ACA Central

Your Health Care Reform Resource

Weighing in at nearly 2,700 pages, the Patient Protection and Affordable Care Act (PPACA) can come across as overwhelming for many employers who just want to know: “What does this mean for my company?” Here’s a synopsis on the ACA’s impact on employers.

Small Business

Small Employer is defined as having 1-99 employees for California-based employers.

Essential benefits

Individual and small group plans offered inside/outside the exchange must provide the essential benefits package. The minimum benefit package applies to individual and small group new business in 2014 and non-grandfathered existing business. It includes: Ambulatory patient services, Emergency services, Hospitalization, Maternity and newborn care, Mental health & substance abuse, Prescription drug, Rehabilitative & habilitative services/devices, Lab services, Preventive/wellness, Disease management and Pediatric services including oral & vision care.

Merged markets

States are allowed to merge together individual and small group markets if the state determines it is appropriate.

Rating restrictions

Rating restrictions go into effect for new individual and fully insured small group plans. Insurance companies cannot base premiums on health status, claims experience or gender. Premiums can only vary by age, geography, family size, or tobacco use (no more than 1.5:1).

Large Groups

A large employer is defined as one with 100 or more employees.

Comparative effectiveness fee

Employers sponsoring group health plans started paying $1 per participant in 2012. This fee increases in 2013 to $2 per participant. Thereafter the amount will be indexed to national health expenditures. This fee phases out by 2019. Revenue from the fee will fund research to determine the effectiveness of various types of medical treatments.

Employer Form 5500

Large employers will be subjected to expanded 5500 reporting requirements to include information on the health insurance coverage of their employees.

Transitional reinsurance program

A transitional reinsurance program will be established for the individual market and funded by individual and group health plan assessments (totaling $25 billion between 2014 – 2016). This program will provide payments to plans in the individual market that cover high-risk individuals.

Small Business and Large Groups

Employer reporting requirements

6055 Overview – MEC Reporting

Section 6055 requires health insurers and sponsors of self-insured plans to report on this coverage to the IRS annually. The reporting to both individuals and the IRS for 2015 is due in early 2016. It also requires insurers and self-insured plans to report to their MEC recipients, so the individuals can report that coverage when filing their federal taxes.

The 6055 reporting requirement has two goals. It helps individuals verify that they have MEC for purposes of satisfying the Individual Shared Responsibility requirement. At the same time, it enables the IRS to crosscheck that information with insurers or self-insured plans.

Entities subject to 6055 reporting are health insurance issuers, sponsors of self-insured plans, government sponsored programs, such as Medicaid, and providers of other arrangements designated as MEC, such as high-risk pools.

The final rule states that self-insured employers are responsible for reporting this information to the IRS.

Information required to be reported to the IRS by health insurers and sponsors of self-insured plans who provide minimum essential coverage:

  • The name, address and Employer Identification Number (EIN) of the reporting entity required to file the return.
  • The name, address and Taxpayer Identification Number/Social Security Number (or date of birth if a TIN/SSN is not available and applicable requirements are met), of the responsible individual, except that reporting entities may but are not required to report the TIN/SSN of a responsible individual not enrolled in coverage.
  • The name and TIN/SSN (or date of birth if a TIN/SSN is not available and applicable requirements are met), of each individual who is covered under the policy or program.
  • Whether the coverage is a Qualified Health Plan (QHP) provided through the Small Business Health Options Program (SHOP) and the SHOP’s unique identifier. Information required to be reported to responsible individuals:
  • The phone number for a person designated as the reporting entity’s contact person and policy number, if any.
  • All information required to be shown on the Section 6055 return for the responsible individual and each covered individual listed on the return.

Important Note: While the final rule allows reporting of birthdate if SSN cannot be obtained, it also requires the reporting entity (insurer or self-funded employer) to make two attempts to secure the SSN for reporting purposes.

6056 Overview – Employer Reporting

Section 6056 reporting requires employers subject to Employer Shared Responsibility to report to the IRS information about the health coverage they provided to their employees. The IRS will use this information to determine if the employer has to pay any penalties for failing to offer coverage or failing to offer coverage that meets minimum value and is affordable. The reporting to both individuals and the IRS for 2015 is due in early 2016. Even the smaller employer (50-99) will need to report the first year to certify they are exempt from a full report for the first year.

Information required to be furnished to the IRS:

  • Employer’s name, the date, and the employer’s EIN and the calendar year
  • The name and telephone number of employer’s contact person
  • A certification as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under your plan by calendar month
  • The number of full-time employees for each calendar month during the calendar year, by calendar month
  • For each full-time employee, the months during the calendar year for which minimum essential coverage under the plan was available
  • For each full-time employee, the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that full-time employee under your plan, by calendar month
  • Demographic information and social security number of each employee covered name, address and EIN of the applicable large employer member

Information reported to the IRS with the use of indicator codes will include:

  • Information as to whether the coverage offered to full-time employees and their dependents under an employer-sponsored plan provides minimum value and whether the employee had the opportunity to enroll his or her spouse in the coverage.
  • The total number of employees, by calendar month.
  • Whether an employee’s effective date of coverage was affected by a permissible waiting period.
  • Employers also have to provide statements to employees regarding their health coverage that mirrors the information reported to the IRS — primarily so employees can use this information to help determine if they are eligible for a premium tax credit

Employers also have to provide statements to employees regarding their health coverage that mirrors the information reported to the IRS — primarily so employees can use this information to help determine if they are eligible for a premium tax credit for health insurance through the Marketplace.

Additional information for Sponsors self-insured plans

  • To reiterate, ASO employers are accountable to report for MEC reporting (regardless of size) and employer reporting (if they meet the 50+ full time employee threshold including equivalents). That is, they are accountable for 6055 and 6056 if it applies to them.
  • A single, combined form for reporting is available for employers who self-insure that will handle reporting for both 6055 and 6056.
  • The combined form will have two sections: the top half includes the information needed for section 6056 reporting, while the bottom half includes the information needed for section 6055.
  • Forms 1094-B and 1095-B will generally be used by entities reporting as health insurance issuers or carriers, sponsors of self-insured group health plans that are not subject to Employer Shared Responsibility, sponsors of multi-employer plans and providers of government-sponsored coverage under Section 6055.
  • Forms 1094-C and 1095-C will be used by applicable large employers (ALEs) that are reporting under Code Section 6056.
  • If you are a self-funded employer that is required to report under both Section 6055 and Section 6056, you can file under a combined reporting method, using Forms 1094-C and 1095-C.

Flexible spending account contributions

Contributions to flexible spending accounts for medical expenses are limited to $2,500 per year.

Cost-sharing limits

For 2014, the out of pocket maximums are the same as the maximum out-of-pocket limits applicable to HSA-compatible high deductible health plans under IRS Code (note that the 2012 maximums are $6,050 for self-only coverage and $12,100 for family coverage). For future years, the 2014 limits are increased by the premium adjustment percentage - the percentage increase in the average per capita premium for health insurance coverage. These limits impact individual, small group and large group new business in 2014 and existing non-grandfathered business.

Guaranteed availability of insurance

Also known as "guaranteed issue," with this provision health insurers must accept every individual and employer who applies for coverage.

Health insurance Exchanges

Exchanges are online marketplaces. Insurance Exchanges will be created, along with Small Business Health Options Program (SHOP) Exchanges. In 2014, individuals and small businesses with up to 100 employees can purchase health insurance on these Exchanges. States can allow large employers to participate beginning in 2017.

No annual limits on coverage

Annual limits on essential health benefits are prohibited. However, this does not apply to grandfathered individual plans.

Pre-existing conditions

Individual and group health plans can no longer impose pre-existing condition exclusions for any person of any age. This includes children under the age of 19 and does not apply to grandfathered individual plans.

Wellness programs

The law permits employers to offer employee rewards of up to 30% of the cost of coverage for participating in a wellness program and meeting certain health-related standards.

Employer Shared Responsibility

Employers with 50 or more full-time employees or full-time equivalents will pay an assessment if they don’t offer adequate and affordable coverage.

The U.S. Treasury Department released final regulations on Employer Shared Responsibility in February 2014. It will take effect Jan. 1, 2015, for employers with 100 or more full-time or full-time equivalent employees. Employers with between 50 and 99 full-time employees (including full-time equivalents) are exempt from the Shared Responsibility penalty until 2016, if the employer provides an appropriate certification and meets certain conditions.

Beginning in 2015 for employers with 100 or more full-time employees (including full-time equivalent employees) and beginning in 2016 for employers with 50 or more full time employees (including full time equivalent employees) must offer coverage that meets the requirements below to full-time employees (those working 30 hours a week or more) and their dependent children or face potential penalties:

  • Meets the definition of minimum essential coverage (MEC)
  • Offers a plan that will pay for at least 60% of expected costs for an average person or family (this is 60% actuarial value, also known as minimum value)
  • Ensure that the coverage is affordable by limiting an employee’s share of the premium contribution to no more than 9.5% of the employee’s income for that employer
  • Make the coverage available to at least 70% of its full-time employees and their dependent children in 2015; this will increase to 95% in 2016

How do you know if you meet the requirements?

Minimum essential coverage (MEC) is defined by the ACA as an employer-sponsored plan offered in a state (including a self-funded plan) or health coverage provided by the government. However, a plan consisting solely of “excepted benefits” such as stand-alone dental coverage is not MEC.

Affordability*: There are three safe harbor methods for determining affordability:

  • 9.5% of an employee’s W-2 wages (not reduced for salary reductions under a 401(k) plan or cafeteria plan)
  • 9.5% of an employee’s monthly wages (hourly rate x 130 hours per month)
  • 9.5% of the Federal Poverty Level for a single individual

*Note: This percentage is for plan years beginning on or after 1/1/2015. It is subject to change annually.

What are the penalties for not meeting the requirements?

If an employer does not offer minimum essential coverage for any calendar month, and any full-time employee obtains a premium subsidy or cost-sharing reduction through the Federal Marketplace or a state-based exchange, the penalty will be $2,000 per year multiplied by the number of full-time employees for each calendar month of the year, minus the first 80 full-time employees (this number decreases to 30 in 2016).

If an employer offers minimum essential coverage but it doesn’t meet the minimum value or affordability guidelines and any full-time employee obtains a subsidy or cost-sharing reduction through the Federal Marketplace or a state-based exchange, the penalty will be the lessor of $3,000 per each full-time employee certified as eligible to receive a premium tax credit or cost-sharing subsidy or $2,000 per year for each full-time employee, minus the first 80 employees (this number decreases to 30 in 2016). This penalty will be calculated calendar month to calendar month.

What is the compliance date?

For employers with a plan year on a calendar year basis, it is 1/1/15. Whether an employer needs to comply as of 1/1/15 or on its plan year date (for those with non-calendar year plan years), depends on whether it qualifies for transition relief that would enable a delay until the plan year date.

Non-discrimination rules for employers

The non-discrimination rules that currently apply to self-funded health plans are expanded to group fully insured health plans. Plans cannot base an employee's eligibility or continued eligibility for coverage on hourly or annual salary. Employer-provided insurance may not discriminate between employees. This will prevent employers from providing enhanced insurance benefits based on an employee's length of service. Under the new rules, plans may be subject to penalties of up to $100 per enrollee per day for violating the requirements.

NOTE: HHS has delayed application of the non-discrimination rules to fully insured health plans until additional regulations or other guidance are issued. The recent guidance makes clear that the Treasury Department will not apply the penalties until additional guidance or rules are issued on the nondiscrimination requirements.

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