How Does the ACA Affect
Employers’ Health Plans in 2014
and Beyond?
Stacy Clark, Esq.
Stacy.clark@alston.com
Dan Taylor, Esq.
Dan.taylor@alston.com
© 2014, Alston & Bird, LLP
Challenges Facing Employers
• Compliance Costs
– Health insurance reforms
• Additional benefits
– Reporting Requirements
• E.g. 6055 individual mandate
• E.g. W-2 reporting
– Employer shared responsibility (50 or more FTEs in preceding year)
– Cadillac Tax
• Added fees/taxes
– Transitional Reinsurance (direct and indirect)
– PCORI (direct and indirect)
– Health Insurer Fee (indirect)
The Legal Landscape: Level Setting
• ACA has many parts that affect Employers
– Health Insurance Reforms
– Individual Mandate
– Exchange
• Premium Subsidy
– Employer Shared Responsibility
– Taxes and Fees
– Misc.
Health Insurance Reforms
•
Reforms Not Applicable to GF Plans
(2010/2014)
– Nondiscrimination for fully insured
plans
– Preventive care coverage mandate
– Patient Protections
– Claims Procedures
– Rating Requirements
– Cost Sharing Limitations*
• Deductible limitation (small group
market only)
• OOP
– Requirement to provide essential
health benefits (small group market
only)*
•
Reforms applicable to All Plans
(2010/2014)
– Lifetime/Annual Limit Prohibition*
– “Child” coverage to age 26
– Rescissions
– Uniform Explanation of Coverage
– MLR
– Wellness requirements
– No waiting periods in excess of 90
days
– No pre-existing condition
exclusions
Health Insurance Reforms
• To which plans do the Health Insurance Reforms
Apply?
– All group health plans except
• Excepted benefits
• “Retiree-only” plans
– Penalties for failing to comply:
• $100/per day/per affected beneficiary excise tax under 4980D
• Specific performance under ERISA
• $100 per day penalty under PHSA (governmental plans/insurers)
Health Insurance Reforms
•
What is an excepted benefit?
– The “Always” bucket
• Accident
• Disability
• Liability
• Workers Comp
• Onsite Health Clinics
– Limited
• Non-integral dental/vision
• Health FSA that satisfies certain conditions
– Non-coordinated
• Specified disease
• Fixed/hospital indemnity
– Certain supplemental
– EAPs (see proposed rules)
– Wrap around coverage (see proposed)
Individual Mandate
• Beginning in 2014, all individuals must maintain
minimum essential coverage or pay a tax
• What is minimum essential coverage?
– All “group health plans” other than excepted benefits
• Policies issued in the group market
• Self-insured plans
– Policies issued in the individual market
• Inside Exchange
• Outside the Exchange
Individual Mandate
• Is minimum essential coverage the same as “minimum
value”?
– No
• Does a plan have to comply with applicable health
insurance reforms?
– Presumably
• Will “skinny plans” qualify as minimum essential
coverage?
Exchange
•
•
•
•
All policies generally provide a “metallic” level of coverage
All policies provide essential health benefits (whether you want them or not)
All policies subject to certain rating requirements
Special/annual enrollment ONLY
– Cannot enroll any time you want!
• Certain individuals may qualify for a premium subsidy/cost sharing reduction
in Exchange
– Household income between 100% and 400% of poverty level and
– Not “eligible” for employer sponsored MEC that is both affordable and
provides minimum value OR
– Not enrolled in employer sponsored MEC (regardless of whether it is
affordable or provides minimum value)
Exchange
• How do employer coverage and Exchange coverage
interact?
– Eligibility for or enrollment in employer MEC does NOT
affect eligibility for Exchange
– Eligibility for employer MEC can affect eligibility for Subsidy
• Eligibility for COBRA and retiree coverage does not affect eligibility
– Enrollment in employer MEC DISQUALIFIES
employee/retiree from Subsidy
Employer Shared Responsibility
• Begins January 2015
• Only applicable to “applicable large employers” (ALE)
– 50 or more full-time equivalents in the prior calendar year
• Full-time employees (average 30 hours of service per week in a month)
• Hours for part-time employees divided by 120
• Determined on a controlled group basis
• If an ALE, then each controlled group member will pay
an excise tax for any month that a “full-time” employee
receives a subsidy in the Exchange
Employer Shared Responsibility
• 2 penalty buckets (for each month, you are either in one or the other—but not
both):
– Sledgehammer- occurs if the employer fails to offer MEC to at least 95%
of its full-time employees and 1 full-time employee receives a subsidy in
the exchange
• 1/12 of $2000 ($166) x the total number of that controlled group
member’s full-time employees, reduced by the employer’s allocable
share of 30
– Tackhammer- occurs if the employer fails to offer affordable, minimum
value MEC to 100% of its full-time employees and one or more full-time
employees receives a subsidy in the Exchange
• 1/12 of $3000 ($250) x the total number of full-time employees receive
the subsidy
Employer Shared Responsibility
• NOT A MANDATE TO PROVIDE COVERAGE!
• Many employers will choose to pay an excise
tax/penalty as opposed to modifying coverage
– Many employers will try to avoid sledgehammer but may
choose to pay tackhammer
• A few concepts to consider:
– ALEs not subject to excise taxes under employer shared
responsibility for part-time employees
– ALEs who merely want to avoid Sledgehammer need only
offer MEC to 95% of their full-time employees
New Reporting Requirements
• Designed to help the IRS measure compliance with
employer shared responsibility and individual mandate
• Two categories of reporting:
– Report on MEC offered by “coverage providers”
• Employers for self-insured plans, and insurers for fully funded plans
– ALEs (all members of controlled group)
• Reports provided to IRS and to covered individuals
– Significant amount of information required to be reported
• Applies in 2015 – first reports due in early 2016
Taxes and Fees
• PCORI fee
– Responsibility entity pays FEE x average number of covered individuals
for plan years ending on or after October 1, 2012 and before October 1,
2018
• Fee=
– $1 for plan years ending on or after October 1, 2012 and before
October 1, 2013
– $2 for 2013
– Adjusted annually thereafter
• Responsibility entity
– Plan sponsor of self insured plans
– Insurer of fully-insured plans
• Does not include “excepted benefit” plans
Taxes and Fees
• Transitional Reinsurance Fee
– Contributing entity pays FEE x average number of covered individuals for
calendar years 2014-2016
• Fee=
– $63 for 2014
• Responsibility entity
– Self-insured plans
– Insurer of fully-insured plans
• Does not include any plan that does not provide MINIMUM VALUE
(as proposed)
– Would not include excepted benefit plans
Taxes and Fees
•
•
Cadillac Tax
Beginning in 2018, PPACA imposes a 40 percent excise tax on:
– “Coverage providers:” for the sum of months in which the aggregate value of
employer sponsored health coverage for the employee exceeds:
• 1/12 of $10,200 for single coverage and $27,500 for family coverage
– The higher family threshold applies to both single and family coverage
offered under a multiemployer plan
– These amounts are to be adjusted automatically if health costs increase by
more than anticipated before 2018
– The thresholds are increased by CPI + 1 in 2019, and by CPI thereafter
– An employer may make an adjustment to reduce the cost of plans when
calculating the tax if the employer’s age and gender demographics are not
representative of a national average
• The annual limit for retirees between ages 55 and 64, individuals engaged in
certain high-risk professions is increased to $11,850 for individual coverage
and $30,950 for family coverage
Miscellaneous
• Small employer tax credit
• W-2 Reporting
– What coverage is required to be reported?
– See http://www.irs.gov/uac/Form-W-2-Reporting-ofEmployer-Sponsored-Health-Coverage
• MOST excepted benefits exempt (special rule for pre-tax specified
disease/hospital indemnity)
• Limitation on Health FSA salary reductions
– Effective with plan years beginning in 2013
– $2500 limitation on salary reductions
Recent Non-ACA Issues
• FSA Carryover
– Optional, but must be in place of grace period
• Mental health parity (final regulations)
• Wellness plans (final regulations)
• HIPAA Omnibus Rule
– Affects HIPAA documents (Notice of Privacy Practice,
Policies and Procedures) and Business Associate agreements
What Should You Be Doing Now?
• Plan ahead for Employer Shared Responsibility and
associated reporting requirements
– YOU SHOULD BE COLLECTING DATA NOW
• Make sure plan documents and Summary Plan
Descriptions reflect recent changes
– E.g., cost-sharing limits, restricted waiting periods, patient
protections, enhanced claims procedures, revised mental
health parity rules
– Consider any eligibility changes to be made in 2015 (e.g.,
revised definition of “full-time” employees)
What Should You Be Doing Now?
• Don’t forget account-based plans
– E.g., FSA limits, new HRA restrictions
– Consider FSA carryover in place of grace period
– HSA limits change annually
• Check your wellness plan for compliance
• Any 2013 changes you missed?
– E.g., HIPAA Omnibus Rule, Marketplace Notice