health outcomes, prevent hospital readmissions, improve patient safety, and implement wellness promotion. The Secretary will publish this information on the Internet. HHS has not yet issued guidance, so it is unclear when it will apply. This requirement does not apply to grandfathered plans.
- Transparency Reporting – Group health plans must report to HHS and their state insurance commissioner (for insured plans) information about claims payment and policies, enrollment, number of claims denials, rating practices, and cost-sharing. This information also will be available to the public. HHS has not yet issued guidance, so it is unclear when it will apply. This requirement does not apply to grandfathered plans.
We expect that the time leading up to 2014 will be filled with additional guidance and regulations about a number of the above requirements. Plan sponsors should consider how each of these requirements apply to their plans, watch for guidance, and develop their own strategies for compliance.
Got a health-care reform question? You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions
You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.