Legislative & Regulatory Information

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1 Americas - U.S. Legislative, Privacy & Projects Topic Citation: UFS Jurisdiction Effective Date Author Release Date File No. Federal Multiple Joseph Tigro 3/10/14 LI-487 Affordable Care Act, Dental Patient Protection and Affordable Care Act 1302 and implementing regulations AFFORDABLE CARE ACT ESTABLISHES SMALL BUSINESS HEALTH OPTIONS PROGRAM MARKETPLACE Executive Summary The Affordable Care Act ( ACA ) requires United States residents maintain medical insurance that includes a minimum set of benefits. The Small Business Health Options Program, a government run insurance marketplace, helps employers purchase medical plans. Employers with 51 or more employees will be required to purchase employee medical plans. The ACA and implementing regulations also outline: levels of coverage; employee enrollment; medical plan effective dates; and tax credits for employers with medical plans. The state and federal marketplaces for purchasing these medical plans are being implemented. Background On December 24, 2009, the United States Senate ( Senate ) passed the ACA, which was later passed by the United States House of Representatives ( House ) on March 21, An amendment bill, the Health Care and Education Reconciliation Act, was also passed by the House on March 21. President Obama signed the ACA on March 23, The ACA was reconciled with the amendment bill by the Senate on March 25, 2010, and signed by President Obama on March 30, Significant Terms Full-Time Employees: an employee who works an average of at least 30 hours per week. The total number of Full-Time Employees will determine employer eligibility in the government run insurance marketplace. 2 Legislative & Regulatory Information 1 The ACA has also been referred to as PPACA, healthcare reform, and Obamacare. 2 Hours worked by part-time employees will be calculated in determining employer eligibility. Part-time employees are those working less than 30 hours per week. Typically, two part-time employees will equal one Full-Time Employee. An employer is not required to offer medical insurance to part-time employees Metropolitan Life Insurance Company

2 2 Qualified Health Plan: an insurance plan offered through a government run insurance marketplace. This plan provides ten essential health benefits. 3 Small Business Health Options Program ( SHOP ): a government run insurance marketplace where employers can purchase Qualified Health Plans. SHOP is run by individual states or districts for their residents. 4 For states that do not have their own SHOP, the marketplace is run by the federal government. Analysis The ACA requires all legal United States residents, with certain exceptions, maintain medical insurance. 5 To comply with the requirements of the ACA, employers can purchase Qualified Health Plans through SHOP. Employer Mandate The following employers are required to offer medical insurance to eligible employees based on their total Full-Time Employees: Large Employers: employers with 100 or more Full-Time Employees are required to offer medical insurance to its employees beginning January 01, To phase in this mandate, employers must offer insurance to 70 percent of their Full-Time Employees in In 2016 and beyond, they must offer insurance to 95 percent of Full-Time Employees. Mid-Size Employers: employers with 51 to 99 Full-Time Employees are required to offer medical insurance to 95 percent of their Full-Time Employees beginning January 01, Small employers, those with 50 or fewer Full-Time Employees, are not required to offer medical insurance. If the employer does elect to provide insurance, the insurance must be compliant with the ACA. 3 See Legislative & Release Information release 480, released December 23, 2013, for a description of the ten essential health benefits. 4 The following have a state or district administered SHOP: California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont Washington and Washington, D.C. 5 Exceptions include, but are not limited to, the following: if the lowest priced coverage available would cost more than 8% of an individual s household income; if an individual didn t have to file a tax return because their income was too low; and if there were certain hardship conditions, such as being homeless, experiencing domestic violence, being foreclosed upon in the preceding 6 months, and filing bankruptcy. 6 This phase in would permit, for example, an employer to offer insurance to employees who work 35 or more hours per week, but not yet to that fraction of employees who work 30 to 34 hours. 7 Mid-size employers were previously required to offer insurance beginning January 01, To qualify for this extension, a mid-size employer must meet the following conditions: (1) between February 09, 2014 and December 31, 2014, the employer may not reduce the size of its workforce to qualify for this extension, unless a bona fide business reason exists; and (2) between February 09, 2014 and December 31, 2015 the employer may not eliminate or materially reduce the medical coverage, if any was offered as of February 09, See 26 C.F.R. Parts 1, 54 and 301, Sections XV(D)(6)(a) and XV(D)(7)(a).

3 3 SHOP Availability Even though the SHOP employer mandate does not take effect until 2015 for large employers and 2016 for mid-size employers, SHOP is available for small employers as follows: For employers served by the federal government, they may submit a paper application for a Qualified Health Plan. 8 Currently, premium payments are paid directly to the insurance company, with premium payments being made through HealthCare.gov, the federal government online exchange system, beginning in It is anticipated that small employers can purchase Qualified Health Plans on HealthCare.gov by November For employers located in states that have a state administered SHOP, Qualified Health Plans may be available to be purchased online. 9 Employers eligible to participate in SHOP may select a Qualified Health Plan at any time during the year. SHOP Insurance Plans The following Qualified Health Plans will be available in SHOP: Bronze Plan: covers 60 percent of the total average costs of care Silver Plan: covers 70 percent of the total average costs of care Gold Plan: covers 80 percent of the total average costs of care Platinum Plan: covers 90 percent of the total average costs of care 10 In 2014, some states will permit employers to offer more than one plan to their employees. Beginning in 2015, it is anticipated that all SHOP marketplaces will enable employers to select multiple plans. 11 Dental plans may also be available through SHOP. 12 Employers can offer a stand-alone dental plan alongside a medical plan, but may not offer a dental-only plan to employees. Employee Enrollment The ACA sets forth requirements for employee enrollment. Employers with Qualified Health Plans must have an annual enrollment of at least 30 days prior to the end of the plan year. If an employee experiences a life event that involves a change in family status or loss of other medical coverage, the employee has 30 days to modify coverage Employers should consult with an agent, broker or insurance company in submitting a paper application. 9 Many states that administer SHOP permit Qualified Health Plans to be purchased online. However, California recently announced it was suspending SHOP online to implement redesigns with a return expected in fall See 42 U.S.C (d). 11 See Key Facts About the Small Business Health Options Program Marketplace, available at 12 See Legislative & Release Information release 480, released December 23, 2013, for a description of required dental benefits. 13 Life events include a dependent that is added through marriage, birth, adoption or placement for foster care and an employee or dependent who loses minimum essential coverage.

4 4 There are also employee enrollment participation requirements in the ACA and implementing regulations. If an employer purchases a Qualified Health Plan between November 15 and December 15 of any given year, there will be no minimum participation requirement. If, however, an employer selects a Qualified Health Plan at any other time during the year, 70 percent of eligible employees must enroll in the plan. 14 The minimum participation is measured at the time of initial enrollment and renewal. 15 Plan Effective Dates Qualified Health Plans will take effect after the following waiting periods: For a plan selected between the 1 st and 15 th of a given month, the coverage effective date is the first day of the following month (e.g., if a Qualified Health Plan is selected on March 15, the effective date is April 1). For a plan selected between the 16 th and the end of a given month, the coverage effective date is the first day of the second following month (e.g., if a Qualified Health Plan is selected on March 16, the effective date is May 1). SHOP Tax Credits Employers who meet the following conditions will be eligible for a tax credit: less than 25 full-time employees; and average annual wages of employees is less than $50,000; and employer contributes at least 50 percent of the total premium cost. 16 A tax credit can be received for two consecutive years of up to 50 percent of the employer s contribution and tax-exempt employers are eligible for tax credits of up to 35 percent. 17 Effective Date Effective date by which employers must offer medical plans: Large employers by January 01, Mid-size employers by January 01, Small employers are not required to offer medical plans under the ACA. 14 See 45 CFR (b)(10). The following states require 75 percent participation: Arkansas, Iowa, New Hampshire, New Jersey, South Dakota and Texas. Tennessee requires 50 percent participation. 15 If a small business falls below the requirement during the plan year, coverage will be unaffected. 16 See 26 U.S.C 45R. 17 See Internal Revenue Service Notice Transition Relief with Respect to the Tax Credit for Employee Health Insurance Expenses of Certain Small Employers.

5 5 Impact Employers should be aware of the requirements to enroll in SHOP and the financial assistance available. This LEGISLATIVE & REGULATORY INFORMATION release is not intended to supply legal advice or to offer solutions to individual problems. Those who require such advice should consult their attorneys.