Although the employer mandate required under the Affordable Care Act (ACA) doesn't take effect until 2015, several reforms become effective in 2014. Here are the key reforms that you need to know.
1. Minimum Essential Coverage
Beginning in 2014, the ACA requires that health insurance issuers and sponsors of self-insured plans provide "minimum essential coverage" and report health coverage information to the IRS. This information will likely be used to verify data related to the ACA's individual and employer mandate.
2. Plan Design
For plan years beginning on or after January 1, 2014, health plans...
- Are prohibited from placing annual limits on essential health benefits
- Are prohibited from imposing pre-existing condition exclusions on enrollees
- May not impose a waiting period that exceeds 90 days
- Grandfathered plans are not required to cover adult children under age 26
- Non-grandfathered plans are subject to limits on cost-sharing or out-of-pocket costs:
- Out-of-pocket expenses cannot exceed amounts applicable to HSA coverage ($6,350 for self-only coverage and $12,700 for family coverage)
- Deductibles may not exceed $2,000 (single coverage) or $4,000 (family coverage).
(Source: Checkpoint HR)
3. Wellness Program Incentives
In 2014, new rules regarding wellness programs will go into effect, increasing the caps on wellness incentives that employers can offer for outcome-based wellness initiatives.
Employers will be able to offer incentives of up to 30% of the cost of coverage for programs that have metrics or specific goals, and up to 50% of cost of coverage for programs designed to decrease or prevent tobacco use. The rules do not apply to participation-based wellness programs.
The rules also require employers to provide "reasonable alternatives" to outcomes-based wellness programs for employees with medical conditions who may not be able to comply with the wellness program’s requirements.
4. Reinsurance Fees
Under the ACA, health insurance issuers and self-funded group health plans need to pay fees to a transitional reinsurance program for the first three years of the operation of health insurance exchanges, which will be used to stabilize premiums for coverage in the exchange market.
Employers should review the health coverage they provide to employees to assess whether it is subject to reinsurance fees. The fees will be determined and announced by the HHS annually, and for 2014, the rate is $63 per covered life.
5. Individual Mandate
The individual health insurance mandate, required under the ACA, goes into effect in 2014. All individuals will be required to attain health insurance coverage either through their employer or via the exchanges set up by the government.
Individuals can purchase coverage through a variety of means, including the federal and state health insurance exchanges which were established as of October 2013. The coverage they obtain must meet the requirements for minimum essential coverage, otherwise individuals will need to change their coverage or pay a penalty on their federal income tax return.
6. Defined Contribution Health Care Plans
The IRS and DOL have released guidance, which is effective for plan years beginning in 2014, on applying annual limits and preventative care to defined contribution health care plans. These include health reimbursement arrangements (HRAs), health flexible spending arrangements, and employer payment plans (arrangements that reimburse employees’ premiums for individual health insurance coverage) under the ACA.
This may be subject to change based on the President's 2013 remarks regarding the ACA. Additionally, more regulations and rules will be sure to hit in 2014 and beyond, so be sure to stay abreast of how the ACA will affect your organization.
Please note that by providing you with research information that may be contained in this article, ERC is not providing a qualified legal opinion. As such, research information that ERC provides to its members should not be relied upon or considered a substitute for legal advice. The information that we provide is for general employer use and not necessarily for individual application.
ERC Health has consistently and significantly beat the market relative to annual premium rate adjustments. This fully-insured program for employers with 2 to 500 benefit-eligible employees, provides employers the tools necessary to reduce claims and manage health insurance costs.