Kansas businesses have the responsibility to inform all current employees about the availability of the Health Insurance Marketplace (Exchange) and how it can be accessed. While the original deadline was March 1, 2013, the effective date has been changed to Oct. 1, 2013.
Employers that offer medical coverage to some or all of their employees should provide the “Employee Notice of Coverage Options” by Oct. 1, 2013, using this model notice (also en español). After that date, new employees must be provided the notice as they are hired. The notice must be provided in writing and may be delivered electronically if ERISA standards for electronic delivery are met.
Grandfathering - If a Kansas business already offers health insurance to its employees there is a good chance the plan is a grandfathered plan. Health insurance plans are considered "grandfathered" if they were in effect on March 23, 2010 have had at least one enrollee since that date, and have not substantially changed. Even if an employer enrolls a worker into such a plan after that date, the employee is still covered by a grandfathered plan. The status of a plan depends on when the plan was created, not when someone is enrolled in it.
A grandfathered plan is not subject to all the requirements of the Affordable Care Act (ACA). Such plans don’t have to cover government-mandated preventive health services or “essential health benefits," be subject to new rating rules, or include annual out-of-pocket maximums.
Changes coming for non-grandfathered small business plans - Small businesses who currently offer non-grandfathered plans – plans that came into existence after March 23, 2010 will see changes in the benefits offered and how premiums are calculated. This change will occur on the group’s anniversary date.
All non-grandfathered health plans must include essential health benefits. Also, beginning Jan. 1, 2014, premiums for all non-grandfathered health plans will be based only on these four factors: age, geographic location, family size and use of tobacco products. The group’s premium will be built by considering these four factors for each employee in the plan.
Flexible spending accounts - For some of your employees, flexible spending accounts are an important budgeting tool. This is an ideal time to remind them that beginning in 2013, contributions to such accounts can be no more than $2,500.
W-2 reporting - For tax year 2012, employers that issue more than 250 W-2 Forms must report the total cost of health care coverage on each employee’s W-2. Both the employer and the employee’s portion of the cost must be reported. The cost must be reported on the 2012 W-2 Forms which were issued in Jan. 2013. This was an optional employer responsibility beginning in 2011, but becomes mandatory in 2013.
Comparative effectiveness research fee - Fully insured and self insured plans will be assessed $1 per participant to fund comparative effectiveness research. This research was established to assess the most effective treatments for certain conditions and to share that information with health care providers. The fee increases to $2 per participant in 2014. Insurers will pay the fee on the insured plans and build the fee into their rates. Employers will be responsible for paying the fee on self-insured plans.
Increased Medicare tax for high earners - Starting Jan. 1, 2013, high wage earners will be taxed an additional amount equal to 0.9 percent of any wages over $200,000 for single taxpayers and $250,000 for married couples filing jointly. Employees earning up to $200,000 will continue paying the same 1.45 percent Medicare tax.
The employer mandate component of the Affordable Care Act has been delayed until 2015. Check back later for more details.
Employer mandate - For Kansas businesses with 50 or more employees, the Affordable Care Act requires that they offer affordable, minimum value coverage to their full-time employees and their dependents. This is often referred to as employer shared responsibility or "Play or Pay.” These large businesses must begin providing the affordable, minimum value coverage in 2014, but the reporting requirements and penalties for not providing such coverage has been delayed until 2015. This is a change that was made by the government in July to allow businesses more time to understand these requirements and take the steps necessary to comply with the law.
Beginning in 2015, employers with 50 or more full-time employees, defined as those working 30 or more hours a week, will pay a tax penalty if they don’t offer health insurance plans that give employees and their dependents a minimal level of affordable coverage. There are no tax penalties for employers with fewer than 50 full-time employees. If your business offers minimum value coverage that is affordable to all full time employees and their dependents, your business cannot, under any circumstances, be subject to pay or play penalties.
A “minimum” level of health insurance coverage is a plan that covers 60 percent of the worker’s total health care expenses. This means the plan pays at least 60 percent of covered services while an employee pays no more than 40 percent through deductibles, copays and coinsurance.
An employer is considered to be providing “affordable coverage” if the cost of the least-expensive employee-only plan doesn’t require an employee to pay more than 9.5 percent of his or her income in premium. An employer will have to pay a penalty if the cost of the plan exceeds 9.5 percent of the worker’s income AND an employee obtains a tax credit for Marketplace coverage.
Beginning in 2015, employers who do not meet these standards or who have as few as one employee qualify and receive a tax credit through the Marketplace will pay a penalty. The amount of the annual Employer Shared Responsibility Payment is based partly on whether an employer offers insurance at all:
SHOP (Small Business Health Options Program) - Some small Kansas businesses may decide they want to offer health insurance to their employees. These businesses can call on an insurance company to purchase their plan, or they could go to the Small Business Health Options Program, or SHOP exchange. SHOP provides coverage options to employers with fewer than 50 employees to purchase health insurance for their employees.
In Kansas, SHOP will be a federally-facilitated, online exchange where small business owners can research, compare and buy health insurance. To make shopping easier, all insurance companies must offer the same set of comprehensive health benefits, including coverage for doctor’s visits, hospital stays and medication. SHOP will open Oct. 1, 2013, so small businesses may begin to shop and purchase insurance that will be effective Jan.1, 2014. SHOP will remain open all year so employers can purchase insurance when the time is right.
View a Kaiser Family Foundation/Journal of the American Medical Association chart showing the different ways employees can obtain health coverage under the Affordable Care Act in 2014.
SHOP will continue to evolve during the next year. The first phase allows for businesses to purchase the exact plan they want to offer all of their employees. In 2015, SHOP will include a second option permitting employee choice. In this case, an employer would let employees know how much the company will contribute to their premium and each employee could go out on SHOP to purchase the plan that best meets their needs.
Employer tax credit - One of the early provisions of the Affordable Care Act enabled qualified small businesses to be eligible for a tax credit of up to 35 percent of employer-paid health and dental premiums. In 2014, the tax credit will increase to 50 percent of premiums paid by eligible small businesses and 35 percent of premiums paid by eligible tax-exempt organizations. You can learn all the details under Tax Credit in our Topic Library, or by visiting the IRS website at www.irs.gov.
Timeline - We’ve developed a timeline of important dates and information for you to keep in mind as we move closer to full implementation of the Affordable Care Act. Be sure to check back periodically for the most up to date information.
Employee Wellness Discounts - Many Kansas employers provide incentives for their workers to remain healthy and/or prevent harmful health issues. Currently, such incentives and rewards can’t exceed 20 percent of the total cost of an employee’s health benefits coverage.
In 2014, employers that reward employees for healthy habits will be able to expand the 20 percent limit to a maximum of 30 percent generally, or as much as 50 percent for tobacco usage.
Waiting periods - Beginning with plan years starting in 2014, employers will no longer be able to impose enrollment waiting periods that exceed 90 days. This provision applies to grandfathered and non-grandfathered plans. This restriction applies to the time period from enrollment to the coverage effective date.
Issuer - A health insurance issuer refers to an insurance company that is licensed to conduct the business of insurance in a state.
Individual mandate - Health care reform requires that individuals must obtain a minimum amount of health care insurance or be subject to a tax penalty of $95 in 2014 or 1 percent of their taxable income, whichever is greater. This penalty increases annually. See a chart from the Kaiser Family Foundation detailing the penalties for being without health insurance.
Qualified Health Plan (QHP) - In order for a plan to be offered in the Marketplace, it must be certified. The certification designates that the plan provides essential health benefits and follows established limits on cost sharing (deductibles, copayments, out-of-pocket maximums).
Coverage levels - Plans offered on the Marketplace will be based on a tiered format of coverage levels named after types of metals. The four levels of coverage are based on “actuarial value.” Actuarial value is a measure of the level of protection offered by the insurance plan (for the average population) indicated by the percentage of health care costs that would be covered by the health plan.
As an example, a Gold plan would offer 80 percent coverage of health care costs, while the enrollee would be responsible for the remaining 20 percent of costs. Individuals with high cost health issues, such as cancer, could end up paying more than the average. Catastrophic plans, that cover essential benefits but have high deductibles, will be available to some individuals that have been exempted from the individual mandate.