Several key reforms under the Affordable Care Act (ACA) measure the affordability of employer-sponsored health insurance coverage. Effective January 1, 2014, the affordability of an employer’s health plan may be assessed in the following three contexts: the shared responsibility penalty for large employers, the premium tax credit for low-income individuals to purchase health coverage through an Affordable Care Act exchange, and the tax penalty imposed on individuals who fail to obtain health insurance coverage or the “individual mandate.” All three ACA mandates involve an affordability determination, but the test for affordability varies for each provision.
On March 21, 2013, the departments of Labor, Health and Human Services and the Treasury issued a proposed rule on the Affordable Care Act’s (ACA) 90 day waiting period limit. For plan years beginning on or after January 1, 2014, the ACA prohibits group health plans and group health insurance issuers from applying and waiting period that is any longer than 90 days. The 90 day waiting period limit will apply to both non-grandfathered and grandfathered health plans. The 90 day waiting period limit does not require and employer to offer coverage to any particular employee or class of employees, including part-time employees. The 90 day waiting period limit prevents any eligible employee or dependent from having to wait more than 90 days before coverage under a group health plan becomes effective. Even though the rule is not in final form, the departments will consider you compliant if you offer a 90 day waiting period after January 1, 2014.
The Affordable Care Act (ACA) made several changes affecting Health Reimbursement Arrangements (HRAs). There are special rules for HRAs and some the fees that are subject to be paid by health plans. These fees include:
- Patient-Centered Outcomes Research Institute fees (PCORI fees)
- Reinsurance fees
Both of these fees are calculated based on the average numbers of lives covered under the plan. For plan sponsors that maintain multiple self-insured arrangements (an HRA in addition to a major medical plan), this could have resulted in paying each fee twice for each covered life, effectively doubling the amount of these fees. To avoid this, the IRS developed special rules for applying PCORI fees and reinsurance fees to these types of plans. (See Legislative Brief below).
PCORI fees apply for plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. For calendar year plans, the research fees will be effective for the 2012 through 2018 plan years. The first possible payments will be due on July 31, 2013. The fee is $1.00 per covered life for plan years ending before Oct. 1, 2013 and after Oct. 1, 2013 and before Oct. 1, 2014, the fee increases to $2.00 per covered life. For plan years after Oct. 1, 2014, the fee amount will increase based on increases in the projected per capita amount of National Health Expenditures. Final regulation were issued on Dec. 5, 2012 and can be linked below.
Under the special rule, an HRA is not subject to a separate research fee if the plan sponsor also maintains another self-insured plan providing major medical coverage, as long as the HRA and the plan have the same plan year. This allows the plan sponsor to treat both plans as on applicable self-insured plan for purposes of calculating the research fee. However, a plan sponsor may not treat an HRA and a fully-insured group health plan as a single plan for purposes of calculating the PCORI fee. In this case, the plan sponsor of the HRA and the issuer of the insured plan will both be subject to the research fee, even though the HRA and insured health plan are maintained by the same plan sponsor. This means that there may be two fees for the same lives.
The reinsurance fees were established to stabilize premiums for coverage in the individual market during the first three years of Exchange operation (2014-2016) when individual with higher cost medical needs gain insurance coverage. ACA requires health insurance issuers and plan sponsors of self-insured group health plans to pay the fees to support the reinsurance program.
The fee’s on this program will be based on the national contribution rate, which HHS will announce annually. For 2014, HHS proposes a national contribution rate of $5.25 per month ($63 per year). The fee would be calculated by multiplying the average number of covered lives (employees and their dependents) during the benefit for all of the entity’s plans and coverage that would pay contributions, by the national contribution rate for the benefit year. The annual contribution rate for a group health plan with 200 covered lives (employees and dependents) would be $12,600 per year (200 x 63=12,600).
The proposed regulations that HRAs that are integrated with major medical coverage would be excluded from reinsurance fees. This applies whether the group is self-insured or fully-insured. An HRA is considered integrated with an employer’s group health coverage if, under the terms of the HRA, the HRA is available to employees who are covered by employer-sponsored coverage that meets ACA’s annual limit requirements.
Excepted benefits are not to the PCORI or reinsurance fees. See the Legislative Brief below to see a list of “excepted benefits”. An HRA will not be required to pay PCORI fees or reinsurance fees if substantially all of the coverage is considered excepted benefits. If you have any questions on HRAs and ACA fees, please contact your McLaughlin Smoak & Clarke Benefits representative.
This month’s post covers Essential Health Benefits (EHB). The final rule confirms prior guidance defining EHB based on a state-specific benchmark plan and requiring all plans that cover EHB to offer benefits that are substantially equal to those offered by the benchmark plan.
ACA’s essential health benefits requirement applies to non-grandfathered plans offered in the individual and small group markets, both inside and outside of the Exchanges. Self-insured group health plans, health insurance coverage offered in the large group market and grandfathered plans are not required to cover essential health benefits.
ACA requires the EHB package to be equal in scope to the benefits covered by a typical employer plan. Additionally, the EHB package must include items and services within at least the following 10 general categories: Ambulatory patient services; Emergency services; Hospitalization; Maternity and newborn care; Mental health and substance use disorder benefits, including behavioral health treatment; Prescription drugs; Rehabilitative and habilitative services and devices; Laboratory services; Preventive and wellness services and chronic disease management; and Pediatric services, including oral and vision care.
Actuarial value (AV) is calculated as the percentage of total average costs for covered benefits that a plan will cover. Beginning in 2014, non-grandfathered health plans in the individual and small group markets must meet certain levels of AV (or “metal levels”): 60 percent for a bronze plan; 70 percent for a silver plan; 80 percent for a gold plan; and 90 percent for a platinum plan. In addition, issuers may offer catastrophic-only coverage with lower AV for eligible individuals. “Metal levels” are intended to allow consumers to compare plans with similar levels of coverage in order to help consumers make an informed decision about their health insurance coverage.
HHS has provided an AV calculator to help issuers determine health plan AVs based on a national, standard population. The final rule allows health plans some flexibility in meeting the metal levels if the actuarial value is within two percentage points of the standard. For example, a silver plan may have an AV between 68 percent and 72 percent.
If you were an attendee at the February 19th, 2013 HCR webinar “What Employers Need to Know” you can access the page with the Webinar recording, PowerPoint, and calculator examples now. You were furnished a password to access the page, click on the link below and enter the password and all the information will be available. Thank you for your attendance at the webinar and if you have any question on HCR and/or the material today email them to Colin Smoak.