Delay Doesn’t Really Mean DELAY

Some time has passed since the fireworks of the July announcement of a one-year delay in employer penalties under the employer responsibility section of 4980H. In that month, many employers may have assumed that this meant all is status quo regarding employer health coverage for 2014—no penalties means non-compliance is okay, right?

Not so fast. While the delay is certainly welcome news for employers, it does not mean that they can ignore the ACA or the critical decisions it calls upon employers to make.

To put it in the clearest terms: the ACA is the law of the land, despite the penalty delay, and a very substantial number of compliance and management issues that are impacted by the ACA remain. 2014 is going to be a busy and confusing year for all. Employers need to be aware, prepared, and in compliance as major mandates go into effect beginning in October, less than a month away.

Critical ACA Regulations Currently in Effect

1.  Benefit Mandates

a.  All non-grandfathered plans must continue to offer preventive care coverage, clinical trial services, provider nondiscrimination, and limits on out-of-pocket maximums.
b.  Maximum 90-day waiting period.
c.  No limits on pre-existing conditions or essential health benefits.
d.  Dependent coverage changed to age 26.
e.  Expansion of Wellness Incentives (30%, or up to 50% for smoking-related incentives).
f.   Limits on deductibles and out of pockets not to exceed the HSA-regulated amount.

2.  Summary of Benefits and Coverage

a.  SBCs must be made available and distributed during the Open Enrollment period for 2014 and must indicate whether the plan provides minimum value, as defined under the ACA.

3.  W-2 Reporting

a.  Employers must continue to report the aggregate value of employee’s health coverage on Form W-2 each year.

4. Fees

a.  PCORI: Patient-Centered Outcome Research Institute Fees must be paid by July 31 each year. For plans beginning after October 2013, the fee is $2 per member.
b.  Transitional Reinsurance Fee is $63/year or $5.25/month for each covered member that must be paid on or before January 15, first one in 2015.

5.  Exchange Notification

a.  Employers must distribute ACA-mandated Exchange notices by October 31, 2013, to all current employees and to each new employee within 14 days of hire.

6. Application for Advance Premium Credits

a.  All employers are required to fill out the appropriate section of a 12-page application for health coverage when requested by employees who are applying for ACA advance premium tax credits when purchasing coverage through an Exchange.

7.  Employer Mandate Determination

a.  All employers must assess their monthly eligible population to determine if they will be subject to the employer-mandate penalties that will begin in January 2015. Since clarification on a transition period is needed, it is highly recommended that all employers track hours for each employee, every month, beginning no later than January 1, 2014. If a 12-month measurement period is going to be used and there is no short counting period allowed, this count should have begun as early as August 2013!

While employers will avoid penalties for offering unaffordable plans or not offering coverage at all, it is wise to continue to track and forecast the future predicted penalty for non-compliance as well as any risk for discriminatory practice penalties.

Top 10 Issues Employers Should Consider Now

1.  Review and revise documents related to healthcare plans and arrangements. Employers need to verify that they have made all necessary changes and eligibility provisions. Employers may have already had plan design changes in play in preparation for the Employer Mandate, and they should consider what to implement in 2014 and what to delay to 2015.

2.  Continue to prepare for the Employer Mandate. Employers do not have to worry about enforcing the Employer Mandate tax penalties and reporting requirements in 2014, yet they should continue to prepare by evaluating their workforce—both employee classification and hour counting.

3.  Review cost-sharing for 2014 coverage of the Employer Mandate. Even though the affordability requirement will not be enforced in 2014, limits on cost-sharing provisions are still effective in 2014. Employers should take the time to review their cost-sharing structures and evaluate whether to implement or delay any shifts in employee-contribution cost-sharing.

4.  Review and revise wellness programs and incentives based on the ACA guidance. Employers can financially incentivize employees to meet certain health standards. Compliance with the ACA's guidance on wellness programs does not guarantee compliance with other program provisions, however, so employers need to carefully develop their wellness programs.

5.  Prepare for the rest of the ACA. Although the Employer Mandate has been delayed, the rest of the ACA provisions are scheduled to move forward. Employees need to implement new employee notice requirements and communications, plan fees, and other ACA requirements as originally scheduled.

6.  Gear up for ACA notices. Significant ACA requirements involve communicating information regarding the employer’s health plan to employees. Employers are required to send notices to their employees regarding the “New Health Insurance Marketplace Coverage Options and Your Options.” All employers must produce and distribute this notice.

7.  Prepare for earlier open enrollment as a result of additional notice requirements. With the October 1, 2013, deadline for the distribution of the Marketplace Notice, employers should consider moving open enrollment to an earlier date to accommodate the Marketplace Notice deadline.

8.  Develop strategies for the Individual Mandate and Health Insurance Marketplaces. Even though the Employer Mandate is delayed to 2015, the obligation of employees to have individual coverage under the “Individual Mandate” begins January 1, 2014. The opportunity for individuals to purchase coverage on the Health Insurance Marketplaces starts October 1, 2013. Employers are required to provide notices to employees regarding the Marketplaces and will be required to respond to Marketplace requests to confirm employee data and coverage.

9.  Review HIPAA/HITECH—Updates required for the Final Rule. All employers should be reviewing and updating their HIPAA policies and procedures for their covered entity health plan. Reviews should include updating Privacy Notices and evaluating business associate relationships and underlying agreements. The deadline for compliance is generally September 23, 2013.

10. Evaluate changes necessitated by the Supreme Court's ruling related to the Defense of Marriage Act (DOMA). Although it is anticipated that guidance for this act will be issued soon, all employers should be evaluating their health

Issues Facing Employers Under ACA Legislation Impact More than a One-Time “Pay or Play” Decision

On the surface, the “Pay or Play” requirements of the Affordable Care Act (ACA) seem relatively straightforward. Employers analyze their employee census data and current plan contribution information regularly, and knowing if you are a “large employer” is a fairly easy calculation of ACA-defined full-time and full-time equivalent employees as of a certain moment in time. Based on this, if you qualify as a large employer, the "Pay or Play" decision begins. “Pay” applies if you choose to not offer minimum essential coverage or any coverage. This will result in a $2,000 per full-time employee per-year excise tax. “Play” applies if you offer minimum essential coverage to all of your full-time employees - relatively simple when an Employer has the correct data regarding their current population and spend. However, ongoing monitoring of compliance and projected cost, while ensuring consistent eligibility and affordability standards are met over time, especially within the context of highly variable employee populations, is where ACA impacts become orders of magnitude more challenging in context of current benefits management approaches within organizations.

Employer decisions will have ramifications well beyond the initial impact of whether or not to continue providing health benefits to employees, or to pay penalties and have employees seek benefits from a public exchange. The decision itself either way can have both a financial and motivational impact on employees. The employee population has come to expect, rightly or wrongly, that their company will offer a comprehensive benefits package as a part of total compensation/total rewards. Should this no longer be offered, the employee is faced with the prospect of lower take home pay (due to loss of what are known as Section 125 Cafeteria Plan benefits) and the stress of having to ensure coverage is secured and is paid on time.

The employer must be aware of the compensation issues and expectations when removing something that ranks high on the list of employee “wants”. There is also the need to identify the goals, opportunities and risks associated with these decisions surrounding recruitment and retention in employee strategy. Benefits have long been used as a recruiting tool to ensure the best and brightest employees are hired and are retained. With the ACA implementation, a “Pay” decision is much larger than the “straightforward” $2,000 per-head, per-year calculation. Compensation changes, loss of tax deductibility and effect on total compensation, employee turnover and retention, competitive value to employee attraction...all have significant financial impacts on the total cost of the decision. When employers really start looking at the impacts of a "Pay" decision, many will find that the equation can become much more complex and quickly shift in favor of a “Play” decision.

As such (...and as is suggested through many industry polls of employers qualifying as “large” under the ACA) many employers will elect to continue providing health benefit plans, but will also seek ways to reduce cost-burden while maintaining employee morale and company “brand” as an employer of choice. Many employers will evaluate or expand on self-insured plans as a means to effect this cost-control, and focus significant resources to arrive at ‘best-of-all options’ approaches. Achieving this, however, presents a significant challenge to employers and their advisors that will require changes to current benefits management practices, data, and systems.

How are the carriers affected?


    • Under the Affordable Care Act (ACA), patients have more rights, protections, and security that coverage will be available when they need it. Insurance providers—or carriers—are accountable for ensuring compliance. For example:

    • ·      No more pre-existing condition denials for children.

    • ·      No more lifetime dollar limits on coverage—annual limits on essential health benefits, as defined by the ACA are no longer set. Annual dollar limits for other coverage are set at increasing higher amounts until January 1, 2014, when plans are banned from having an annual dollar limit on coverage.

    • ·      Insurance carriers cannot drop people with coverage when they get sick.

    • ·      No more denials of coverage without appeal.

    • ·      All health plans must assist consumers in understanding their coverage without the difficulty that comes with insurance documents. Beginning September 2012, all health plans must provide consumers with clear, consistent, and comparable information about the health plans offered and coverage available.

The ACA also includes features that hold insurers/carriers/providers accountable for how they spend premium dollars and rate increases. Medical loss ration and rate review are two features that directly will affect consumers and employers offering coverage.

What does this mean to employers? Whether you are self-insured or fully insured, the ACA’s fee requirements and mandates will have a direct impact on rates, delivery of health care, and management of plan design and effectiveness. For example, to ensure that premiums are spent primarily on health care, the law generally requires that at least 85% of all premium dollars insurance companies collect for large employer plans are spent on services and quality improvement. If this requirement is not met, rebates will be mandated. As the state exchange process and development becomes more clear, it is expected that large and small insurance providers will be more transparent on their plans, network effectiveness, and quality so that employers can make good, cost-efficient decisions.