Affordable Care Act Small and Large Employer Checklist

8/16/2019 Affordable Care Act Small and Large Employer Checklist

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AFFORDABLE CARE ACTSMALL AND LARGE EMPLOYER

HEALTH REFORM CHECKLIST


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This material is offered for general information only.It does not provide, and is not intended to provide, tax or legal advice.

Edition: Octob

Employers that offer health care coverage to employees are responsible for complying with many of the provisions

the Affordable Care Act (ACA). Most health reform changes apply regardless of the employer’s size, but somechanges apply only to small employers and other changes apply only to large employers. Even employers that donot offer any coverage need to comply with certain requirements to distribute notices to workers or submit reportsfederal agencies.

This edition of our Health Reform Checklist summarizes the provisions applying to small employers.

ThinkHR grants the reader nonexclusive, nontransferable, and limited permission to use this document. The reader m

not sell or otherwise use this document without express permission. ThinkHR provides this document to our clients fo

general information and encourages users to review the applicable federal and state insurance and labor laws and/or

seek guidance from legal counsel before establishing any company policy or procedures relating to benefits. Brokers

and clients who are registered to receive ThinkHR services may contact the HR Hotline at 877-225-1101 with questions

Starting with Basics

The effective dates of most ACA provisions usually are based on the employer’s group health “plan year” startingdate. Other items take effect on a specific calendar date. Further, whether or not a provision applies often dependon the employer’s size or on the type of group policy.

“Small Employer” generally means an organization (including subsidiaries) with fewer than 50 full-time andfull-time-equivalent employees.

“Small Group” refers to the type of group health insurance policy that is sold only to small businesses. Policy

requirements, and the provisions that determine the group’s size, are defined by each state according to its stateinsurance law. In many states “small group” policies are limited to groups with up to 50 employees, while otherstates include groups up to 100 employees. For details about your state’s insurance law and policy options,consult an agent or broker licensed in that state.

“Plan Year” is the period (usually a 12-month period) that is identified in the plan’s ERISA document or Form 5500.For non-ERISA plans, the plan year is the benefit year or policy year.

Ongoing Requirements for Notices and Reports

Employer Notice about Health Insurance Exchanges (Marketplaces) — Employers must provide a writte

notice to all full-time and part-time employees, whether or not benefits eligible, within 14 days of hire. Thefederal notice explains the availability of the Health Insurance Exchanges (Marketplaces) and thecircumstances under which employees may be eligible for subsidies to buy coverage through an Exchange

This requirement applies to all employers covered by the Fair Labor Standards Act (FLSA), includingemployers that do not offer health coverage.

SMALL EMPLOYERHEALTH REFORM CHECKLIST

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Employers can satisfy the Employer Exchange Notice requirement by using one of the following DOL mod

notices, filling in the blank sections as needed, and distributing the completed notice to all employees with14 days of hire:

Employers who currently offer health insurance to any or all employees can use this notice:www.dol.gov/ebsa/FLSAwithplans.doc

Employers who do not offer health insurance to any employees can use this notice:www.dol.gov/ebsa/FLSAwithoutplans.doc

Summary of Benefits and Coverage (SBC) — Health insurers, and employers with self-funded health planmust provide an SBC for each plan describing its benefits and coverage using a standardized format. ACAregulations require that the SBC be provided in several instances (by the first day of open enrollment, by tfirst day of coverage if there are any changes, upon special enrollment events, upon request, and prior tooff-renewal changes). The DOL provides samples and instructions atwww.dol.gov/ebsa/healthreform/regulations/summaryofbenefits.html.

Grandfathered Plan Notice — Employers with a grandfathered plan must review it to confirm that it stillqualifies for grandfathered status. If so, materials describing the plan’s benefits must include a noticeregarding the plan’s status as a grandfathered plan. The notice must include contact information forquestions or complaints. Note that plans that lose grandfathered status immediately become subject to thsame health reform requirements as nongrandfathered plans.

Patient Protection Notice — Nongrandfathered health plans must include a notice regarding eachparticipant’s right to designate a primary care physician and to obtain obstetrical or gynecological care

without prior authorization.

W-2 Reporting of Employee Health Coverage Cost — Employers must report the total cost of eachemployee’s health coverage on Form W-2 (box 12). This item is informational only and has no tax consequencThe requirement does not apply to employers that filed fewer than 250 Forms W-2 for the prior tax year.

Small Business Tax Credit (Optional) — Employers with fewer than 25 employees should check whether thqualify for the Small Business Tax Credit to help with the expense of offering health coverage to employeesStarting with tax year 2014, the credit is available to small businesses that meet various criteria and purchascertified Small Business Health Options Program (SHOP) plan. For information, seewww.irs.gov/uac/Small-Business-Health-Care-Tax-Credit:-Questions-and-Answers .

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Health Plan Fees and Taxes

The ACA imposes certain fees on health plans in order to raise revenue for various purposes, including clinicalresearch, stabilization of high-risk insurance markets, and expansion of health coverage. Some fees apply for a fewyears, while others are permanent.

For insured plans, the carrier or HMO is responsible for reporting and paying any applicable fees. The employer(policyholder) is not responsible for any duties. For a self-funded (uninsured) health plan, the employer sponsor mureport and pay the PCORI fee and TRP fee explained below, if applicable:

The Patient-Centered Outcomes Research Institute (PCORI) Fee, also called the Comparative EffectivenesResearch (CER) Fee, is imposed on group health plans to help fund studies on clinical effectiveness andhealth outcomes. Dental or vision only plans, and most health flexible spending accounts (HFSAs), are

exempt. The small fee is an annual amount multiplied by the average number of plan participants:

Plan year ending between October 1, 2013 and September 30, 2014: $2.00Plan year ending between October 1, 2014 and September 30, 2015: $2.08Plan year ending between October 1, 2015 and September 30, 2019: TBD based on inflation

Payment is due July 31 following the calendar year in which the plan year ended (e.g., July 31, 2015 for planyears ending in 2014) using Form 720.

The Transitional Reinsurance Program (TRP) Fee is collected from group medical plans for calendar years2014 to 2016 to help fund state reinsurance programs in the individual insurance market. The fee is an annuamount multiplied by the average number of plan participants:

Calendar year 2014: $63Calendar year 2015: $44Calendar year 2016: $27

Enrollment count reports are due by November 15 of the current year and payment is due in installments thfollowing year. For instance, for 2015, the report is due November 15, 2015 and the fee will be due January15, 2016 (or January 15, 2016 and November 15, 2016, if paying in two installments).

The Health Insurer Provider (HIP) Fee is collected from health insurance providers and HMOs (carriers) bason a percentage of the carrier’s net written premiums for insured groups. The fee began in 2014 and is

permanent. It applies only to insurers and is expected to impact premiums by approximately 2.3 percent.

A Risk Adjustment Fee of about $1 per member per year is assessed on carriers issuing risk-adjusted plansthe nongrandfathered “small group” insurance markets, whether in or out of the Exchanges. The fee begain 2014 and is permanent. It is intended to help fund the administrative costs of running the Risk AdjustmenProgram. This fee does not apply to large group plans or self-funded plans.



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“Small Group” Insurance Market Reforms

The ACA requires group health insurance policies sold in the “small group” market to adopt several reforms. Thefollowing requirements apply to nongrandfathered “small group” policies issued or renewed in 2014 or later, unlesstate’s insurance law allows exceptions. Many states allow insurance companies to continue renewing certain “smagroup” policies without adopting one or more of the provisions indicated below by an asterisk (*). For details abouyour state’s insurance law and policy options, consult an agent or broker licensed in that state.

Essential Health Benefits (EHB)* — All nongrandfathered “small group” health insurance plans must coveall Essential Health Benefits (EHBs). This requirement does not apply to grandfathered plans, self-fundedplans, or insured plans in the large group market. Each state, through its state insurance code or laws, mayestablish a detailed definition of EHBs for purposes of “small group” policies issued in that state. The geneEHB definition includes health care services in the following 10 benefit categories:

Ambulatory patient servicesEmergency servicesHospitalizationMaternity and newborn careMental health and substance use disorder services, including behavioral health treatmentPrescription drugsRehabilitative and habilitative services and devicesLaboratory servicesPreventive and wellness services and chronic disease managementPediatric services, including oral and vision care (services for individuals under 19 years of age)

Limits on Annual Out-of-Pocket Maximums* — All nongrandfathered health plans, including “small groularge group and self-funded plans, are subject to limits on annual out-of-pocket maximums. All cost-sharinsuch as co-pays, deductibles, and co-insurance, for EHBs must accumulate to the plan’s out-of-pocketmaximums up to the following limits:

1.2.3.4.5.6.7.8.9.10.


(1) For plan year 2014, some exceptions were allowed for plans that utilized multiple service providers (e.g., different providersmedical benefits versus pharmacy benefits).

For Plan Year beginning in: Self-Only Coverage Coverage other than self-only

2014 (1) $6,350 $12,700

2016 $6,850 $6,850 per person

$13,700 per family

2015 $6,600 $13,200

Adjusted community rating (ACR)* — Health insurers may use only family size, geography, and age as ratfactors for nongrandfathered “small group” plans. The impact of age factors is limited to a range of 3 to 1. Ain certain states, premiums for tobacco users may be up to 50 percent higher than for non-tobacco users.


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Employer Shared Responsibility Provision

Starting January 1, 2015, the ACA’s Employer Shared Responsibility provision takes effect. There are two parts:

Employer Reporting Requirement: Under IRC § 6056, employers must report information about healthcoverage offered to full-time employees. To comply with the reporting requirement, prepare and distributeForm 1095-C to the employee and file a copy with the IRS. For calendar year 2015, the first reports are due early 2016.

Employer Coverage Offer (often called “the Employer Mandate” and “Play or Pay”): Employers may beassessed a penalty for failure to offer health coverage to full-time employees if at least one employeereceives a government subsidy to buy individual coverage through an Exchange (Marketplace).

Important: Most small employers are exempt. Employers that employed an average of fewer than 50 full-timeemployees (including full-time-equivalent (FTE) employees) in a calendar year are exempt from both parts of theEmployer Shared Responsibility provision for the following calendar year.2

For instance, the employer’s average number of employees in 2014 determines whether the employer is exempt fo2015. Then the average number of employees in 2015 will determine whether the employer is exempt for 2016.Related employers in a controlled group are counted together to determine the number of employees. Generally,each full-time employee (i.e., 120 hours of service or more per month) counts as one FTE. Each part-time employeecounts as a fraction of one FTE (i.e., divide the employee’s hours of service per month by 120). Employers withseasonal workers, usually in the agricultural or retail industries, may be able to take advantage of a special rule tosubtract the seasonal workers from the employer’s FTE count.


For more information about which employers are subject to the Employer Shared Responsibility provision, seequestions 4 through 14 in www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act#Which .

(2) In the unlikely event that the employer with fewer than 50 employees has a self-funded (uninsured) group medical plan, the small emplo

should consult with a tax advisor regarding the reporting requirements under IRC § 6055.


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Edition: Octob

Employers that offer health care coverage to employees are responsible for complying with many of the provisions

the Affordable Care Act (ACA). Most health reform changes apply regardless of the employer’s size, but somechanges apply only to small employers and other changes apply only to large employers. Even employers that donot offer any coverage need to comply with certain requirements to distribute notices to workers or submit reportsfederal agencies.

This edition of our Health Reform Checklist summarizes the provisions applying to large employers.

ThinkHR grants the reader nonexclusive, nontransferable, and limited permission to use this document. The reader m

not sell or otherwise use this document without express permission. ThinkHR provides this document to our clients fo

general information and encourages users to review the applicable federal and state insurance and labor laws and/or

seek guidance from legal counsel before establishing any company policy or procedures relating to benefits. Brokers

and clients who are registered to receive ThinkHR services may contact the HR Hotline at 877-225-1101 with questions

Starting with Basics

The effective dates of most ACA provisions usually are based on the employer’s group health “plan year” startingdate. Other items take effect on a specific calendar date. Further, whether or not a provision applies often dependon the employer’s size or on the type of group policy.

“Large Employer” generally means an organization (including subsidiaries) with 50 or more full-time andfull-time-equivalent employees.

“Large Group” refers to the type of group health insurance policy that is sold to groups over a certain size. Policy

requirements, and the provisions that determine the group’s size, are defined by each state according to its stateinsurance law. Generally, “large group” policies are subject to fewer policy design requirements than “small group”policies. In many states, “large group” policies are available to groups with 50 or more employees, while other statesrequire at least 100 employees. For details about your state’s insurance law and policy options, consult an agent orbroker licensed in that state.

“Plan Year” is the period (usually a 12-month period) that is identified in the plan’s ERISA document or Form 5500.For non-ERISA plans, the plan year is the benefit year or policy year.

Ongoing Requirements for Notices and Reports

Employer Notice about Health Insurance Exchanges (Marketplaces) — Employers must provide a writte

notice to all full-time and part-time employees, whether or not benefits eligible, within 14 days of hire. Thefederal notice explains the availability of the Health Insurance Exchanges (Marketplaces) and thecircumstances under which employees may be eligible for subsidies to buy coverage through an Exchange

This requirement applies to all employers covered by the Fair Labor Standards Act (FLSA), includingemployers that do not offer health coverage.

LARGE EMPLOYERHEALTH REFORM CHECKLIST

855.271.1050


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Employers can satisfy the Employer Exchange Notice requirement by using one of the following DOL mod

notices, filling in the blank sections as needed, and distributing the completed notice to all employees with14 days of hire:

Employers who currently offer health insurance to any or all employees can use this notice:www.dol.gov/ebsa/FLSAwithplans.doc

Employers who do not offer health insurance to any employees can use this notice:www.dol.gov/ebsa/FLSAwithoutplans.doc

Summary of Benefits and Coverage (SBC) — Health insurers, and employers with self-funded health planmust provide an SBC for each plan describing its benefits and coverage using a standardized format. ACAregulations require that the SBC be provided in several instances (by the first day of open enrollment, by tfirst day of coverage if there are any changes, upon special enrollment events, upon request, and prior tooff-renewal changes). The DOL provides samples and instructions at www.dol.gov/ebsa/healthreform/regulations/summaryofbenefits.html.

Grandfathered Plan Notice — Employers with a grandfathered plan must review it to confirm that it stillqualifies for grandfathered status. If so, materials describing the plan’s benefits must include a noticeregarding the plan’s status as a grandfathered plan. The notice must include contact information forquestions or complaints. Note that plans that lose grandfathered status immediately become subject to thsame health reform requirements as nongrandfathered plans.

Patient Protection Notice — Nongrandfathered health plans must include a notice regarding eachparticipant’s right to designate a primary care physician and to obtain obstetrical or gynecological care

without prior authorization.

W-2 Reporting of Employee Health Coverage Cost — Employers must report the total cost of eachemployee’s health coverage on Form W-2 (box 12). This item is informational only and has no taxconsequences. The requirement does not apply to employers that filed fewer than 250 Forms W-2 for theprior tax year.


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Edition: Octob

Health Plan Fees and Taxes

The ACA imposes certain fees on health plans in order to raise revenue for various purposes, including clinicalresearch, stabilization of high-risk insurance markets, and expansion of health coverage. Some fees apply for a fewyears, while others are permanent.

For insured plans, the carrier or HMO is responsible for reporting and paying any applicable fees. The employer(policyholder) is not responsible for any duties. For a self-funded (uninsured) health plan, the employer sponsor mureport and pay the PCORI fee and TRP fee explained below, if applicable:

The Patient-Centered Outcomes Research Institute (PCORI) Fee, also called the Comparative EffectivenesResearch (CER) Fee, is imposed on group health plans to help fund studies on clinical effectiveness andhealth outcomes. Dental or vision only plans, and most health flexible spending accounts (HFSAs), are

exempt. The small fee is an annual amount multiplied by the average number of plan participants:

Plan year ending between October 1, 2013 and September 30, 2014: $2.00Plan year ending between October 1, 2014 and September 30, 2015: $2.08Plan year ending between October 1, 2015 and September 30, 2019: TBD based on inflation

Payment is due July 31 following the calendar year in which the plan year ended (e.g., July 31, 2015 for planyears ending in 2014) using Form 720.

The Transitional Reinsurance Program (TRP) Fee is collected from group medical plans for calendar years2014 to 2016 to help fund state reinsurance programs in the individual insurance market. The fee is an annuamount multiplied by the average number of plan participants:

Calendar year 2014: $63Calendar year 2015: $44Calendar year 2016: $27

Enrollment count reports are due by November 15 of the current year and payment is due in installments thfollowing year. For instance, for 2015, the report is due November 15, 2015 and the fee will be due January15, 2016 (or January 15, 2016 and November 15, 2016, if paying in two installments).

The Health Insurer Provider (HIP) Fee is collected from health insurance providers and HMOs (carriers) bason a percentage of the carrier’s net written premiums for insured groups. The fee began in 2014 and is

permanent. It applies only to insurers and is expected to impact premiums by approximately 2.3 percent.

A Risk Adjustment Fee does not apply to “large group” policies or self-funded plans. For “small group”policies, $1 per member per year may be assessed on carriers issuing risk-adjusted plans in thenongrandfathered “small group” insurance markets, whether in or out of the Exchanges.


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Limits on Annual Out-of-Pocket Maximums

All nongrandfathered health plans, whether insured or self-funded, are subject to limits on annual out-of-pocketmaximums. All cost-sharing, such as co-pays, deductibles, and co-insurance, for Essential Health Benefits (EHBs) maccumulate to the plan’s out-of-pocket maximums up to the following limits:

Each state, through its state insurance laws, may establish a detailed definition of EHBs for purposes of group healtinsurance policies issued in that state. Self-funded plans may define EHBs based on general federal guidelines or astate benchmark plan. Generally, an EHB definition includes health care services in the following 10 benefit categor

Ambulatory patient servicesEmergency servicesHospitalizationMaternity and newborn careMental health and substance use disorder services, including behavioral health treatment

Prescription drugsRehabilitative and habilitative services and devicesLaboratory servicesPreventive and wellness services and chronic disease managementPediatric services, including oral and vision care (services for individuals under 19 years of age)

Insurance Market Reforms

The ACA requires nongrandfathered group health insurance policies sold in the “small group” market to adoptseveral reforms. Examples include required coverage of all 10 categories of EHBs and adjusted community rating

(unless a state’s insurance law allows exceptions). “Large group” policies, which are available only to groups with aleast 50 employees (or at least 100 employees, depending on the state), and self-funded health plans are exemptfrom the market reforms. For details about your state’s insurance law and policy options, consult an agent or brokelicensed in that state.

(1) For plan year 2014, some exceptions were allowed for plans that utilized multiple service providers (e.g., different providersmedical benefits versus pharmacy benefits).

For Plan Year beginning in: Self-Only Coverage Coverage other than self-only

2014 (1) $6,350 $12,700

2016 $6,850 $6,850 per person$13,700 per family

2015 $6,600 $13,200


1.2.3.4.5.6.7.8.9.10.

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Employer Shared Responsibility Provision

Starting January 1, 2015, the ACA’s Employer Shared Responsibility provision takes effect. There are two parts:

Employer Reporting Requirements:

Under IRC § 6056, large employers must report information about health coverage offered to full-timemployees. To comply with the reporting requirement, prepare and distribute Form 1095-C to theemployee and file copies, along with transmittal Form 1094-C, with the IRS.

Under IRC § 6055, large employers with self-funded plans must report information about the coveraprovided to each individual. To comply with this reporting requirement, prepare and distribute Form1095-B to plan enrollees and file copies, along with transmittal Form 1094-B, with the IRS. If also

subject to § 6056, Forms 1095-C and 1094-C may be used to satisfy both the § 6055 and § 6056requirements.

For calendar year 2015, the first reports are due in early 2016.

Employer Coverage Offer (often called “the Employer Mandate” and “Play or Pay”): Employers may beassessed a penalty for failure to offer health coverage to full-time employees if at least one employeereceives a government subsidy to buy individual coverage through an Exchange (Marketplace).

Applicable Large Employer: Employers with 50 or more full-time-equivalent (FTE) employees are subject to theEmployer Shared Responsibility provision for 2015. Small employers are exempt. The employer must determine itsFTE count for 2014 in order to confirm its responsibilities for 2015. Related employers in a controlled group are

counted together to determine the number of FTEs. Generally, each full-time employee (i.e., 120 hours of service omore per month) counts as one FTE. Each part-time employee counts as a fraction of one FTE (i.e., divide theemployee’s hours of service per month by 120). Employers with seasonal workers, usually in the agricultural or retaindustries, may be able to take advantage of a special rule to subtract the seasonal workers from the employer’s FTcount.

Employers that are subject to the Employer Shared Responsibility provision for 2015 (based on their 2014 FTE counmay qualify for one of several available transition relief provisions to delay compliance under the Play or Pay portiofor several months or into 2016. For example, transition relief is available for certain employers with 50 – 99 FTEsand/or for certain employers with non-calendar year health plans.

For more information about coverage requirements, transition relief provisions, and potential penalties, see ourdetailed “Play or Pay” guide for employers. Brokers and clients who are registered to receive ThinkHR services maobtain copies by contacting the HR Hotline at 877-225-1101.


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Affordable Care Act Small and Large Employer Checklist