With delays galore, it’s easy to get confused about which provisions of the Patient Protection and Affordable Care Act actually went into effect this year and which were put off. Here’s a quick and handy run-down:
1. Establishment of State Health Insurance Exchanges. Starting on January 1, 2014, each state was required to create a health insurance exchange (or HHS will do so) for use by the uninsured and small employers with 100 or fewer employees (although states may set the cap at 50 employees). The exchanges are required to offer fully insured insurance contracts that provide essential health benefits and are also required to offer three different levels of coverage (bronze, silver, gold, and platinum). Employees of small employers who offer health insurance coverage through an exchange may pay their employee premiums for such coverage on a pre-tax basis through the employer’s cafeteria plan.
2. Pre-Existing Condition Exclusion Practices Eliminated. Effective January 1, 2014, pre-existing condition exclusions no longer are allowed in group health plans or individual insurance policies, not even the limited exclusions previously allowed under HIPAA. This also applies to grandfathered plans.
3. Creation of Health Insurance Tax Credits and Subsidies. Individuals who do not have affordable minimum essential coverage from their employer are eligible in 2014 for tax credit subsidies for their health insurance purchase on a state exchange if their income is below 400 percent of federal poverty level. The tax credits are “advanceable” and can be used to lower current monthly premiums.
4. Limits Out-of-Pocket Expenses. Group health plans, including grandfathered plans, may not impose cost-sharing amounts (i.e., copays or deductibles) that are more than the maximum allowed for high-deductible health plans (currently these limits are $6,350 for an individual and $12,000 for a family coverage). After 2014, these amounts will be adjusted for inflation.
5. Eliminates Annual or Lifetime Limits. Group health plans, including grandfathered plans, may no longer include more than restricted annual or any lifetime dollar limits on essential health benefits for participants. Limits may exist in and after 2014 for non-essential benefits.
6. Imposes Ninety-Day Maximum Waiting Period. Starting on January 1, 2014, group health plans and health insurance issuers may not impose waiting periods of more than ninety days before coverage becomes effective.
7. Requirement to Have Health Insurance. Individuals in 2014 are required to obtain minimum essential health coverage for themselves and their dependents or pay a monthly penalty tax for each month without coverage. The monthly penalty tax is one-twelfth of the greater of the dollar penalty or gross income penalty amounts. The dollar penalty is an amount per individual of:
-$95 for 2014 (capped at $285 per family);
-$325 for 2015 (capped at $975 per family); and
-$695 for 2016 (capped at $2085 per family).
These dollar penalties will be indexed for inflation starting in 2017.
The gross income penalty is a percentage of household income in excess of a specified filing threshold of:
-1 percent for 2014;
-2 percent for 2015; and
-2.5 percent for 2016 and later years.
In no event will the maximum penalty amount exceed the national average premium for bronze-level exchange plans for families of the same size.
Minimum essential coverage includes Medicare, Medicaid, CHIP, TRICARE, individual insurance, grandfathered plans, and eligible employer-sponsored plans. Workers’ compensation and limited-scope dental or vision benefits are not considered minimum essential health coverage.
8. Wellness Program Discounts. Employers are permitted to offer employees rewards of up to 30%, potentially increasing to 50% of the cost of coverage for participating in a wellness program and meeting certain health-related standards. A 10-state pilot program is permitted to be established also with participating states to apply similar rewards for participating in wellness programs in the individual market. Changes to employer wellness plans are effective January 1, 2014 and the ten state pilot programs are to be established by July 1, 2014.
9. Coverage for Those in Clinical Trials. Insurers and health plans, unless grandfathered, may not discriminate against an individual for participating in a clinical trial. If a plan covers a qualified individual, it may not deny or impose additional conditions for participation in a clinical trial.
10. Expanded Medicaid Coverage. The Supreme Court has ruled that the requirement for states to offer Medicaid benefits to all persons with incomes at or below 133 percent of federal poverty levels is optional with each state. For states that do participate, beginning January 1, 2014, they will receive full reimbursement of additional costs from the federal government until 2017, at which point reimbursement will gradually decline to 90 percent of extra costs in 2020 and thereafter.
11. Cafeteria Plans Can Be Amended to Allow Employees to Change Election to Purchase Health Insurance or to Terminate Election to Purchase Insurance. Employees can terminate their election to purchase health insurance through the employer’s cafeteria plan and go to the exchange if they are eligible for health insurance exchange tax credits starting in 2014. Other employees may want to elect to purchase health insurance effective January 1, 2014, to avoid the individual mandate penalty. If the cafeteria plan year is a fiscal year, employees wanting exchange insurance on January 1, 2014, would have to terminate or change their elections midyear. However, under current cafeteria plan regulations, these two elections are not a change in status allowing an election change midyear. The proposed regulations allow an applicable large employer with a fiscal year cafeteria plan, at its election, to amend the plan any time during the year on a retroactive basis (by December 31, 2014, retroactive to beginning of 2013 plan year) to permit either or both of the following changes in salary reduction elections:
An employee who elected to salary reduce through the fiscal year cafeteria plan for accident and health plan coverage beginning in 2013 is allowed to prospectively revoke or change his or her election with respect to the accident and health plan once, during that plan year, without regard to whether the employee experienced a change in status event; and
An employee who failed to make a salary reduction election through his or her employer’s fiscal year cafeteria plan beginning in 2013 for accident and health plan coverage before the for making elections is allowed to make a prospective salary reduction election for accident and health coverage on or after the first day of the 2013 plan year of the cafeteria plan without regard to whether the employee experienced a change in status.
Here’s a look at key components of healthcare reform that were set to become effective in 2014 but have been delayed.
1. Employer Mandate (Play or Pay) Tax Penalties. Employers with fifty or more full-time equivalent (FTE) employees are required to offer their full-time employees (FTEs) minimum essential health coverage or pay a fine of up to $2,000 per year for each FTE in excess of thirty FTEs if any employee receives a premium tax credit on a state health insurance exchange. If an employer provides minimum essential health coverage to its FTEs, but fails to pay at least 60 percent of its actuarial value or the coverage is considered unaffordable (costs more than 9.5 percent of household income), then the employer must pay a penalty of up to $3,000 per year for each FTE who receives the premium credit on an exchange, but not more than would be owed for the $2,000 per year penalty. An FTE is defined as an employee who is employed for thirty or more hours per week, calculated on a forty-hour work week. This provision also applies to grandfathered plans.
This provision was originally effective January 1, 2014, but is now delayed until January 1, 2015.
2. Employer Minimum Essential Coverage Reporting. All employers providing minimum essential coverage must file an information return with the IRS and plan participants. This provision was delayed for one year and it effective for calendar years beginning on and after Jan. 1, 2015.
3. Large Employer Health Information Reporting. Large employers and employers with at least 50 full-time equivalent employees must submit annual health insurance coverage returns to the FTEs and the IRS. The returns must certify whether the employer offers healthcare insurance to its employees and, if so, describe the details regarding plan participation, applicable waiting periods, coverage availability, the lowest cost premium option under the plan in each enrollment category, and other information. This provision is also delayed one year and is effective January 1, 2015.
Correction: An earlier version of this story included erroneous out-of-pocket limits for individuals and families in group health plans.