The latest update to the benefit and payment parameters for the Affordable Care Act (ACA) has been published and contains very important information relevant to employer and group health plans.
Every year, the Department of Health and Human Services (HHS) releases a notice for the following year’s parameters. Although most of the information pertains to the marketplace, where individuals can choose and purchase insurance, a great deal specifically pertains to businesses.
Here are a few of those changes below:
- Annual limits for cost sharing. Starting January 1st, 2017, the annual out of pocket limits will be $7,500 for individual and $14,300 for family. These figures will be higher than 2016 limits which are $6,850 for an individual plan and $13,700 respectively. They apply to in-network essential health benefits offered under non-grandfathered health plans (plans purchased before March 23, 2010 which are exempt from many ACA changes). This means that an individual or family cannot pay more than the set limits on deductibles, coinsurance and copayments, or other in-network costs. Premiums, out of network costs, and non-essential health insurance do not apply, however, are not considered cost sharing.
- New Businesses. A newly registered business will be considered large or small, for the purposes of providing quality health insurance, based on the number of employees it is expected to hire within the current calendar year. Normally, a business is determined to be a large or small employer by how many full time employees a company employs the previous calendar year. A large employer is a business which employs more than 51 full time employees. An applicable large employer (ALE) must offer minimum essential coverage or face IRS penalties. The coverage must be affordable (as determined by the government) and provide minimum value (when a plan pays 60% of allowed benefits expected to be incurred under the plan). This amendment that applies solely to ALEs is called the shared responsibility provision, but many call it the employer mandate or pay or play provision. ALEs are also expected to report offers for minimum essential coverage to its employees. This is called the employer information reporting provision. However, if a new business is not expected to hire over 50 full time employees within the current calendar year, these provisions will not apply.
- Marketplace notification to employers. Beginning on January 1st, the marketplace will notify an employer when an employee applies for subsidized coverage and qualifies. Because ALEs may face penalties when an employee qualifies for coverage subsidy, this system will help companies work more efficiently with the IRS in correcting any possible reporting errors that may result in improper coverage subsidy.
- Group Health Plans. Under the new rule, health insurance rates for a small group plan will be determined by the location where most employees reside. Previously, they were determined by the address a business was registered at. However, rates might differ significantly between the two locations if they are different. Therefore, rates will now be determined by where a small business primarily operates. Also, if rates become too high, they will be subject to review by the HHS. Rate increases will be considered too high if they exceed the ‘unreasonableness’ threshold, currently at 10%.
- Changes to the Small business health options (Shop) exchange. Beginning in 2017, the Shop Exchange will allow small businesses to offer plans at all metal levels from one insurer. This ‘vertical choice’ option means that employers can choose bronze, silver and gold plans from the same insurer. States had the choice of opting out of this option before March 16. 2016.
Keeping up with these annual revisions are very important. By staying updated, your company will avoid costly penalties and unnecessary complications with the government.