ACA Large Group


The Affordable Care Act (ACA) provisions that become effective in 2014 will have an impact on how people buy health insurance and what benefits companies offer to their employees. We created a series of videos to help you understand how these provisions will affect individuals, small employers and large employers. In this one, we’ll look at the top considerations for large employers – that’s companies with either 50 or 100 or more full-time employees or equivalents, depending on the provision and the state.

For some ACA provisions, like the benefit provisions, states are required to define large groups as more than 100 employees but have the option of defining large group as more than 50 employees until 2016. And, at this point, most states have chosen to define large group as more than 50 employees.  For the employer mandate that we will discuss, the requirement applies to large employers defined as employers with 50 or more full-time or full-time equivalent employees.

Recent studies show that most large employers will likely continue to offer health care benefits to their employees through 2015 and will make adjustments for the new provisions.  Beyond 2015, employers seem less sure that they’ll continue to offer health care benefits to all their employees, or they may consider different benefit strategies like movement towards defined contributions and emergence of Private Exchanges.  In 2007, 73% of large companies surveyed said they would continue to offer health care benefits for the next 10 years. Today only 23% make this prediction.  So, the way many people access health insurance may change —even for people who have traditionally received benefits from their employer.

Some of the considerations for large employers include:

  • Do the health plans we offer meet minimum value requirements?
  • Do we offer coverage for employees working on average 30 hours a week or more? And what level of coverage if we do?
  • Do employee contributions meet the affordability requirements?
  • Should our benefit strategies change?
  • What alternatives do large employers have regarding implementing the plan design provisions —like out-of-pocket maximums, which limits the amounts employees pay for service?
  • Do our plans exceed the 90 day maximum waiting period for coverage?
  • What taxes and fees do we need to pay?
  • What new reports will need to be filed?

That’s a lot to consider!

Let’s start with the Employer Mandate. This is also referred to as Employer Shared Responsibility or the “Play or Pay” mandate. This part of health care reform requires large employers to offer their employees affordable, minimum essential coverage or pay a penalty. It was originally effective in 2014 and has been delayed until 2015. This gives employers an additional year to prepare their plans and benefit strategies to meet the requirements.

These requirements include:

  • Offering coverage to employees that work on average 30 hours per week
  • Employee contributions to their plan cannot exceed 9.5% of their household income
  • Benefits must meet a 60% minimum value requirement

It is very important to note that this delay did not impact any other ACA provisions that will become effective in 2014. There is confusion in the marketplace and we strongly encourage employers to make sure that they have a clear understanding.

And what about benefit strategies? Instead of the traditional method where employees choose from a set of health plans, employers might consider giving their employees money to buy a plan on a private exchange. Private exchanges are kind of like public exchanges — employees shop for a health plan in an online marketplace. But the marketplace is private;  it’s only open to employees. And the employer may decide which plans employees can choose from on the exchange. The other difference between a public and a private exchange is that federal tax credits and subsidies can only be accessed on a public exchange because it's operated by the state or federal government; private exchanges are not.

Other questions large employers need to ask when reviewing benefit strategies include:

  • What benefit changes will you make in order to be compliant with the regulatory requirements while containing medical costs and offsetting future excise taxes?
  • Have all annual and calendar year dollar limits been removed for essential health benefits?
  • Do employee wellness incentives meet the new guidelines?

Answering these questions will help large employers come up with a benefit strategy that works for their employees and meets the health care reform requirements.

Let’s continue the discussion with taxes and fees. Health insurers and employers will be assessed new taxes and fees to help pay for some of the health care reform provisions. Some examples of the new taxes and fees include the Patient-Centered Outcomes Research Institute fee (PCORI), the Health Insurance Provider Fee, the Transitional Reinsurance Contributions fee, and the High Value Plan tax (also known as the “Cadillac Tax;” it isn’t effective until 2018).

You may be wondering what happens to the money collected from these taxes and fees? Some of it will be used to fund the risk management mechanisms that support pricing stability for the new consumer marketplaces (public exchanges). This provision will offset the risks for insurers who enroll a higher number of people with high cost claims. The money will also help fund tax credits and subsidies for people with lower incomes who buy insurance on a public exchange.  Can you see how these provisions rely on each other to make the whole system work?

And what were those reporting requirements? The federal government has delayed penalties for not meeting the reporting requirements related to the Employer Mandate for one year, but there are others to consider. Employers already have to give employees a Summary of Benefits and Coverage and add the aggregate cost of coverage to employees' W2 forms if they file more than 250 W2 forms. New in 2014, employers have to give the Notice of Coverage Options to employees by October 1st. This notice explains that public exchanges are available for employees.

So let’s review. Large companies have important considerations as a result of the ACA and some key provisions that are effective in 2014.  They will need to determine what changes are needed to be compliant with the new provisions and evaluate the financial impacts of taxes and fees. They’ll need to revisit their benefit strategy – how they plan to offer health plans to employees – and consider if a private exchange may be an option for them.

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