Healthcare Reform: 2014 Timeline
Employer Requirement to Offer Minimum Essential Coverage (50 or More Full-Time Employees) – The new healthcare reform law does not require employers to offer health coverage to their employees. However, those employers of 50 or more FTEs may be subject to an IRS fine beginning in 2014 if they do not provide coverage.
Large employers will be subject to a penalty beginning in 2014 if they do not: (a) offer coverage; (b) offer coverage that is affordable; or (c) offer coverage that meets the minimum value standards.
If employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage,” and one or more full-time employees enrolls for coverage in an exchange and qualifies for premium tax credit or cost-sharing reduction, then the Employer penalty = $2,000 for each of its full-time employees.
If employer provides its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and one or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost sharing reduction because a) the employee’s share of the premium exceed 9.5 percent of income, or b) the actuarial value of the coverage was less than 60 percent, then Employer penalty = $3,000 for each full-time employee who receives a tax credit or cost-sharing reduction
Large Employers: For purposes of the penalty, a large employer is an employer who has 50 or more full-time employees and full-time equivalents. Full-time employees are defined as those that work 30 or more hours a week calculated on a monthly basis. Full-time equivalents are also counted in the determination of whether an employer is a large employer for purposes of the penalty. The monthly number of hours worked by part-time employees is aggregated and divided by 120 for this purpose. To determine whether an employer is deemed a large employer subject to the penalty, the number of full-time employees is added to the number of full-time equivalents. If that number is 50 or more, the employer is subject to a penalty as described below. Employers falling below the threshold will not be subject to a penalty.
Even though the hours of part-time workers are counted for purposes of determining whether an employer is a large employer, the penalty only applies with respect to full-time employees. An employer is not considered a large employer if it employs more than 50 people for 120 days or less during the calendar year and the employees in excess of 50 employed during such 120 day period were seasonal workers. The controlled group rules (i.e., the rules under Sections 414(b), (c), (m), and (o) of the Internal Revenue Code of 1986) that apply to qualified retirement plans will similarly apply in determining whether an employing entity is a large employer.
Individual Mandate - U.S. citizens will be required to purchase Health Insurance if it is not provided for them through their employer, or face a penalty.
State-based Exchanges for Individuals and Small Groups - Exchanges established for individual and small employer groups of 1-100 employees.
There will be a state-by-state creation of exchanges, where individuals and small employers can purchase qualified health benefits plans. No new federal agency would be created under the law to oversee the process. HHS would be charged with establishing and operating an exchange in any state that fails to establish one on or before January 1, 2014. The exchanges will initially be limited to employers of fewer than 101 employees. States would have the option to reduce this to employers with less than 51 employees. In 2017, a state would also have the option of expanding its exchange to accommodate larger employers.
Small Employer Tax Credits Available Only in Exchange - Eligible small businesses that purchase coverage through the exchange may apply for a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium.
For tax years 2014 and later, for eligible small businesses that purchase coverage through the exchange, there will be a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost. The credit will be available for two years. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium.
Employer Reporting Requirements - Employers with 50 or more employees must annually report to the Secretary of the Treasury whether they offer health coverage to their full-time employees and dependents.
Employers must annually report to the Secretary of the Treasury whether they offer health coverage to their full-time employees and dependents, the total number and names of full-time employees receiving health coverage, the length of any waiting period, and other information about the cost of the plan for each month during the calendar year.
Pre-Existing Conditions – Prohibits the limiting of benefits for pre-existing conditions in all plans.
Effective January 1, 2014, for Individual and Group Health Insurance Plans:
- Pre-existing condition exclusions prohibited in all health insurance plans
- Prohibit treating acts of domestic violence as a pre-existing condition
- Waiting Period for enrollment in new health insurance plans limited to 90 days
- Grandfathered existing health insurance plans must prohibit pre-existing condition exclusions by January 1, 2014
Benefit Waiting Periods – Prohibit waiting periods in excess of 90 days for most states, 60 days for California (including grandfathered plans).
Some employer-provided health plans do not offer benefits to new employees until they have been with the company for an extended period of time. Under PPACA, these general waiting periods are limited. Group health plans offered either directly by an employer or indirectly from a health insurer cannot impose a waiting period for benefits to take effect longer than 90 days. This reduces the gap in coverage that many persons experience when they begin a new job.
Rating – Modified community rating for individual and family coverage in the small group market. Rates may be surcharged up to 50% for tobacco use. A maximum 3:1 premium ratio takes effect on age-rated rates.
Plans may not establish eligibility rules based on health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), disability, or any other health status-related factor determined appropriate by the Secretary of the HHS.
Wellness Program – Wellness program incentives may increase to 30% of the cost of coverage for a reward based program.
The PPACA codifies the existing HIPAA rules allowing wellness programs to offer an incentive, such as a premium reduction, for achieving a health standard. However, the maximum amount of the incentive is increased from 20% to 30% of the cost of employee-only coverage under the plan, with Secretarial discretion to increase the cap to 50%.
Health Insurance Carriers - New fees imposed in health insurance carriers.
Beginning in 2014, a fee will be applied on net premiums of all health insurers based on their market share. For non-profit insurers, only 50 percent of net premiums will be taken into account in calculating the fee. Exemptions are granted for: non-profit plans that receive more than 80 percent of their income from government programs targeting low-income or elderly populations, or people with disabilities; voluntary employees’ beneficiary associations (VEBAs) not established by an employer; certain nonprofit insurers with medical loss ratios within specific limits; and self-insured plans and federal, state or other government entities. (The fee does apply to companies that underwrite government-funded insurance, such as Medicaid managed care plans and the Federal Employee Health Benefits Program.)
Small Group Redefined as 1-100 - Small Group will be redefined as 1- 100 employees in most states. (Will remain 1-50 in California until 2016.)
Small Group will be redefined as 1- 100 employees for the market reform starting 2014. However, for the employer responsibility requirements it is 50 employees or less, with part-time workers taken into the calculation on an aggregate basis.
List of Employer Mandates for 2014 - 5 things employers must remember for 2014.
- Employers with 50 or more employees will face penalties if full-time employees receive government assistance through the Exchange.
- Automatic enrollment with employee opt-out for employers with more than 200 employees.
- Increased tax credits for small employers who provide health plan coverage through the Exchange for 2 years.
- Employer must provide notice to employees of the existence of the Exchange.
- Employer must provide notice to the IRS and participants with information detailing the c overage under the employer-sponsored health plan.