Update on the Current Status of Key Provisions of the ACA

By: Carmel Cosgrave, Rebecca Dobbs Bush, Janice Evans, and Moses Suarez

INTRODUCTION

The Affordable Care Act was intended to change the face of healthcare in the United States. This historic legislation has ramifications for many constituents in our society, including healthcare providers, consumers and employers. This paper summarizes the current status of several key provisions of the ACA.

AFFORDABLE CARE ACT DEADLINES

The Obama administration has delayed the employer mandate and reporting requirements under the Affordable Care Act (ACA) for one year.[1] Originally, employers and insurers had until January 1, 2014 to implement the mandate and reporting requirements before facing penalties, which has since been pushed to 2015.[2] Under the ACA, large employers, those having at least 50 full-time employees,[3] are required to provide minimum coverage insurance to its employees or pay a penalty per employee.[4] Further, employers and insurers must provide the government with annual reports on each person for whom coverage is provided.[5] In regards to the individual mandate requiring U.S. residents to obtain health insurance, employees are still subject to the January 1, 2014 deadline.[6]

HHS has also delayed other provisions of the act. For example, the disclosure of financial relationships between health entities, including hospitals, pharmacists, manufacturers and distributors of covered drugs, devices, biological and medical supplies was delayed by one year, from March 31, 2013 to March 31, 2014. The start of the initiation of data collections for this report was also delayed from January 1, 2013 to August 1, 2013. Earlier this year, HHS missed deadlines for implementing provisions regarding Medicaid (including increased reimbursement to primary physicians; increasing federal funding to states that eliminate copayments for preventive care; and guidance on the “basic health program”) and Medicare.

The deadlines, both past and present, are listed below, but a more complete list is available online.[7]

PROVISION / EFFECTIVE DATE
Small employer tax credits begin taxable years on or after / Jan. 1, 2010
Individual policies and group plans grandfathered in if in place before / Mar. 23, 2010
Allowed to stay on parent’s insurance if under age 26 / Sept. 23, 2010
New private insurance plans must offer free preventative services w/o a co-pay / Sept. 23, 2010
Insurance companies cannot deny coverage for paperwork error or mistake / Sept. 23, 2010
Insurance companies can no longer deny coverage for children with pre-existing conditions / Sept. 23, 2010
Insurance companies can no longer set lifetime limits on key benefits, such as hospital stays. / Sept. 23, 2010
Insurance company’s ability to set annual dollar limits on coverage for individual and group plans are restricted. / Sept. 23, 2010
Grants to small business that provide workplace wellness programs begins / Oct. 1, 2010
Elimination of employer deductibility of subsidy under Medicare Part D taxable years after / Dec. 31, 2010
Free preventative care for senior citizens begins / Jan. 1, 2011
Lower prescription drug costs for seniors / Jan. 1, 2011
Healthcare Innovation Center established to research and develop ways to improve healthcare / Jan. 1, 2011
Insurers seeking to increase their rates by more than 10% must submit requests to state and federal agencies / Sept. 1, 2011
Health plans must provide summary of benefits and explanation of coverage to enrollees by / Mar. 23, 2012
Additional preventative care services for women are covered with no cost sharing for new health plans begins / Aug. 1, 2012
Reporting on W-2s of aggregate cost of employer-sponsored health benefits / Jan. 1, 2013
Excise tax to fund comparative effective research begins / Jan. 1, 2013
Small employers looking to enroll in health plan must provide participants and beneficiaries with a summary of benefits and coverage / Jan. 1, 2013
Medical device tax begins / Jan. 1, 2013
Medicare investment tax begins / Jan. 1, 2013
Additional Medicare payroll tax begins / Jan. 1, 2013
Employers must provide notice to current employees and upon hire for new employees of their insurance options (was originally Mar. 1, 2013) / Oct. 1, 2013
Open enrollment in healthcare exchanges begins / Oct. 1, 2013
Coverage under healthcare exchanges begins / Jan. 1, 2014
Individual mandate enforcement begins / Jan. 1, 2014
Insurance plans must accept individuals with pre-existing conditions beginning / Jan. 1, 2014
Health insurance tax (HIT) begins / Jan. 1, 2014
Each group health plan must contribute an annual per capita rate of $63 for 2014 beginning / Jan. 1, 2014
Medicaid coverage expands to those ineligible for Medicare and under age 65 beginning / Jan. 1, 2014
Annual limits on the dollar value of coverage are prohibited / Jan. 1, 2014
Employer and insurer reporting requirements begins (was originally Jan. 1, 2014) / 2015 (Jan. 1?)
Employer mandate begins (was originally Jan. 1, 2014) / 2015 (Jan. 1?)
First increase in penalty for being without insurance begins / Jan. 1, 2015
Doctor’s incomes based on quality of care, not quantity / 2015
Increase Federal match in Children’s Health Insurance Program / Jan. 1, 2015
Healthcare choice compacts begin / Jan. 1, 2016
Second increase in penalty for being without insurance begins / Jan. 1, 2016 and beyond
Health plans must provide preventative care coverage / 2018
Cadillac Tax begins / Jan. 1, 2018

HEALTH INSURANCE MARKETPLACES

The ACA offered states the opportunity to participate in health insurance marketplaces, also referred to as exchanges. Health insurance exchanges are state and federally run programs that offer consumers a variety of comprehensive health insurance options to fit their budgets.[8] There are two types of programs states could have elected to engage in: the State-based Exchange, where states initiate and operate their own marketplace or the State Partnership Exchange, where the state runs certain aspects of the program and can “make key decisions and tailor the marketplace to local needs and market conditions.”[9] States can also choose to opt out of creating their own market and defer to the federally available market.[10]

According to CMS, 18 states, including the District of Columbia, have been conditionally approved for the State-based Exchange program while 7 states have been conditionally approved for the State Partnership Exchange.[11] Open enrollment in the market places begins on October 31, 2013, but coverage under the selected policy begins January 1, 2013.[12] Twenty-seven states opted out of the state-centered programs and into the federally operated exchange.[13] The exact prices for the federal program will not be published until enrollment opens in October;[14] however, an insurance premium calculator is available to consumers looking for an estimate at the future costs of coverage.[15] I have attached documents indicating New York’s health insurance prices both on and off the exchange[16] and California’s estimated costs under the exchange for individuals[17] and single people[18].

Below is a breakdown of the states in their respective categories:[19]

State-based Exchange: / Partnership Exchange
  • California
  • Colorado
  • Connecticut
  • District of Columbia
  • Hawaii
  • Idaho
  • Kentucky
  • Maryland
  • Massachusetts
  • Minnesota
  • Nevada
  • New Mexico
  • New York
  • Oregon
  • Rhode Island
  • Utah
  • Vermont
  • Washington
/
  • Arkansas
  • Delaware
  • Illinois
  • Iowa
  • Michigan
  • New Hampshire
  • West Virginia

Coverage through the exchanges is available to any individual who is legally in the country. Certain criteria must be met, however, for an individual to be eligible for financial assistance to pay for the coverage selected through the exchange.

GUIDANCE FOR EMPLOYERS: Pay or Play Compliance Guide

Question 1: How many employees do you have?

  • Most likely not necessary to mess with details of how to count unless you are hovering around 50 FTEs.
  • You need to determine how many full-time equivalent (FTE) employees you have.
  • Full-time is considered to be 30 hours or more per week
  • Part-time employees count as a fraction of an employee
  • To determine amount of FTEs that part-timer’s account for you add up total hours worked by all part-timers in that calendar month and then divide by 120 (or 130 if you are going to be looking at a monthly average of the entire preceding calendar year).
  • Note that there is NO exclusion for union employees.
  • If your FTE count fluctuates throughout the year:
  • Determine the total number of FTE for each calendar month in the preceding calendar year
  • Add up the 12 monthly numbers and then divide by 12 to reach an average FTE number.
  • Disregard fractions and round-down.
  • ***Also Note: there is an exception where you exceed 50 FTEs for no more than 4 calendar months (equivalent of 120 calendar days) and employees in excess of 50 during those month were “seasonal” workers).
  • ANSWER:
  • If you have less than 50 FTE’s, you are done. You are still subject to the additional notification requirements and coverage mandates, but you are not subject to the pay or play penalties tied to whether or not you offer coverage.
  • If you have 50 FTE’s or more, you need to continue on…

Question 2: Do you offer health care coverage to at least 95% of your full-time employees?

  • Remember, a full-time employee is one who works only 30 hours or more per week and there is no exclusion for union employees.
  • Remember, the question does not ask if you offer coverage to your part-time workers even though we just accounted for them in Question 1.
  • And remember, the question is just about whether you actually offer coverage and is not asking whether at least 95% of your full-time employees actually sign up and enroll in the available coverage.
  • ANSWER:
  • If no, you are going to be subject to the sledge-hammer provision – proceed to Question 3.
  • If yes, you are not subject to the sledge-hammer provision – skip question 3 (but note that you may want to review question 3 as the sledge-hammer penalty is still relevant as it represents the absolute maximum penalty amount you can possibly be assessed under Health Care Reform). Proceed to question 4.

Question 3: You don’t offer coverage to at least 95% of your full-time employees so how much of annual penalty are you faced with?

  • Count up your actual full-time employees (i.e., those individuals working 30 hours or more per week)
  • Note, you are not counting your full-time equivalent employees, but only the actual full-timers.
  • Take that number of individuals and subtract 30. Then, multiply that by $2,000.
  • ANSWER:
  • The amount you have in front of you is the annual penalty amount you will need to pay in order to comply with Health Care Reform.
  • And no, there is no exception if you have full-time employees and are paying them higher salaries in lieu of benefits (due to union contracts, prevailing wage issues, or otherwise). If you don’t offer coverage, you don’t offer coverage.

Question 4: You offer coverage to at least 95% of your full-time employees, but is at least one of your health plan offerings of minimum value?

  • Health Care Reform requires at least one benefit offering to have an actuarial value of 60% or be of minimum value.
  • If you are unaware of what the actuarial value of your plan is, a minimum value calculator was made available by the IRS and the Department of Health and Human Services (HHS) on February 25, 2013.
  • ANSWER:
  • If you have a benefit offering that is of “minimum value,” proceed with the next question to determine if it is also “affordable.”
  • If you do not have a benefit offering that is of “minimum value” you will be subjected to penalties as long as one of your full-time employees goes to purchase coverage on the Marketplace with the assistance of a subsidy. The amount you will be assessed is $3,000 per individual that accesses the subsidy. (the tack-hammer penalty) And, the total annual penalty amount is capped at the sledge-hammer tax amount (see question 3 above).

Question 5: You offer coverage to at least 95% of your full-time employees and that coverage is of “minimum value” – now, is your “minimum value” benefit offered at an “affordable” price to your employees?

  • See Question 6 for the analysis in determining who is full-time that you should be offering coverage to where you have variable hour or seasonal employees.
  • To be affordable, the employee’s share of the premium for employee-only coverage cannot exceed 9.5% of that employee’s income.
  • Note: the statute itself refers to “household” income. However, the IRS has published rules allowing an employer to look to the employee’s W-2 box 1 income or the employee’s gross monthly wages (i.e., their hourly rate multiplied by 130).
  • ANSWER:
  • If your benefit offering is “affordable” for all of your full-time employees, you will not be subjected to any penalties.
  • If your benefit offering is only “affordable” for some of your full-time employees, you will be assessed the tack-hammer penalty -- $3,000 annually for each employee that it is not affordable for who also goes to the Marketplace to purchase coverage with the assistance of a subsidy.
  • If your benefit offering is not “affordable” for any of your employees, you are technically subject to the tack-hammer penalty -- $3,000 annual penalty per individual. However, the amount of penalty you will be assessed will likely be capped at the sledge-hammer penalty amount noted in question 3.
  • NOTE: If you have union employees and they are covered under a multiemployer plan, you will not be subjected to penalties on those individuals through 2014. (Rules for 2015 and beyond are still being determined.)

Question 6: Do you have variable hour or seasonal employees? And if so, how do you know who is considered full-time that you need to offer coverage to?

  • Note: This analysis does not apply to all full-time employees – only those who work variable hours or are considered seasonal. If someone is a full-time employee and you reasonably know that at the time of hire, making them go through these measurement periods in order to earn coverage could run afoul of the provisions in Health Care Reform prohibiting a waiting period of more than 90 days.
  • Also note: If you have variable hour or seasonal employees, you will likely need to edit/revise your plan document and SPD to incorporate provisions that reflect the actual operations of your plan.
  • ANSWER:
  • If you do not have variable hour or seasonal employees, you can skip this analysis as it does not pertain to you.
  • If you do have variable hour or seasonal employees, proceed with the below analysis:
  • You need to determine 3 things to measure your ongoing employees with variable hours to determine when they are eligible for benefits: 1) a measurement period; 2) an administrative period; and 3) a stability period.
  • Think of a measurement period as the period that someone has to complete to “earn” benefits.
  • The stability period is then the period that you offer them benefits for which they have already “earned” during the measurement period.
  • And the administrative period is similar to an open enrollment period – it’s the period you are counting up everyone’s hours during the measurement period to figure out who is eligible during the next upcoming stability period and handing out enrollment forms and benefit offering information.
  • The Measurement Period
  • you get to decide on the amount of time – anywhere from 3 to 12 months
  • Most will likely pick a 12 month period to keep administrative burdens as minimal as possible
  • The Stability Period
  • You get to decide on the amount of time – but it can’t be less than 6 months and it can’t be a shorter period of time than your measurement period
  • (because the law doesn’t want someone to have to “earn” eligibility over a 12 month period only to then be eligible for a 6 month period)
  • If someone is determined to be “full-time” during the “measurement period” you are going to need to offer them coverage for the length of the “stability period”
  • The Administrative Period
  • Remember, this is similar to the concept of an open enrollment period
  • You get to pick the amount of time but it cannot be longer than 90 days.
  • Example:
  • Employer with calendar year plan
  • Uses 12 month measurement and stability period and a 90 day administrative period
  • Measurement period would run from 10/1/13 to 9/30/14
  • Administrative period would run from 10/1/14 to 12/31/14
  • Stability period would run from 1/1/15 to 12/31/15
  • Glitches
  • You can have different rules for different categories of employees (union v. nonunion, salaried v. hourly, employees of different entities, or employees located in different states)
  • There is a slightly different set of rules for measuring new employees and the above only discusses measurement of ongoing employees.

Question 7: You aren’t offering coverage to all of your employees that work 30 hours or more a week, when do you have to comply or face penalties?

  • ANSWER:
  • Now delayed to 2015

*** This handout is for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

[1] Jeffrey Young, Obama Employer Mandate Delayed for One Year, Huffington Post, (July 2, 2013),

[2]Id.

[3] 26 U.S.C. § 4980H(c)(2)(A) (2010).

[4]Id. at § 4980H.

[5]Id. at §§ 6055-56; see also Tina Bull, PPACA’S Employer Reporting Requirements and Penalties Delayed, PSA Financial (Aug. 1, 2013),

[6]Id.

[7]The Henry J. Kaiser Family Found., Health Reform Implementation Timeline, (last visited Aug. 8, 2013).

[8]Health Insurance Marketplace, CMS, (last visited Aug. 5, 2013).

[9] The Ctr. for Consumer Info. & Ins. Oversight, State Health Insurance Marketplaces, CMS (May 10, 2013),

[10]Id.

[11]Id.

[12]Id.

[13]Id.

[14]Health Insurance Marketplace, supra note 8.

[15]The Henry J. Kaiser Family Found., Subsidy Calculator: Premium Assistance for Coverage in Exchanges (2013),

[16]Approved Monthly Premium Rates for Individual Health Insurance Coverage in New York State, N.Y. Times (July 16, 2013),

[17]Covered California,Standard Benefits for Individuals (2014),

[18]Covered California, Sliding Scale Benefits: Single Person (2014),

[19]State Health Insurance Marketplaces, supra note 9.