The enactment of the Affordable Care Act (ACA) in 2010 began an extended period during which far-reaching changes to the American healthcare system will take effect. While the ACA remains politically contentious, employers can no longer delay preparing to make important strategic decisions.
The provisions of the ACA go into effect over several years. Following is a summary of the most important provisions of the law that are already in effect and those that will take effect in the future, arranged by year. This summary may be used to help locate items in the detailed analysis that follows.
This timeline is excerpted from BLR's HR Compliance Focus Healthcare Reform Countdown.
2010 — 2011 — 2012 — 2013 — 2014 — 2015 & 2016 — 2018
Dependent coverage to age 26
Health plans that cover dependents now have to cover dependents on a parent’s plan until their 26th birthday. This provision applies to both existing and new plans effective for the first plan year beginning on or after September 23, 2010.
Ban on lifetime limits and restriction on annual limits
Plans and insurers may not place lifetime dollar limits and unreasonable annual limits on coverage of participants and beneficiaries. These provisions apply to both existing and new plans effective for the first plan year beginning on or after September 23, 2010.
Preexisting condition restrictions on children
Plans and insurers may not deny coverage of children because of preexisting conditions. This provision applies to both existing and new plans effective for the first plan year beginning on or after September 23, 2010.
Insurers and plans generally may not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. This provision applies to both existing and new plans effective for the first plan year beginning on or after September 23, 2010.
Minimum coverage without cost sharing for preventive services
Qualified health plans must provide coverage without cost sharing for preventive services, including immunizations; preventive care for infants, children, and adolescents; and additional preventive care and screenings for women. This provision is effective for the first plan year beginning on or after September 23, 2010, but does not apply to plans in existence on March 23, 2010.
Tax credits to small employers
Certain small employers may claim a tax credit for the cost of providing health insurance to their employees.
The existing rules barring discrimination in favor of the highly compensated apply to insured group health plans established after March 23, 2010, effective for plan years beginning on or after September 23, 2010.
Note: Enforcement of this provision has been delayed until sometime after the Internal Revenue Service (IRS) issues regulatory guidance (IRS Notice 2011-1).
Other coverage requirements
Effective for plan years beginning on or after September 23, 2010, group health plans established on or after March 23, 2010:
- Must allow plan participants to choose any participating primary care provider;
- Must allow plan participants or beneficiaries to choose a pediatrician as a child’s
primary care provider;
- Are prohibited from requiring prior authorization or referrals for visits to an
- Must treat an obstetrician/gynecologist as a primary care provider; and
- Must provide emergency care services without prior authorization and with the
same cost sharing both in and out of network.
Grandfathered plan rules exempt group health plans that were in existence on March 23, 2010, from many of the new insurance requirements.
Breastfeeding/expressing breast milk
The ACA amended the Fair Labor Standards Act (FLSA) by requiring that employers provide a reasonable break time for an employee to express breast milk for her nursing child for one year after the child’s birth each time the employee needs to express milk. Employers must provide a place, other than a bathroom, which is shielded from view and free from intrusion from coworkers and the public, that may be used by an employee to express breast milk.
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Simple cafeteria plans for small employers
Effective for years beginning after December 31, 2010, small businesses may adopt simple cafeteria plans for small businesses that include a safe harbor from nondiscrimination requirements. A simple cafeteria plan is one that is established and maintained by an eligible employer and that meets specific contribution, eligibility, and participation requirements.
Exclusion of the costs for OTC drugs for reimbursement from HRAs, HSAs, FSAs, and Archer MSAs
Effective for taxable years beginning after December 31, 2010, the costs of over-the-counter (OTC) drugs not prescribed by a doctor (except insulin) may not be reimbursed through a health reimbursement account (HRA) or health flexible spending account (FSA) and may not be reimbursed on a tax-free basis through a health savings account (HSA) or Archer medical savings account (Archer MSA).
Tax on HSA and MSA distributions not used for qualified expenses
Effective for taxable years beginning after December 31, 2010, the tax on distributions from an HSA or an Archer MSA that are not used for qualified medical expenses increased from 10 percent to 20 percent of the disburse amount.
Requirement to provide value for premium payments
By January 1, 2011, plans and insurers in the individual and small group market had to maintain a medical loss ratio (MLR) of 80 percent, and plans and insurers in the large group market had to maintain an MLR of 85 percent. For each plan year, plans and insurers must provide a rebate to each enrollee on a pro rata basis equal to the amount that premium revenue spent on nonmedical costs exceeds the percentage limits.
Informing employees of the cost of their health coverage on W-2 Forms
Effective for tax years beginning after December 31, 2010, employers were required to report on Form W-2 the total cost of group health coverage, including the portionpaid by the employer and the portion paid by the employee.
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Benefits summary requirement
The ACA requires a summary of benefits and coverage (SBC) that accurately describes the benefits and coverage under group health plans and group or individual health insurance coverage. The SBC is to be provided to applicants, enrollees, reenrollees, and policyholders or certificate holders.
Group health plans and health insurance issuers offering group or individual health insurance coverage are required to report information on benefits and healthcare provider reimbursement structures that improve health outcomes through the implementation of certain activities.
Comparative effectiveness research fee
The law imposes a fee on the issuers of specified health insurance policies (including self-insured plans) for each policy/plan year ending on or after October 1, 2012, and before October 1, 2019. The Comparative Effectiveness Research Fee is a certain amount determined annually multiplied by the average number of lives covered under the policy/plan.
The money collected will fund the Patient-Centered Outcomes Research Institute. The Institute’s research will assist patients, clinicians, purchasers, and policymakers in making informed health decisions by advancing the quality and relevance of evidence based medicine by publicizing comparative clinical effectiveness research findings.
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Health insurance administration simplification
The ACA requires the Department of Health and Human Services (HHS) to develop uniform standards to reduce the clerical burden on patients, healthcare providers, and health plans. The HHS must also reduce the number and complexity of forms (including paper and electronic forms) and data entry required by patients and providers.
Effective January 1, 2013, the Medicare tax rate on wages went up by 0.9 percent on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly. There is also a 3.8 percent Medicare taxassessment on certain investment income for individuals earning over $200,000 and married couples who file jointly
earning over $250,000.
Health FSA contribution limit
Effective January 1, 2013, contributions to a health FSA for medical expenses are limited to $2,500 per year increased annually by the cost-of-living adjustment.
Elimination of tax deduction for Part D subsidy payment
Effective January 1, 2013, the tax deduction for employers that receive Medicare Part D retiree drug subsidy payments was eliminated.
Requirement on employers to inform employees of coverage options
Employers are to provide existing employees and new employees at the time of hiring with a written notice informing them about health insurance exchanges. Starting October 1, 2013, employers must provide the notice to each new employee at the time of hiring. Employers were required to provide the notice to current employees no later than October 1, 2013.
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Now that constitutional challenges to the individual mandate have been rejected by the U.S. Supreme Court, U.S. citizens and legal residents, with few exceptions, will be required to have qualifying health coveragebeginning in 2014. Those who do not have coverage will be required to pay a yearly financial penalty phased in from 2014 to 2016.
Large employer automatic enrollment requirement
Large employers with more than 200 full-time employees that offer coverage will be required to automatically enroll employees into the employer’s lowest cost plan if the employee does not sign up for employer coverage or does not opt out of coverage. The U.S. Department of Labor (DOL) has stated that it is its view that until related regulations are issued, employers are not required to comply with automatic enrollment requirements.
Note: Because of the need for coordinated guidance and a smooth implementation process, including an applicability date that gives employers sufficient time to comply, the DOL has concluded that its automatic enrollment guidance was not ready to take effect by 2014.
Insurance exchanges for individuals and small businesses
The ACA created a system of healthcare exchanges that, according to the federal HHS, are designed to be “state-based competitive marketplaces where individuals and small businesses will be able to purchase affordable private health insurance.” The exchanges (or “marketplaces”), which were required to be in place in 2014, are supposed to make it easy for small businesses and individuals to compare healthcare plans, receive answers to their questions, find out whether they are eligible for certain tax credits and/or health programs, and enroll in a healthcare plan that works for them.
Guaranteed issue, renewability, and rating variation requirements
Effective January 1, 2014, insurers in the individual and the small group market are required to guarantee issue and renewability and can vary rates based only on age (limited to 3-to-1 ratio), rating area, family composition, and tobacco use (limited to 1.5-to-1 ratio).
Effective for plan years beginning on or after January 1, 2014, plans and insurers may no longer impose annual dollar limits on essential benefit coverage.
Limit on waiting periods
Effective for plan years beginning on or after January 1, 2014, insurers and plans must limit any waiting periods for coverage to 90 days.
Effective for plan years beginning on or after January 1, 2014, employers may offer employees rewards of up to 30 percent, increasing to 50 percent if appropriate, of the cost of coverage for participating in a wellness program and meeting certain health related standards.
Preexisting condition exclusions
The application of preexisting condition exclusions for plan years beginning on or after January 1, 2014, is prohibited.
Comprehensive health insurance coverage
Effective for plan years beginning on or after January 1, 2014, a health insurance issuer that offers health insurance coverage in the individual or small group market must ensure that such coverage includes the essential health benefits package.
Effective for plan years beginning on or after January 1, 2014, group health plans are subject to certain cost-sharing limits.
Note: The DOL announced a 1-year grace period postponing limits on certain out-of-pocket costs until 2015.
Coverage of clinical trials
Effective for plan years beginning on or after January 1, 2014, a nongrandfathered group health plan must provide coverage for certain clinical trial costs./p>
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2015 & 2016
Employer play or pay—The employer mandate
Under ACA’s employer mandate (also known as the “play or pay” provision), applicable large employers must decide if they want to play by providing affordable, adequate coverage to substantially all of their full-time employees or pay fines assessed under IRC Section 4980H.
Note: The play-or-pay provision was originally supposed to become effective January 1, 2014, but in July 2013, the Obama administration delayed its implementation until 2015. In February 2014, the administration released final regulations making further changes to implementation of the provision.
Now, under the new final regulations, applicable large employers with 100 or more employees will still have to contend with possible penalties under the play-or-pay provision in 2015. However, applicable large employers with 50 to 99 employees will not face any potential penalties under the provision until 2016 if they meet certain requirements and provide appropriate certification.
Employer and insurer reporting requirements
To help the IRS collect data and enforce the play-or-pay provision, the ACA amended the Internal Revenue Code to provide for related reporting requirements. Section 6056 concerns information reporting by applicable large employers on health insurance coverage offered under employer-sponsored plans, while Section 6056 deals with information reporting requirements for providers of minimum essential health coverage (including self-insured employers that provide “minimum essential coverage” to individuals).
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Excise tax on Cadillac plans
Effective January 1, 2018, an excise tax is imposed on insurers of employer-sponsored health plans with total values that exceed $10,200 for individual coverage and $27,500 for family coverage.
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More guidance. Visit HR.BLR.com’s Healthcare Reform: A Resource Center for Employers.