Health Care Reform Updates
Major health care changes resulting from the implementation of the Affordable Care Act has had considerable impact on businesses and individuals. Additionally, in recent weeks, there have been significant changes to requirements that were set to become effective in 2014 that have now been delayed until 2015. This newsletter will help inform you of the key provisions of the law that have been delayed and those still scheduled to take place.
What Does This Mean For Employers?
The delay of certain Affordable Care Act requirements means employers with more than 50 FTE employees will NOT have to meet the following provisions for 2014:
Offer minimum essential coverage to all but the greater of: 5% of full-time employees and their dependents, or 5 full-time employees and their dependents.
Offer minimum value coverage to full-time employees (covering at least 60 percent of the cost of medical expenses).
Offer affordable coverage to full-time employees (not exceeding 9.5 percent of household income). There are several safe harbor methods that can be used to determine whether coverage is deemed affordable.
Consider and track employees' hours. Those who average 30 or more hours per week are considered full-time employees.
What Requirements Do Employers Still Need To Meet?
This fee on issuers of specific health insurance policies and plan sponsors of applicable self-insured health plans stillhas a July 31, 2013 deadline for reporting and payment of fees for plans that ended October 1, 2012 through December 31, 2012.
Timely distribution of any Medical Loss Ratio (MLR) rebates the plan may receive. The DOL suggests employers have three months to distribute rebates received by the plan.
Summary of Benefits & Coverage (SBC)
A summary of benefits and coverage must be provided to employees as a part of open enrollment which includes an easy-to-understand summary of benefits and coverage and a uniform glossary of terms commonly used in health insurance coverage.
DOL Notice Distribution
Beginning January 1, 2014, individuals and employees of small businesses will have access to coverage through the Health Insurance Marketplace, which offers "one-stop shopping" to find and compare private health insurance options. Open enrollment begins October 1, 2013. A DOL notice regarding information on the exchange must be distributed to current employees by October 1, 2013 (or at the time of hiring new employees after October 1, 2013).
Employers must report health care costs on W-2s (Box 12, Code DD). Employers that issued fewer than 250 W-2s in the prior year, or contribute to a multiple employer plan, are exempt.
Transitional Reinsurance Fee:
The new Department of Health and Human Services (HHS) Transitional Reinsurance regulations require both insurers and self-funded plans to pay a fee in 2014 of $63 each for all of those enrolled in major medical coverage. Fees are due in January 2015.
Requirements Still Scheduled to Go into Effect for 2014
90-Day Waiting Period Rules
New regulations implemented by the Affordable Care Act include restrictions on the number of days before an individual becomes eligible for health benefits provided by an employer's group plan. Under the regulations, all group health plans beginning on or after January 1, 2014 are prohibited from imposing waiting periods that exceed 90 days. As defined in HIPAA regulations, a waiting period is the period of time required to pass before coverage for an eligible employee or dependent.
Beginning January 1, 2014, the Affordable Care Act prohibits insurers, both in the individual and group markets, from imposing pre-existing conditions exclusions. Grandfathered individual plans are excluded from this new rule. In addition, insurance companies are required to guarantee the issuance of health plans to any applicant regardless of his or her health status and impose rating restrictions that limit how much insurers can vary premiums based on the applicant's health status.
Starting in 2014, non-grandfathered plans will not be allowed to have an out-of-pocket maximum greater than $6,350 for single coverage and $12,700 for family coverage.
Lifetime & Annual Limits
The Affordable Care Act has, through phases, prohibited health plans from putting a lifetime dollar limit on most benefits an individual can receive. Beginning in 2014, these limits are entirely removed. However, there are important exceptions to remember. Plans can set annual dollar limits and lifetime dollar limits on spending for health care services that are not considered "essential." Also, grandfathered individual health policies are not required to follow the new rules on annual limits.
Grandfathered Plans & Dependent Children:
Dependent coverage is another area affected by health care reform, particularly grandfathered plans. For plan years beginning on January 1, 2014 or later, grandfathered group plans must allow children up to age 26 to stay on their parents' employer plan, even if they have other employer-sponsored coverage available. Dependents can also join even if they are married, do not live with their parents, attend school, or are financially independent.
Beginning in 2014, all plans must design their cost-sharing model (deductibles, copays, and coinsurance) into specific levels of coverage. These levels include:
Bronze Level - The plan must cover 60% of expected costs for the average individual
Silver Level - The plan must cover 70% of expected costs for the average individual
Gold Level - The plan must cover 80% of expected costs for the average individual
Platinum Level - The plan must cover 90% of expected costs for the average individual
Health plans offered in the small group market cannot have deductibles higher than $2,000 for single plans and $4,000 for any other plans. It should be noted that employer group plans that are self-insured or insured large group plans (generally more than 100 employees) do not have to comply with these deductible limits.
Modified Community Rating
Community rating is a method insurance companies use to calculate the average cost of insurance by evaluating risk factors in an entire market. Modified community rating allows for premium variations based on individual risk factors. Beginning in 2014, modified community rating restricts rating factors to family size, geographic rating area, age and tobacco use. In addition, there are limits to the allowed rating factors. For example, insurers cannot charge a smoker more than 50% of what it charges a non-smoker.
Guaranteed Issue Rules
Starting January 1, 2014, all individual and group health plans must guarantee issue policies to all applicants regardless of health status or other factors. The guaranteed issue provision applies to all group plans and new plans on the individual market, but does not apply to grandfathered individual plans.
Guaranteed renewal rules
Guaranteed renewal requires that issuers in the individual and group markets renew or continue coverage at the option of the individual or the plan sponsor. A provider is permitted to increase premiums to renew coverage. There are general exceptions to this rule such as the following: the individual or plan sponsor failed to pay premiums, the individual or plan sponsor committed acts of fraud, or the issuer ceases to offer coverage in the market and other related exceptions.
The overhaul on the health care system has resulted in numerous new laws and regulations, many of which are complex and confusing. Please do not hesitate to contact us with any questions you may have regarding how the new rules will impact your business or individual tax circumstances, or if you would like more information.