The Affordable Care Act at Six…and Counting
While the results of this fall’s national elections might re-shape the debate around the Affordable Care Act (the ACA), substantive change, if any, won’t occur until at least mid-2017. In the interim, employers must remain mindful of the impact that the ACA’s various coverage, cost and compliance requirements have on their employee benefit offerings.
Here’s a brief, top line summary of the ACA provisions that employers should be aware of. Unless specifically noted otherwise, all apply for the 2016 Plan Year:
The Notice of Coverage Options: (“Exchange Notice”): must be provided to all new employees within 14 days of their hire date.
The Summary of Benefits and Coverage: (“SBC”): must be provided to all eligibles at least once per year, and also upon request.
Cost-Sharing Limits: the maximum out-of-pocket expense (e.g., copays, deductibles, coinsurance) for covered in-network services cannot exceed $6,850 per person or $13,700 per family.
Flexible Spending Account (Unreimbursed Healthcare) Election Limit: the maximum allowed employee contribution is $2,550.
“While the results of this fall’s national elections might re-shape the debate around the Affordable Care Act (the ACA), substantive change, if any, won’t occur until at least mid-2017.”
Patient-centered Outcomes Research Institute (PCORI) and Transitional Reinsurance Program fees: are included in the premiums charged to fully insured plans, and reported/paid by the carrier. Self funded employers are responsible for calculating, reporting and paying these fees.
W-2 Reporting of Employee Coverage Cost: all employers that filed 250+ W-2s for the 2015 tax year must report the total cost of each employee’s coverage in box 12 of the employee’s W-2 for the 2016 tax year, and subsequent tax years.
Definition of “Small Group”: the ACA changed the definition of Small Group (from “50 and under” to “100 and under” employees). In many states, this has impacted both the benefits and the funding arrangements that are available to employers with 51 – 100 employees.
“Large Employer Shared Responsibility”: the following provisions apply to all “Applicable Large Employers” (ALEs) — those that employed an average of 50 or more full-time employees, including full-time equivalent employees, during the employer’s designated 12 month Measurement Period:
“Pay or Play”: an ALE will Pay (a monthly penalty if at least one FTE receives an approved government subsidy to buy coverage on the Exchange) if it does not Play (offer “affordable”, “minimum essential coverage” that provides “minimum value” to FTEs).
Annual Reporting requirement: all ALEs must provide an IRS Form 1095-C to all individuals who were an FTE for at least one month in the year. In addition, ALEs with self-funded plans must also distribute a 1095-C to anyone who was eligible for benefits during the calendar year, regardless of employment or enrollment status. Finally, all employers must submit annual filings to the IRS, containing all of the information contained on the Form 1095-Cs.
The High-Cost Health Plan Excise Tax (aka the “Cadillac Tax”): this ACA provision will not take effect until at least the plan year starting in 2020. For all employers, especially those with collectively-bargained benefits, this was welcome news — getting additional time to plan and implement any needed benefit design changes. The sobering news is that the cost implications of non-compliance will be significant — a tax of 40% of the amount by which the health/Rx plan(s) cost exceeds the ACA-mandated cost thresholds. The tax will be calculated based on the total cost of the plan(s) offered, not just the employer’s share. So increasing employee/retiree contributions will not reduce the employer’s potential Cadillac Tax exposure.
