The Affordable Care Act, signed into law in March 2010, is a set of health insurance reforms aimed at making preventative care more accessible to Americans. The ACA allows for the distribution of health insurance to those who wouldn’t have the ability to acquire it otherwise. Nationwide, approximately 15 percent of people don’t have health insurance. The goal of the ACA is to decrease that number.
To accomplish this goal, the ACA establishes an online health insurance marketplace, a database of health care plans from private insurance companies that are in compliance with the new federal requirements. Opened on Oct. 1, these ACA “exchanges” allow uninsured Americans to shop for insurance plans and to find discounts or subsidies where applicable.
The ACA exchanges, set up by states, allow for open enrollment in comprehensive health plans, which will begin coverage on Jan. 1, 2014. All employers were required to distribute notice of the open enrollment period to their employees. The notice requirements include reporting of the value of the health benefits that the company provides, information on how to get premium assistance as well as information about the state insurance exchange program.
Other provisions have already been put into effect as well, such as the establishment of discounts on prescription drugs for seniors, the 80/20 Rule that requires insurance companies to spend 80 cents out of every premium dollar on medical claims and quality improvement, free Medicare preventative services for seniors and new preventative services for women.
Employers should be aware of the various effects of the ACA reforms and take action where necessary. The companies affected by the Act include businesses with more than 50 “full-time equivalent” employees. These businesses will need to provide health insurance that is affordable (premiums must not exceed 9.5 percent of the employee’s income) and in compliance with the minimum coverage requirements outlined by the ACA. Failure to do so will result in penalties.
As of 2015, companies that have more than 50 full-time employees are subject to a tax payment called the Employer Shared Responsibility Payment if they fail to provide coverage that meet ACA’s minimum standards. The payment amounts to $2,000 per full-time employee per year, minus the first 30 employees.
Note, however, that providing insurance to an employee makes the family ineligible for subsidies through the state health insurance exchange. To assist employees in the dilemma of family coverage, employers have the option of either making group plans employee-only or to completely stop offering group plans and instead offer reimbursement of portions of the premium cost.
The Affordable Care Act also contains a provision called the Early Retiree Reinsurance Program that provides subsidies to employers who provide health care to retirees that have yet to qualify for Medicare. Once the retiree has made at least $15,000 in annual claims the subsidy covers up to 80 percent of claims. The program is temporary, however, and will end on Jan. 1, 2014.
The ACA also affects small businesses that employ 25 full-time workers. These businesses will be able to receive tax credit up to 35 percent (25 percent for nonprofits), amounts which will increase in 2014. Additionally, these companies must pay average annual wages less than $50,000, buy insurance through the exchange and reimburse employees for 50 percent of the premium. Remember that there are penalties of $2,000 per employee per year, minus the first 30 employees for those companies that do not provide insurance.
There are several additional requirements that the Affordable Care Act imposes on existing plans. For example, there can be no lifetime dollar limits on insurance covering essential health benefits (including emergency care, hospitalization, maternity and newborn care, prescription drugs, laboratory services, mental health and preventive care). Further, adults have the option of staying as dependents on their parents’ coverage up to the age of 26 if they lack access to job-based insurance on their own. Insurers cannot deny coverage to a child because of a pre-existing condition. Coverage may be rescinded only if the insured commits fraud.
New plans are required to fully cover preventative care with no deductible or co-pay, pay the full cost of any wellness programs, cover participation in clinical trials and must not discriminate in favor of highly compensated employees for group health plans.
Employers should be aware of additional provisions and their deadlines. For instance, the “Individual Mandate,” which outlines the requirements and exceptions for when individuals must have health insurance or otherwise face a penalty, will take effect as of Jan. 1, 2014. Cost-sharing limits, such as co-payments on out-of-pocket maximums, take effect at the beginning of January 2014 as well. Additionally, despite the postponement of implementation of the “Employer Mandate,” which requires certain businesses to provide an adequate level of affordable health insurance coverage to their employees or pay a penalty, employers should be aware of its effects and make changes to ensure compliance before it takes effect in 2015.
Since the Affordable Care Act has substantial impact on many businesses, owners should be well versed on the Act’s implications.
— Rob Hoxton is the President and CEO of HFI Wealth Management. He is the developer of The Grow Greenr® Method and the author of “Grow Greenr, 10 Steps to a Richer Life,” available at Amazon.com