Healthcare Reform Questions and Answers

Affordable Care Act The complexities of health care reform, beginning with the basics…

In 2010, President Obama signed comprehensive health reform, The Affordable Care Act, into law. The ACA, or what's commonly known as "health care reform," will take years to become fully enacted and requires the creation of many new regulations. The legislation focuses on provisions to expand coverage, control health care costs, and improve healthcare delivery systems, with important implications for companies and employees alike. Like many Americans, you're probably unsure of how this landmark legislation will affect you, your family or your business. Associated Benefits recognizes the challenges created by The ACA's broad scope of changes and the rapid pace at which the health insurance and benefits landscape is being altered. Below are several of the most commonly asked questions regarding the legislation's far-reaching effects.

Affordable Care Act FAQs

What is grandfathering?

The Affordable Care Act (ACA) standards and requirements have an important exception. If plans were already in place on March 23, 2010, and do not violate the impermissible change rules, they meet the criteria to be deemed as a "grandfathered health plan." The plans that meet this status are granted a permanent exemption from certain mandates. The rules are applied separately to each benefit option; for example, if an employer offers both a PPO and an HMO, each option will retain grandfathered status as long as each does not violate the impermissible change rules.

What does it mean to me as an employer?

Employers are at the epicenter of the Affordable Care Act. The decisions that you make associated with ACA will have significant ramifications for both you and your employees. Employers will potentially be subject to new penalties. Tax credits will be available to selected employers as well. The ACA includes a number of provisions that impact and drive your decisions on providing health care coverage as a benefit to employees. Additionally new systems and processes may be required to meet mandates, avoid being penalized and meet the new detailed reporting requirements.

A few of the key areas of employer impact:

• Mandate to provide coverage (firms with less than 50 full time equivalent employees not subject to mandate in 2014)
• Penalties for not providing coverage if mandated
• Pay or Play Tax - Tax penalties if coverage is deemed "unaffordable"
• Mandate to certain standards "essential health benefits," "minimum essential coverage" and "cost-sharing" limitations
• New small business tax credit to purchase coverage
• New insurance exchanges offer new avenues for purchasing health care coverage
• Potential penalties if employees seek subsidized coverage through or on an exchange
• Limits on underwriting
• Elimination of tax deduction for retiree drug subsidies to employers
• Restrictions on Flexible Spending Account (FSA) salary deferral contributions
• Large employer automatic enrollment
• Employee notification and general reporting requirements
• Existing plans grandfathered as of date of enactment for some, but not all, of the new plan requirements
• Changes in taxation and potential penalties

What does ACA mean for non-grandfathered vs. grandfathered plans? If your plan has "grandfathered" status, it means:

• Coverage for adult children up to 26 years old on parents' health plan
• No lifetime limits for essential benefits
• Restricted annual limits for essential benefits
• No cancellations except in cases of fraud or misrepresentation
• No pre-existing conditions for children under 19 years old

If your plan has "non-grandfathered" status, it means:

• Coverage for adult children up to 26 years old on parents' health plan
• No lifetime limits for essential benefits
• Restricted annual limits for essential benefits
• No cancellations except in cases of fraud or misrepresentation
• No pre-existing conditions for children under 19 years old
• Coverage of preventive services without cost sharing
• Plan is subject to both an internal and external appeals process
• Patient protections relating to choice of provider and emergency treatment
• Disclosures regarding transparency
• Nondiscrimination rules apply to insured health plans

What issues should I consider regarding grandfathering?

• What effect will the benefit change I'm considering have on my company's grandfathered status?
• What is the cost of keeping current offerings?
• What is the cost - now and in the future - of changing plan design and losing grandfathered status?

When will ACA be fully implemented?

Coverage mandates and insurance reforms will continue to be implemented through 2014.

What size employer is mandated to provide coverage?

An employer with 50 or more Full Time Equivalencies (FTEs) that work 30+ hours per week must provide coverage. ACA requires large employers to provide health coverage per the regulations issued by DHHS, DOL, and the NAIC.

What are the penalties for noncompliance with employer mandated coverage?

Penalties will be assessed for not providing coverage. For example, if one FTE in an employer group with over 50 employees receives subsidized coverage, the employer will be penalized. Penalties will also be assessed if someone receives a subsidy or is charged greater than 9.5% of their wages.

What does ACA mean for small employers?

Per The ACA, a small employer is defined as a business having less than 50 FTEs. Small employers are not mandated to provide health insurance to employees. A tax credit of up to 35% (25% for non-profits) is immediately available for small employers who offer health insurance, pay 50% of the employee coverage, have less than 25 employees and the average wage (excluding owner's and owner's family members) is $50,000 or less. Tax credit is available only for the purpose of offsetting tax liability.

Confused about healthcare reform and its effects on your organization?

Pacific Coast Benefits can help you pinpoint your opportunities, obligations, and strategies for dealing with the ACA provisions.