As full implementation of the Affordable Care Act (health care reform) draws near, there are steps you can take today to prepare for tomorrow. Many of the market changes go into effect in 2014, ultimately revealing a changed benefits landscape not only for health insurance issuers but for the employer as well. This information serves as a guide for you and your benefits management team allowing you to be prepared when more key provisions of the reform legislation become effective. So that you continue to be informed, we continue monitoring and analyzing any new or changing health care reform developments.
Several new reforms have been implemented in 2013 impacting employer-sponsored health benefits. Compliance of these provisions may also include communication of certain aspects of health care reform to your employees. Take advantage of this opportunity to keep employees informed as they make decisions about their health care coverage.
All current employees must be informed 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 October 1, 2013. After that date, new employees must be provided the notice as they are hired.
Employers that offer medical coverage to some or all of their employees may begin providing the “Employee Notice of Coverage Options” sooner than October 1, 2013, by using this model notice (also en español). The model notice is provided as part of the Department of Labor’s temporary guidance and employers are not required to provide notices until formal guidance is provided later this year.
The notice must be provided in writing and may be delivered electronically if ERISA standards for electronic delivery are met.
If you have a grandfathered plan, it is important that your business determines whether or not it will maintain its grandfathered status moving forward. Grandfathered health plans are exempt from many of the new insurance reforms; however, if you make certain changes to your plan, your plan may no longer be grandfathered.
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.
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 January 2013. This was an optional employer responsibility beginning in 2011, but becomes mandatory in 2013.
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.
Starting Jan. 1, 2013, high wage earners will be taxed an additional amount equal to 0.9% 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% Medicare tax.
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% of employer-paid health and dental premiums. In 2014, the tax credit will increase to 50% of premiums paid by eligible small businesses and 35% 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.
Please note: The employer mandate component of the Affordable Care Act has been delayed until 2015. Check back later for more details.
Beginning in 2014, employers with 50 or more full-time equivalent employees face a tax penalty if they don’t offer health insurance plans that give employees a minimal level of coverage. There are no tax penalties for employers with fewer than 50 full-time equivalents.
Barring any major deadline revisions, the Marketplace is scheduled to be fully operational for coverage with effective dates beginning on Jan. 1, 2014. Open enrollment for individual health insurance plans will begin on Oct. 1, 2013.The Small Business Health Options Program or SHOP exchange will allow small employers to coordinate their employees’ open enrollment periods with their specific health plan’s effective date.
Every plan offered on the Marketplace must meet new coverage and benefit rules. In Kansas, the federal government will run a federally facilitated exchange (FFE).
Similar to Expedia.com and other websites that allow you to pick and choose which product or service makes the most sense for you, the Marketplace will provide consumers and small employers a new place to research, evaluate and buy health insurance. 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.
Even with full implementation of the new health care reform laws, there will still be some people unable to afford health care coverage through the Marketplace. The law offers subsidies to those with household incomes of up to 400% of the federal poverty level (FPL). The tax credits will be determined on a sliding scale based on income, with the lowest incomes receiving the largest credit. See the 2013 FPL chart and the applicable percentage table.
Regardless of health status or other factors, individual and group health plans must guarantee issue policies to anyone applying for coverage beginning Jan. 1, 2014. This new provision applies to all group health plans and new individual health policies. Grandfathered individual health policies are not guaranteed issue.
Many employers providing health insurance also provide health wellness programs – rewarding workers who achieve specific health improvement goals. Rewards offered to those employees cannot exceed 20% of the total cost of an employee’s health benefits coverage. In 2014, employers that reward employees will be able to expand the 20% limit. (Although no final regulation has been released, the limit is expected to be raised to 30% – only for smoking cessation programs.)
Employers will no longer be able to impose enrollment waiting periods exceeding 90 days. This provision applies to grandfathered and non-grandfathered plans.
A health insurance issuer refers to an insurance company that is licensed to conduct the business of insurance in a state.
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% 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.
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).
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% coverage of health care costs, while the enrollee would be responsible for the remaining 20% 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.
This material is for informational purposes only. As regulations and other interpretive guidance are published, this information may change. This material is presented with the understanding that Blue Cross and Blue Shield of Kansas is not engaged in rendering legal, financial or tax advice. If tax or other professional assistance is required, utilize the services of a CPA, attorney, accountant or other consultant as may be required.