Depending on the size of business, employers have different obligations and opportunities under the Affordable Care Act.
Not all of the market reforms of the ACA apply to large employer group insurance and self-funded plans, however many basic requirements still apply. All group health plans must guaranteed issue to all applicants, regardless of health status or other factors. Preventive services are required to be covered at 100% (no copays, deductible or coinsurance), with in-network providers. Annual limits on EHB are prohibited (this does not apply to grandfathered plans). Additional requirements for large employers were created as well. These include the requirement that large employers provide health coverage to employees that is affordable (cannot cost more than 9.5% of the employee’s income), and adequate (must pay for at least 60% of covered healthcare expenses). If affordable and adequate coverage is not provided, the employer may face a penalty.
Employers must also provide employees with a standard “Summary of Benefits and Coverage” (SBC) form explaining what their plan covers and what it costs. The purpose of the SBC is to help employees understand their health insurance options. Employers could face a penalty for non-compliance if the SBC is not provided.
Large employers could also face an excise tax on high value plans. This “Cadillac tax” imposes an excise tax on insurers of employer-sponsored health plans with aggregate values that exceed a prescribed threshold of $10,200 for individual coverage, and $27,500 for family coverage. The tax is going to be 40% of the costs of benefits that exceed the required threshold amounts beginning in 2018. The tax will be imposed on various plans, but payable by the health insurance issuers.
The market reforms created by the ACA apply to small employer group insurance as well as individual insurance. Employers with up to 50 full time equivalent employees (FTE) (employees working on average 30 or more hours per week) are considered small employers. If an employer has 50 or fewer FTE employees, they are not required to offer health insurance. Employers may choose to offer insurance through the Small Business Health Options Program (SHOP) Marketplace or any other source, but are not required to. There are currently two companies offering coverage through SHOP, and seven companies offering coverage outside of the Marketplace.
Small employers buying employee insurance through SHOP may qualify for a tax credit worth up to 50 percent of an employer’s contributions to premiums for covering employees and their dependents. For an employer to qualify for the federal small business tax credits, the employer must have fewer than 25 FTE employees, pay employees an average annual wage of less than $50,000, and pay at least half of the insurance premiums.
On January 1, 2016, the definition of a small group changes to 1-100, and employers will be required to adopt new plans that comply with ACA regulations in accordance with small group provisions. Groups sized 51-100 are at risk of facing more restrictive rating rules, which may increase premiums for some groups and reduce them for others. Additional benefits and cost-sharing requirements will also apply, which could reduce benefit flexibility and increase premiums. In addition, groups sized 51-100 will for the first time be subjected to certain requirements which are not typically included in plans in the large group. For instance, the ACA requires health plans offered in the individual and small group markets, both inside and outside of Health Insurance Marketplaces, to offer a core package of items and services, known as “essential health benefits (EHBs).” The EHB package must also be equal in scope to benefits offered by a typical employer plan.
The Department is currently reviewing all of the requirements and implications of this change, as there is proposed federal legislation that would allow the states options in the definition of small group:
The United House Committee on Energy and Commerce on March 25, 2015 introduced in Congress H.R. 1624-Protecting Affordable Coverage for Employees Act, to amend title I of the Patient Protection and Affordable Care Act and title XXVII of the Public Health Service Act to revise the definition of small employer. The bill also includes a provision that gives states the options to extend the definition of small employer from 1-100 employees.
On April 27, 2015, S. 1099: Pace Act, was also introduced in Congress. This bill seeks to amend the Patient Protection and Affordable Care Act to provide states with flexibility in determining the size of employers in the small group market. This bill also includes a provision giving states the option to extend the definition of small employer from 1-100 employees.