HOW DOES THE AFFORDABLE CARE ACT AFFECT EMPLOYERS?

The major provisions of the Affordable Care Act that affect employers are explored below.

Employer Mandate

The employer mandate applies to large employers with 50 or more full-time employees and/or full-time equivalents (FTE's) and states that if the employer does not offer health insurance coverage that provides minimum essential coverage, is affordable, and meets minimum value requirements, and any employee seeks coverage in the marketplace and qualifies for a tax credit or subsidy, the employer can incur penalties. In other words, the ACA does not specifically require employers to provide coverage, but it does penalize them if they do not and even one of their employees seeks and is eligible for subsidies in the health insurance marketplace/exchange. The employer mandate goes into effect on January 1, 2015.

Employers that do not comply with the employer mandate generally fail to do so under one of two circumstances. The first is failure to offer health insurance coverage that provides minimum essential coverage (MEC), as defined by the Affordable Care Act, or not providing coverage at all. In these cases, the employer faces fees of $2,000 per full-time employee per year, but the first 30 employees are excluded from the fee. The second results from offering health insurance coverage that is unaffordable or does not meet minimum value requirements for as little as one employee. Coverage is unaffordable if the employee's share of the premium for self-only coverage exceeds 9.5% of the employee's household income, and the minimum value requirement states that the health insurance plan must pay at least 60% or more of the plan's total estimated benefit costs (equal to bronze plan coverage in the marketplace). Employers who fail to comply for this reason face a fee of $3,000 per full-time employee per year, but this fee is only assessed per full-time employee that qualifies for and receives a tax credit or subsidy in the marketplace.

Small Employer Subsidies

Small employers, those having 2-49 employees, are not subject to the employer mandate. However, they are able to participate in the health insurance marketplace under the Small Business Health Options Program (SHOP) Exchange and may qualify for subsidies, so legislators hopes that this encourages them to provide coverage for their employees.

Small businesses are eligible for tax credits if they have no more than 25 full-time employees and equivalents, have average annual wages of less than $50,000, and purchase health insurance for employees. Phase I of the small business tax credits takes place in tax years 2010 through 2013 and provides a tax credit up to 35% of the employer's contribution toward the employee's health insurance premium if the employer contributes at least 50% of the total premium cost. Phase II of the small business credits takes place in tax years 2014 and later for eligible small businesses that purchase coverage through the marketplace and provides a tax credit of up to 50% of the employer's contribution toward the employee's health insurance premium if the employer contributes at least 50% of the total premium cost, and the credit will be available for two years.

Deductible Caps

As of January 1, 2014, employer-sponsored health plans must have a maximum annual deductible of $2000 for an individual and $4000 for a family. However, many grandfathered plans are exempted from this requirement. A grandfathered plan means that an employer decided to keep the health insurance plan it had in place on March 23, 2010, when the ACA was signed into law, and has made no or only minimal changes to the plan. Significant plan changes, such as eliminating certain benefits and increasing patient out-of-pocket costs, can cause loss of a plan's grandfathered status.

ACA Taxes and Fees

Many of the ACA taxes and fees that apply to health insurance issuers impact employers either directly or indirectly. If an employer is self-funded, meaning that the employer administers its own health benefits for employees, some of the taxes and fees that apply to insurers apply directly to the employer, including the Excise Tax, also known as the Cadillac Tax, and the Patient-Centered Outcomes Research Institute (PCORI) Fee. For employers that are not self-funded, the cost of ACA taxes and fees, including a new annual Insurer Fee, is often passed along in the form of higher premiums from the insurance company.

Based on the ACA rules and health insurance industry analysis, the cumulative impact of taxes and fees is estimated to increase employer health premiums by about 3.8 percent. A few of the new fees imposed by the Affordable Care Act on health insurance issuers are described below.

• The Patient-Centered Outcomes Research Institute (PCORI) Fee helps to fund research on the comparative effectiveness of medical treatments.
• The Excise Tax, also known as the Cadillac tax, begins in 2018 and imposes a 40% excise tax on the value of health insurance benefits exceeding $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation).
• The Insurer Fee, also known as the health insurance industry tax or premium tax, is an annual, permanent fee on health insurance carriers beginning in 2014 that will be used to fund tax credits and subsidies for individuals purchasing health insurance through the marketplace. The amount of the Insurer Fee is determined by the market share of the carrier.

Auto Enroll

Employers with 200 or more full-time employees and equivalents are required to automatically enroll employees in health insurance plans offered by the employer unless the employee opts out.

Eligibility Waiting Periods

The ACA prohibits patient eligibility waiting periods in excess of 90 days for group health coverage, effective as of Jan 1, 2014. In other words, workers eligible for health benefits must be covered by the 91st day after satisfying employment eligibility requirements.

Essential QSA Knowledge

As might be expected, pro-business groups have lobbied against the employer mandate and managed to get the effective date pushed back from January 1, 2014 to January 1, 2015. From a consumer's perspective, the mandate and other provisions may be good if they encourage your employer to offer you health insurance coverage that you didn't receive prior. However, new taxes and fees may raise premiums for some employers, which would in effect raise the employee's premium cost-share amount.

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