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The Patient Protection and Affordable Care Act (aka, ACA or commonly known as Obamacare) was enacted on March 23, 2010. From that time forward, many changes to health insurance have been incrementally implemented. Small business, large corporations and individuals all have different requirements under the law. The following is a brief overview of the ACA and is not intended to be legal advice or all-encompassing of this vast legislation.
Businesses with less than 50 employees are not required to offer health insurance. If they do, they must contain the Essential Health Benefits as outlined by the ACA. If they have an old plan that is officially considered “Grandfathered” some provisions do not apply. The following are a few of the key components of the law which have been incrementally implemented since its inception in 2010:
Must have fewer than 25 full-time employees or a combination of full-time and part-time staff (for example, two half-time employees equal one employee for purposes of the credit)
The average annual wages of employees must be less than $50,000
The employer must pay at least half of the insurance premiums
Obtain coverage through SHOP, the Small Business Health Options Program, which is administered by each state’s Exchange or Marketplace.
The Affordable Care Act (ACA) doesn’t have a consistent answer for that question. An employer might be considered “small” for one rule, but not another. The ACA requires employers with more than 50 employees to offer “affordable” health insurance coverage to their employees and file an annual report to the IRS. If not, employers are subject to a fine. Also, commonly owned businesses may all count together in some circumstances.
No Pre-Existing Condition Limitations
No Annual Dollar or Lifetime Limits to coverage
Maximum out of Pockets and Maximum Deductibles
determined by ACA
New employee Waiting Period cannot exceed 90 days
Children of employees can be covered to age 26, without full time student status requirements
Preventive services covered at 100%, no copay or deductible
30 Hour minimum for Full Time
Pediatric dental and vision required
All plans fall within a “Metal Tier” of Platinum, Gold, Silver or Bronze.
Businesses with less than 100 employees are considered a “small group” for rating purposes (varies by state). Insurance companies must use the ACA required community rating model, which limits the rating to only four factors: Age, Geography, Family Size and Tobacco Use. There is a different rate for each member, beginning at age 21 through 65 and above. Each spouse and child is rated based on their age and added to the employee rate. This age banded concept caused many administrative hurdles for businesses.
Beginning in April of 2016 legislation has changed in Colorado and ALL CARRIERS will have the ability to offer COMPOSITE RATES to all size companies. Most other states have or will follow suit.
Small businesses may be eligible for tax credits for offering health insurance to their employees.
The ACA requires businesses with more than 50 employees, also called “Applicable Large Employers” or ALE’s to offer group health insurance to their employees, or pay a penalty, beginning in 2016. The employer’s size for purposes of the employer shared responsibility rules is based on the average employee count for the prior calendar year. Part-time employees are included in the calculation according to a formula, but do not have to be offered coverage. Special rules apply for counting certain types of employees, including seasonal employees, volunteer employees and foreign employees. Companies with common ownership may have to be combined for purposes of this rule. Companies with a variable, part-time and/or seasonal workforce will need a technology solution to track their employees.
The penalty amount for not offering health coverage to substantially all full-time employees (and dependents) is $2,080 annually for each full-time employee, excluding the first 30 employees. An ALE will not be liable for this penalty for 2015 if it offers coverage to at least 70 percent of its full-time employees. In 2016 and beyond, an ALE will not be liable for this penalty if it offers coverage to all but 5 percent (or, if greater, five) of its full-time employees and dependents.
Applicable large employers (ALEs) (Code Section 6056) - ALEs subject to the shared responsibility rules must file report with IRS and send 1095-B’s to covered members of the plan.
Employers with self-insured health plans (Code Section 6055) - must file reporting. Applies to “Partially Self-Funded” and “Level Funded” plans 1095-C forms to plan participants.
Penalties for Non Compliance - $250 per return or statement, with a $3 million maximum in a calendar year. This first year the IRS has stated they are following a “Good Faith Effort” from employers.
The ACA incorporated many fees in the legislation. The following is a brief listing of current fees:
• Patient-Centered Outcomes Research Institute fees (PCORI fees), or also called Comparative Effectiveness Research (CER), these apply to all Health Insurance Issuers, Self-Funded Plans and some HRA’s. The current cost is $1.00 per employee per year.
• Reinsurance fee - The fees will be used to help stabilize premiums for coverage in the individual market. Applies to health insurance issuers and sponsors of self-insured group health plans For 2016 a rate of $5.25 per month ($27 per year). States may impose a higher fee.
• The Health Insurance Providers fee applies to health insurance issuers and does not affect self-funded coverage. Beginning in 2014, health insurance issuers will pay an annual fee based on net written premiums. The fee will fund premium tax subsidies for low-income individuals and families who purchase insurance through Exchanges (Health Insurance Marketplaces). A few carriers hare recently quoted this at 2.5%. This fee has been suspended for 2017.
• Connect for Health Assessment Fee - The 2015 assessment was $1.25 per policy/per month, in 2016, it is $1.80 per policy/per month. Employer is billed for this fee. Employer pays this fee, in addition to monthly premiums.
• Cadillac Tax - delayed in December 2015 by the Federal Budget until 2020. This tax is intended to encourage companies to choose lower-cost health plans for their employees, but also to raise revenue to fund other ACA provisions. Additionally, a study is to be conducted on age and gender adjustment to the annual limit.