National Health Care Reform for Brokers


Provisions That Apply to Brokers

Here is an overview of important provisions in health care reform for different groups and when they will take effect.

Provisions Taking Effect in 2018

Imposes a 40 percent excise tax on group health insurance premiums exceeding $10,200 per year for single coverage, and $27,500 per year for any other coverage (amounts will be adjusted for inflation).

Provisions Taking Effect in 2017

There are no provisions.

Provisions Taking Effect in 2016

There are no provisions.

Provisions Taking Effect in 2015

Employers with more than 50 employees who do not offer coverage, and have at least one full-time employee who receives premium tax credits, will be assessed a fee of $2,000 per year for every fulltime employee beyond the first 30 employees. Employers who have more than 50 employees and who offer coverage, but have one full-time employee receiving premium tax credits, will be required to pay a fee of $3,000 per year for each employee receiving premium credits. A large group is defined as at least 50 full-time equivalent employees.

Creates Small Business Health Options Program (SHOP) exchanges, and makes employers with 100 or fewer employees eligible to purchase coverage through the new exchanges starting in 2015. Starting in 2017, states may elect to permit businesses with more than 100 employees to purchase health insurance through the exchanges (amounts will be adjusted for inflation).

Efective

2014

Who Is Affected?

Employers

  • All fully insured policies with more than 50 employees
  • All self-insured policies with more than 50 employees

Summary

Employers with more than 50 employees who do not offer coverage, and have at least one full-time employee who receives premium tax credits, will be assessed a fee of $2,000 for every full-time employee beyond the first 30 employees.

Employers that offer coverage and have more than 50 employees, but have one full-time employee receiving premium tax credits, will be required to pay premiums up to $3,000 for each employee receiving premium credits.

To determe whether an employer qualifies as a "large employer," the total number of hours worked in a month by part-time employees, divided by 120, will be added to the number of full-time employees.

Frequently Asked Questions

Will my company be subject to a penalty if it fails to provide health coverage to my employees?

  • Depending on the size of your firm, you may be subject to a federal employer mandate in 2014.
  • Beginning in 2014, employers with more than 50 employees who do not offer coverage, and have at least one full-time employee who receives premium tax credits, will be assessed a fee of $2,000 for every full-time employee beyond the first 30 employees.
  • Employers that offer coverage and have more than 50 employees, but have at least one full-time employee receiving premium tax credits, will be fined either $3,000 for each employee receiving premium credits or $2,000 for each full-time employee, whichever is less.
  • Employers with fewer than 50 employees are not subject to any of these penalties.
  • Massachusetts health care reform law does still apply such that employers with 11 or more employees in Massachusetts must pay a $295 per full-time equivalent employee "fair share contribution" for failing to provide health insurance to their employees.

What size employer am I if my business primarily consists of part-time workers?

  • Beginning in 2014, in determining the number of full-time employees, an employer must add up the total number of hours worked in a month by part-time employees, divide by 120, and add that number to the number of full-time employees.

Does the coverage that I am already offering my employees satisfy the employer responsibility?

  • Employers that offer coverage must determine whether the current employee plan they offer adheres to the requirements established by the legislation. Regulations that will be issued by the federal government will clarify whether current coverage will satisfy federal standards.

Federal Law

Employers with more than 50 employees who do not offer coverage, and have at least one full-time employee who receives premium tax credits, will be assessed a fee of $2,000 for every full-time employee beyond the first 30 employees.

Employers that offer coverage and have more than 50 employees, but have one full-time employee receiving premium tax credits, will be assessed a fee of either $3,000 for each employee receiving premium credits or $2,000 for each full-time employee beyond the first 30, whichever is less.

Employers with fewer than 50 employees will be exempt from any of these penalties.

Provisions Taking Effect in 2014

Tax credits are provided to help pay for insurance and are available for people with incomes between 100 percent and 400 percent of the federal poverty level.

Elimination of all rating factors other than age, geography, tobacco use, and whether coverage is for individual or family. Variation in rating for age cannot exceed 3:1 for adults, and variation in rating for tobacco use cannot exceed 5:1. All rating rules apply to individual and small group markets. Rating restrictions will also apply to large groups in states that offer large group coverage through an exchange. A large group is 101 or more employees. (Grandfathered plans excluded.)

In determining whether an employer qualifies as a "large employer," the total number of hours worked in a month by part-time employees, divided by 120, will be added to the number of full-time employees.

Requires states to include self-employed and employers with up to 100 employees in small group markets. States have the option to keep small group as 1-50 employees until 2016. This requires insurers to treat individual and small groups as separate risk pools, but permits states to merge markets. (Grandfathered plans excluded). MA has decided to take advantage of this option.

Efective

2014 (to be phased in to 2016)

Who Is Affected?

Individual

  • All individual policies

Employer

  • All small group policies

Summary

Rating rules are the process by which the insurer evaluates, or underwrites, a group or individual in order to determine a premium rate relative to the financial risk of possible health care needs for the person or group.

Massachusetts Law

Individuals and small group rates may vary by:

  • Age
  • Industry
  • Participation rate
  • Wellness program
  • Tobacco (within overall 2:1 band) and adjustments allowed for benefit level
  • Area
  • Family
  • Group size (outside of rate band)

Federal Law

Rates for individuals and small group market will only vary by:

  • Age (3:1 for adults)
  • Individual or family coverage
  • Tobacco (1.5:1)
  • Geographic rating areas established by states

The law addresses how to apply the rating variations permitted for age and tobacco to family coverage.

The health plan coverage an individual must have in order to avoid the federal individual mandate tax penalty under the ACA. Most employer-sponsored comprehensive health coverage is minimum essential coverage, even if essential health benefits are not provided. As a practical matter, an individual that is covered by most employer sponsored health plans or purchases a plan in the individual market (because plans must cover EHBs) will meet the federal MEC requirement.

An "essential benefits" package is required for individual and small group markets. (Grandfathered plans excluded.)

Provisions Taking Effect in 2013

There are no provisions.

Provisions Taking Effect in 2012

Limit on deductibility of $500,000 for compensation for officers, directors, employees, and service providers of health insurers for any taxable year beginning after December 31, 2012, with respect to services after 2009.

Provisions Taking Effect in 2011

Eliminates the ability to use a HSA, an Archer Medical Savings Account (MSA), a Flexible Spending Arrangement (FSA), or a Health Reimbursement Arrangement (HRA) for over-the-counter drugs.

Provisions Taking Effect in 2010

Effective

7/1/10

Calls for HHS websites through which a resident of any state may identify health insurance options in that state. (Grandfathered plans must report data.)

Effective

3/23/10

Requires insurers to submit justifications for "unreasonable" rate increases prior to implementation and post such information on their websites. Applies to all individual, small group, and large group insured coverage. (Grandfathered plans not excluded.)

Effective

9/23/10

Requires insurers to report plan costs for purposes of calculating the insurers' minimum loss ratio (MLR).

2011 Rebates

Requires insurers to rebate costs that exceed the MLR threshold. The threshold in the small group market is 80 percent. This allows states to set lower MLRs. (Grandfathered and new plans included.)

Effective

9/23/10

Prohibits rescissions. Rescissions would still be permitted in cases where the covered individual committed fraud or made an intentional misrepresentation of material fact, as prohibited by the terms of the plan or coverage.

Effective

9/23/10

Requires insured group health plans to meet current IRC § 105(h)(2) requirements for self-funded group health plans that prohibit discrimination in favor of highly compensated individuals. (Grandfathered plans excluded.)

Please note that there are existing non-discrimination requirements under Massachusetts law.

Effective

3/23/10

Prohibits group health plans and insurers from excluding coverage for preexisting health conditions. (Grandfathered individual plans excluded.)


Frequently Asked Questions

National health care reform affects just about everyone in the country, including brokers, employers and individuals. For answers to your questions about how it will affect you, click on the links below.

Small Group Employer


Beginning in 2014, the waiting period may not exceed 90 days.

Yes, there are several new reporting requirements for employers, including but not limited to the following:

Employers must report the value of the benefits on each employee's annual W-2 form, beginning with W-2s issued in January 2013 (i.e., for tax-year 2012). Current rules for COBRA continuation of coverage should be used in calculating the value of benefits (minus the two percent allowed administrative fee, if charged). Contributions to Archer Medical Savings Accounts (Archer MSAs) and Health Savings Accounts (HSAs), as well as salary reduction contributions to Flexible Spending Accounts (FSAs), are not required to be included in determining the value of benefits.

  • Beginning in 2015, employers providing minimum essential coverage must report to the IRS annually with information about the coverage offered. Employers will be required to submit the following specific information:
    • The length of any waiting period
    • The months during the calendar year that coverage was made available to employees
    • The monthly premium for the lowest cost option for each enrollment category within the plan
    • The employer's share of the total allowed costs of benefits provided under the plan
    • The option for which the employer pays the largest portion of the cost of the plan, and the portion of the cost paid by the employer in each enrollment category for such option
    • The name, address, and tax identification number of each full-time employee during the calendar year, and the months during which these employees (and any dependents) were covered under any health benefit plan

Also, beginning in 2015, employers providing minimum essential coverage must provide written statements to each full-time employee, listing the information bulleted above, as well as the name, address, and contact information of the employer's insurer. Statements are to be given to individuals on or before January 31 for the previous calendar year.

Employers interested in the small business tax credit may need to submit additional information required by the Treasury Department. This information will be necessary only if the employer is eligible for the credit, and the employer's coverage is a qualified health plan offered through the exchange.

For plans that are not grandfathered, the law generally states that coverage for emergency department services must be provided without prior authorization of services. In addition, out-of-network emergency services generally must be covered and reimbursed the same as for in-network emergency services, including any cost sharing requirement (i.e., copayments or co-insurance) for both in-network and out-of-network services.

Yes. Plans that were in existence on March 23, 2010, may have chosen to be grandfathered and, therefore, have retained much of their plan design as of that day. However, Blue Cross Blue Shield of Massachusetts did not accept any requests to grandfather groups with less than 100 eligible employees. Even grandfathered plans are now required to adopt some of the changes.

There are a number of other reforms included in the new law that are effective for plan years beginning on or after September 23, 2010. Some of the important additions include:

  • Elimination of coverage rescissions. Canceling of a member's policy by an insurer, after the policy has been issued, is permitted only if the member committed fraud or made an intentional misrepresentation of a material fact on his or her application for health insurance. The regulations clarify that cancellation or discontinuation of coverage can be made for failure to pay premiums in a timely manner.
  • No lifetime or annual limits on the dollar value of benefits. No lifetime limits or annual limits on the dollar value of "essential benefits" (to be defined in future regulation) for any group health plan participant or beneficiary. (Restricted annual limits are allowed through 2013 and are to be further defined by the Department of Health and Human Services [HHS].)
  • Certain other health plan requirements. These include the provision of internal/external appeals, access to emergency services, and provisions related to pediatrician and OB/GYN choice.

Some plans may not be subject to these requirements because of their status as grandfathered plans.

Large Group Employer


There are a number of other reforms included in the new law that are effective for plan years beginning on or after September 23, 2010. Some of the important additions include:

  • Elimination of coverage rescissions. Canceling of a member's policy by an insurer, after the policy has been issued, is permitted only if the member committed fraud or made an intentional misrepresentation of a material fact on his or her application for health insurance. The regulations clarify that cancellation or discontinuation of coverage can be made for failure to pay premiums in a timely manner.
  • No lifetime or annual limits on the dollar value of benefits. No lifetime limits or annual limits on the dollar value of "essential benefits" for any group health plan participant or beneficiary.
  • Certain other health plan requirements. These include the provision of internal/external appeals, access to emergency services, and provisions related to pediatrician and OB/GYN choice.

Some plans may not be subject to these requirements because of their status as grandfathered plans.

Starting in 2020 a 40 percent excise tax will be imposed on group health insurance premiums exceeding $10,200 per year for single coverage, and $27,500 per year for any other coverage. The cost thresholds dictating the tax will be slightly higher for plans covering retirees or employees in certain high-risk industries ($11,850 per year for an individual retiree or $30,950 per year for a family). (All dollar amounts are in 2010 dollars and will be adjusted for inflation before applying to "Cadillac" plans in 2018.)

In 2019, the thresholds will rise to match the increase in the Consumer Price Index (CPI), plus one percentage point. In 2020 and succeeding years, the thresholds will increase to match rises in the CPI, rounded to the nearest $50. Although this tax is on insurers (and self-funded group plans), it is possible that it will be passed on to employers and employees in the form of higher premiums. To avoid the tax, some employers may make changes to their plans.

For plans that are not grandfathered, the law generally states that coverage for emergency department services must be provided without prior authorization of services. In addition, out-of-network emergency services generally must be covered and reimbursed the same as for in-network emergency services, including any cost sharing requirement (e.g., copayments or co-insurance) for both in-network and out-of-network services.

The waiting period may not exceed 90 days.

More FAQ's


For More Information

Want to learn more about how health care reform will affect your clients? Here are helpful links to the information you need.

Department of Labor

For more information on Affordable Care Act regulations and guidance.

What Small Businesses Need to Know

For helpful hints on what small businesses need to know about the Affordable Care Act.

Business.USA.gov/healthcare

Educational information for employers of all sizes on how the Affordable Care Act may affect their business.

Department of the Treasury

Affordable Care Act guidance and regulations.