2014: The Affordable Care Act Is Alive and Well – Are You Ready?

by Wilson Elser
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The U.S. Department of the Treasury (Treasury) recently announced yet another delay in the Employer Shared Responsibility (ESR) provisions of the Affordable Care Act (ACA). While this latest suspension in the enforcement of the ESR provisions may lead some employers and insurers to believe that issues regarding the Act can wait, that is simply not the case. Several key aspects of the ACA that took effect on January 1, 2014, impact employers and insurers alike.

Additionally, with the new transition rules regarding the now phased-in implementation of the ESR provisions, questions abound concerning how these new regulations apply to employers of various sizes and how these employers should calculate the number of their full-time employees. Moreover, there are a number of actions that employers and insurers need to take during 2014 and 2015 to help ensure a smooth transition to compliance with the ESR provisions. Perhaps most importantly, 2014 will no doubt see the issuance of new ACA regulations and interpretations of existing ACA regulations that may impact procedures that insurers and employers already have in place or are seeking to adopt.

ACA Mandates Effective January 1, 2014
For plan years beginning on or after January 1, 2014, several new requirements have been imposed on group health plans and health plan issuers:

  • Group health plans or health plan issuers cannot apply a waiting period exceeding 90 days for any employee who is otherwise eligible to purchase insurance. “Otherwise eligible” means that the employee meets plan eligibility requirements, such as having an eligible job classification or working the required number of hours.
  • Group health plans and insurers cannot deny an employee health insurance coverage or charge a higher rate of premium based on preexisting conditions. 
  • Group health plans and insurers cannot impose annual dollar limits on essential health benefits. 
  • Employers who offer wellness programs will have to ensure that these programs comply with expanded nondiscrimination standards.

Aside from these new rules, insurers and employers must continue to provide the ACA-specific Summary of Benefits and Coverage, monitor and distribute any medical loss ratio payments that may be due, and generally report employee health care costs on W-2 forms. 

Most Recent Treasury Announcement Regarding Phased-in Application of ESR Provisions
On February 10, 2014, Treasury issued final regulations concerning the implementation of the ESR provisions. Specifically, employers with 50 to 99 employees will not be subject to any ESR penalty until 2016 so long as they provide adequate certification. They will, however, have to file reports relative to their workers and the coverage that they offer in 2015. Large employers, those with 100 or more employees, will have to offer 70 percent of their full-time workers’ essential health benefits in 2015 or potentially be subject to the ESR tax; and that percentage increases to 95 percent in 2016.

The rules also clarify definitional questions surrounding whether certain types of employees – volunteers, seasonal employees, educational employees, etc. – are considered full-time employees. Additionally, the rules contain further guidance to employers in calculating the number of full-time employees that they have. Lastly, Treasury announced that final rules regarding reporting requirements will be forthcoming.

Actions Employers and Insurers Need to Take in 2014 to Prepare for 2015 and 2016
There are a number of steps or procedures that employers and insurers should undertake in 2014 to ensure 2015-2016 compliance with the ESR provisions and other aspects of the ACA.

Employers

  • Ensure compliance with the 2014 ACA-required provisions referenced above.
  • Review the final Treasury regulations referenced above to determine applicability to your business.
  • Employers with 50 to 99 employees seeking to avoid application of the ESR provisions in 2015 should review the certification requirements contained in the final Treasury regulations to ensure the 2016 application of those provisions to their business.
  • Identify types of employees in the workforce and numbers of hours worked, and develop measurement periods and stability periods necessary to determine the number of full-time employees in compliance with the final Treasury rules. 
  • Focus on minimum value and affordability analysis of current health plans to identify changes that may need to be made to existing coverage.
  • Review plans on the Exchanges to evaluate whether offering Exchange coverage to employees is advisable.
  • Consider the development and implementation of wellness programs and evaluate the impact of financial incentives that may be obtained in connection with the offer of health care coverage.
  • Identify Employer Liability, Fiduciary Liability, and Director & Officer Liability policies for adequacy and coverage in light of potential ACA liability.

Insurers

  • Monitor new regulations regarding essential health benefits for changes necessary to maintain Exchange-certified status of existing health insurance policies.
  • Review the final Treasury regulations referenced above and review the soon-to-be released Treasury regulations outlining information reporting requirements.
  • Identify systems and administrative issues regarding implementation in light of these reporting requirements.
  • Identify form and rate issues regarding provision of coverage through the Exchanges and update compliance procedures to mitigate risk.

Whether you are an employer or an insurer wondering if you are in compliance with the 2014 ACA mandates or how compliance with the new ESR implementation rules can be best achieved, or whether you are simply overwhelmed by the volume and impact of the ACA regulations, you should work with a law firm that can assist you with these and other issues you may have relative to adherence to the ACA requirements.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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