Health Care Reform - The Impact on Employers and Employer-Sponsored Health Plans
After the U.S. Supreme Court decision and the re-election of President Obama, the Affordable Care Act is certain to be a reality for many years to come. Since its inception in 2010, the Affordable Care Act has dramatically impacted health plans, insurers and health care providers. That impact will only grow in the coming years. The Affordable Care Act brought immediate changes for dependent children enrollment, lifetime and annual maximums, rescission of coverage and pre-existing conditions. In addition, non-grandfathered health plans were required to provide additional benefits, such as first dollar preventive care coverage, emergency room parity and external appeal rights. While grandfathered health plans could avoid some of these new provisions, they were restricted from making many financial and benefit changes. As a result, one of the critical initial decisions for many employers following the passage of the Affordable Care Act was whether to structure their health plan to remain a “grandfathered” health plan. In the years since, the tide has turned to favoring non-grandfathered plans, as employers and sponsors chose financial and design flexibility, over the cost of providing the additional benefits.
In 2014, the Affordable Care Act will unleash another dramatic shift in health coverage, as well as a monumental decision for employers. The individual and employer penalty provisions – the linchpin of the Affordable Care Act – will take effect. Beginning January 1, 2014, a new penalty tax applies to large employers who fail to offer health coverage to their full-time employees. For those large employers who do offer coverage to their full-time employees, a separate penalty tax applies if the coverage that is provided is not affordable or does not meet minimum value standards. Beginning in 2013, employers must determine how the employer and individual penalty provisions affect them and their health plans. Our health and welfare team has prepared a briefing on the employer penalty issues. This briefing includes an hour-long presentation, which can be accessed here.
Even though the employer penalty does not apply to certain small employers, they will be impacted by changes in the small group market and the ability to purchase coverage through the government exchanges. At the same time, the state and federal exchanges are projected to be operational for enrollment in individual policy coverage effective January 1, 2014. Lower income individuals who do not have access to employer coverage that is both affordable and provides minimum value will be eligible for tax credits to pay for health coverage purchased through the Exchange.
The bottom line is that all employers – small and large—will be impacted in 2014 by the changing structure of the health care market and their employees’ changing expectation of how health coverage will be provided. Employers and plan sponsors will need to evaluate and revise their health plan design to address these changes. At a minimum, large employers will need to revise their health plans to comply with the affordability and minimum value standards required by the employer penalty. Changes in eligibility, benefits, wellness initiatives, benefit options and premiums will all likely be necessary.
In addition to the employer penalty provisions, a number of other Affordable Care Act changes take place over the next few years – including reinsurance fees, the patient-centered outcome research fee, the elimination of all pre-existing conditions, and coverage for clinical trials. In 2018, the penalty tax on “Cadillac” health plans also takes effect. The government continues to release regulatory guidance which shapes (and in some cases changes) how these provisions will apply to employers and insurers.
Listed below is a compilation of our health and welfare team’s alerts, publications, and webinars. These links will be updated periodically, so please check back for the latest developments.
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