ACA Timeline

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Small Employer Tax Credit

Employers with 25 or fewer full-time equivalent employees who earn $50,000 or less on average may earn a tax credit if the employer provides health coverage and pays at least 50% of the premium cost. Self-employed individuals and their wages are not taken into account. The credit is available for any coverage in 2010 to 2013. Beginning in 2014, the employer must purchase Exchange coverage. The tax credit will only be available for the first two years of Exchange coverage.

Only limited changes may be made to plans to maintain grandfathered status

Grandfathered status is available for health plans that were providing coverage as of March 23, 2010. Making certain changes to benefit offerings, plan design, or employer contributions toward the cost of coverage will cause a plan to lose its grandfathered status. Grandfathered plans do not have to comply with several plan design mandates imposed by ACA. The plan sponsor must maintain certain documentation and include notice of grandfathered status in any participant materials describing the coverage.

Adult children may receive tax-free health coverage/reimbursement

In addition to the requirement to provide health coverage for adult children, ACA extended eligibility for tax-free employer-sponsored health coverage/reimbursement for adult children until the end of the calendar year in which a child turns age 26. Participants in Health FSAs or HRAs may be reimbursed for medical expenses incurred for these individuals.

Pre-existing condition exclusions for children prohibited

Plans may not impose any pre-existing condition exclusions for enrollees under age 19.

Small Employer Tax Credit

Employers with 25 or fewer full-time equivalent employees who earn $50,000 or less on average may earn a tax credit if the employer provides health coverage and pays at least 50% of the premium cost. Self-employed individuals and their wages are not taken into account. The credit is available for any coverage in 2010 to 2013. Beginning in 2014, the employer must purchase Exchange coverage. The tax credit will only be available for the first two years of Exchange coverage.

Only limited changes may be made to plans to maintain grandfathered status

Grandfathered status is available for health plans that were providing coverage as of March 23, 2010. Making certain changes to benefit offerings, plan design, or employer contributions toward the cost of coverage will cause a plan to lose its grandfathered status. Grandfathered plans do not have to comply with several plan design mandates imposed by ACA. The plan sponsor must maintain certain documentation and include notice of grandfathered status in any participant materials describing the coverage.

Adult children may receive tax-free health coverage/reimbursement

In addition to the requirement to provide health coverage for adult children, ACA extended eligibility for tax-free employer-sponsored health coverage/reimbursement for adult children until the end of the calendar year in which a child turns age 26. Participants in Health FSAs or HRAs may be reimbursed for medical expenses incurred for these individuals.

Pre-existing condition exclusions for children prohibited

Plans may not impose any pre-existing condition exclusions for enrollees under age 19.

Over-the-counter drugs may only be reimbursed with a prescription

Reimbursements for over-the-counter (OTC) drugs and medicines are permitted only with a medical practitioner's prescription. Restrictions also apply to use the debit cards to purchase OTC drugs and medicines.

HSA penalty for non-qualified distributions increased

Withdrawals from HSAs not used for qualified medical expenses are subject to a 20% excise tax, which is an increase from 10% under prior law.

Comparative Effectiveness Research Fee

Plan sponsors of self-funded health plans and insurers of insured health plans must pay a fee to help fund the Patient-Centered Outcomes Research Institute based on the average number of lives covered in the plan. The fee is $1 per individual for the first plan or policy year ending after September 30, 2012., and $2 per plan participant for the next plan or policy year. For subsequent plan or policy years the $2 fee will be indexed to cost increases in per-capita "national health expenditures". The fees don't apply to plan or policy years ending after September 30, 2019. For calendar year plans, fees will be due for the 2012-2018 plan years.

Over-the-counter drugs may only be reimbursed with a prescription

Reimbursements for over-the-counter (OTC) drugs and medicines are permitted only with a medical practitioner's prescription. Restrictions also apply to use the debit cards to purchase OTC drugs and medicines.

HSA penalty for non-qualified distributions increased

Withdrawals from HSAs not used for qualified medical expenses are subject to a 20% excise tax, which is an increase from 10% under prior law.

Comparative Effectiveness Research Fee

Plan sponsors of self-funded health plans and insurers of insured health plans must pay a fee to help fund the Patient-Centered Outcomes Research Institute based on the average number of lives covered in the plan. The fee is $1 per individual for the first plan or policy year ending after September 30, 2012., and $2 per plan participant for the next plan or policy year. For subsequent plan or policy years the $2 fee will be indexed to cost increases in per-capita "national health expenditures". The fees don't apply to plan or policy years ending after September 30, 2019. For calendar year plans, fees will be due for the 2012-2018 plan years.

Form W-2 reporting of employer-sponsored health coverage for large employers

Employers must report the cost of employer-provided health coverage on employees' W-2 Forms. The reporting does not make the coverage taxable to employees.

Employers filing 250 or more Forms W-2 for the 2011 calendar year are required to report beginning with the 2012 tax year (W-2s to be provided at the beginning of 2013). Smaller employers are not required to report until further notice.

Medical device fee (may increase employer costs)

Medical device manufacturers, producers, or importers must pay an excise tax equal to 2.3% of the sale price on the sale of certain medical devices. Costs are likely to be passed on to plan sponsors in the form of increased medical device costs.

Medical loss ratio (MLR)

ACA establishes Medical Loss Ratio (MLR) targets for health insurance coverage offered in the individual, small group, and large group markets. If a health insurer does not achieve the target MLR, it must provide rebates to enrollees in that market. Employers that receive a rebate must allocate to employees a sum that is proportionate to their individual premium contributions.

Summary of Benefits and Coverage (SBC) and Uniform Glossary

Plan sponsors for self-funded plans and insurers for fully insured plans must provide a Summary of Benefits and Coverage (SBC) and Uniform Glossary to plan participants. If the plan is fully insured the plan sponsor shares responsibility with the insurer for distributing the SBC.

Must provide 60-day advance notice of benefit changes

If any material modifications in health plan coverage of the items listed on the SBC, such as increases in cost-sharing or benefit reductions, are made mid-year that are not reflected in the most recently distributed Summary of Benefits and Coverage (SBC), the plan sponsor must send notice of the changes to plan participants at least 60 days before the modifications become effective.

Form W-2 reporting of employer-sponsored health coverage for large employers

Employers must report the cost of employer-provided health coverage on employees' W-2 Forms. The reporting does not make the coverage taxable to employees.

Employers filing 250 or more Forms W-2 for the 2011 calendar year are required to report beginning with the 2012 tax year (W-2s to be provided at the beginning of 2013). Smaller employers are not required to report until further notice.

Medical device fee (may increase employer costs)

Medical device manufacturers, producers, or importers must pay an excise tax equal to 2.3% of the sale price on the sale of certain medical devices. Costs are likely to be passed on to plan sponsors in the form of increased medical device costs.

Medical loss ratio (MLR)

ACA establishes Medical Loss Ratio (MLR) targets for health insurance coverage offered in the individual, small group, and large group markets. If a health insurer does not achieve the target MLR, it must provide rebates to enrollees in that market. Employers that receive a rebate must allocate to employees a sum that is proportionate to their individual premium contributions.

Summary of Benefits and Coverage (SBC) and Uniform Glossary

Plan sponsors for self-funded plans and insurers for fully insured plans must provide a Summary of Benefits and Coverage (SBC) and Uniform Glossary to plan participants. If the plan is fully insured the plan sponsor shares responsibility with the insurer for distributing the SBC.

Must provide 60-day advance notice of benefit changes

If any material modifications in health plan coverage of the items listed on the SBC, such as increases in cost-sharing or benefit reductions, are made mid-year that are not reflected in the most recently distributed Summary of Benefits and Coverage (SBC), the plan sponsor must send notice of the changes to plan participants at least 60 days before the modifications become effective.

Additional Medicare Tax

Employers must withhold additional 0.9% Medicare tax on wages paid to employees in excess of $200,000.

Quality reporting guidance due

Plan sponsors of non-grandfathered plans must report on plan benefits and reimbursement structures that provide certain quality-related programs like disease management. Reports must be issued annually to HHS and to employees during open enrollment.

First PCORI Fee Due

Plan sponsors of self-funded health plans and insurers of fully-insured health plans must pay a fee to help fund the Patient-Centered Outcomes Research Institute. The fee must be reported and paid by filing tax Form 720 by 7/31 following the plan year for which a fee is due.

DOL Issues Model Exchange Notice

Under ACA, employers are required to provide current employees and new hires a notice explaining Exchanges.

Employers are required to provide the notice to all employees regardless of full or part time status by October 1, 2013, and upon hire for new employees after October 1, 2013. Starting January 1, 2014 employers will have up to 14 days from the date of hire to provide the notice to new employees

Additional Medicare Tax

Employers must withhold additional 0.9% Medicare tax on wages paid to employees in excess of $200,000.

Quality reporting guidance due

Plan sponsors of non-grandfathered plans must report on plan benefits and reimbursement structures that provide certain quality-related programs like disease management. Reports must be issued annually to HHS and to employees during open enrollment.

First PCORI Fee Due

Plan sponsors of self-funded health plans and insurers of fully-insured health plans must pay a fee to help fund the Patient-Centered Outcomes Research Institute. The fee must be reported and paid by filing tax Form 720 by 7/31 following the plan year for which a fee is due.

DOL Issues Model Exchange Notice

Under ACA, employers are required to provide current employees and new hires a notice explaining Exchanges.

Employers are required to provide the notice to all employees regardless of full or part time status by October 1, 2013, and upon hire for new employees after October 1, 2013. Starting January 1, 2014 employers will have up to 14 days from the date of hire to provide the notice to new employees

Waiting periods over 90 days prohibited

Plans may not impose an eligibility waiting period of greater than 90 days.

First plan year beginning on or after 1/1/2014

Grandfathered plans must cover all children to age 26

Grandfathered plans that cover dependents must offer coverage for adult children up to age 26 regardless of eligibility for other employment-based coverage.

May not discriminate against providers acting with the scope of their licenses

Non-grandfathered plans may not discriminate against health care providers acting within the scope of their licenses. For example, this could prevent a plan from denying benefits solely because a doctor prescribed a drug for an off-label purpose or provided a service outside the doctor's typical specialty area (assuming both acts were within the scope of the doctor's license).

HIPAA Transaction Compliance

Employers that sponsor large self-funded health plans and insurers for large fully-insured plans need to register for a health plan ID. Large plans are those with annual receipts of more than $5 million.

Waiting periods over 90 days prohibited

Plans may not impose an eligibility waiting period of greater than 90 days.

First plan year beginning on or after 1/1/2014

Grandfathered plans must cover all children to age 26

Grandfathered plans that cover dependents must offer coverage for adult children up to age 26 regardless of eligibility for other employment-based coverage.

May not discriminate against providers acting with the scope of their licenses

Non-grandfathered plans may not discriminate against health care providers acting within the scope of their licenses. For example, this could prevent a plan from denying benefits solely because a doctor prescribed a drug for an off-label purpose or provided a service outside the doctor's typical specialty area (assuming both acts were within the scope of the doctor's license).

HIPAA Transaction Compliance

Employers that sponsor large self-funded health plans and insurers for large fully-insured plans need to register for a health plan ID. Large plans are those with annual receipts of more than $5 million.

Transparency disclosures

Non-grandfathered plans must provide certain information to HHS and the public, such as claims payment policies and practices, data on specified topics (e.g., enrollment, disenrollment, claims denied, and rating practices), financial disclosures, information on cost-sharing, and payments with respect to out-of-network coverage, and information on participants' rights under ACA.

Automatic enrollment

Plan sponsors with 200+ full-time employees must automatically enroll their full-time employees in employer-sponsored health coverage. If an employee wants different or no health coverage, they will be able to change or opt out of the employer's plan. The employer will be required to send notices to employees regarding the automatic enrollment process.

Effective date is unclear - expected to be established by regulations, which the agencies have indicated will be sometime after 2014.

HIPAA Transaction Compliance

Employers that sponsor small self-funded health plans and insurers for small fully-insured plans need to register for a health plan ID. Small plans are those with annual receipts of $5 million or less.

HHS Certification

Plan sponsors must collect assurance from plan administrators and vendors who process standard transactions for the plan that the vendor has gone through a required testing process and has received the necessary certification from HHS.

Transparency disclosures

Non-grandfathered plans must provide certain information to HHS and the public, such as claims payment policies and practices, data on specified topics (e.g., enrollment, disenrollment, claims denied, and rating practices), financial disclosures, information on cost-sharing, and payments with respect to out-of-network coverage, and information on participants' rights under ACA.

Automatic enrollment

Plan sponsors with 200+ full-time employees must automatically enroll their full-time employees in employer-sponsored health coverage. If an employee wants different or no health coverage, they will be able to change or opt out of the employer's plan. The employer will be required to send notices to employees regarding the automatic enrollment process.

Effective date is unclear - expected to be established by regulations, which the agencies have indicated will be sometime after 2014.

HIPAA Transaction Compliance

Employers that sponsor small self-funded health plans and insurers for small fully-insured plans need to register for a health plan ID. Small plans are those with annual receipts of $5 million or less.

HHS Certification

Plan sponsors must collect assurance from plan administrators and vendors who process standard transactions for the plan that the vendor has gone through a required testing process and has received the necessary certification from HHS.

Free Rider Penalty (Transition Relief for Employers with 50-99 FTEs)

The final regulations provide that employers with 50-99 full-time equivalent employees would not be subject to the Employer Mandate Penalty until the first day of the plan year beginning in 2016.

Begins in 2017

Free Rider Penalty (Transition Relief for Employers with 50-99 FTEs)

The final regulations provide that employers with 50-99 full-time equivalent employees would not be subject to the Employer Mandate Penalty until the first day of the plan year beginning in 2016.

Begins in 2017

Health Insurance Exchanges - large employers may be able to participate

Beginning in 2017, employers with more than 100 employees may be allowed to purchase group health insurance coverage through the Exchanges.

Health Insurance Exchanges - large employers may be able to participate

Beginning in 2017, employers with more than 100 employees may be allowed to purchase group health insurance coverage through the Exchanges.

Excise tax on high cost plans (Cadillac Tax)

A 40% nondeductible excise tax will be imposed to the extent the aggregate value of specified employer-sponsored health coverage exceeds certain threshold amounts – generally, $10,200 for individual coverage and $27,500 for family coverage. Although the excise tax generally will be paid by insurers and/or third party administrators, the amount of the tax is expected to be passed through to the employer sponsoring the high cost plan(s).

Excise tax on high cost plans (Cadillac Tax)

A 40% nondeductible excise tax will be imposed to the extent the aggregate value of specified employer-sponsored health coverage exceeds certain threshold amounts – generally, $10,200 for individual coverage and $27,500 for family coverage. Although the excise tax generally will be paid by insurers and/or third party administrators, the amount of the tax is expected to be passed through to the employer sponsoring the high cost plan(s).

Neither American Fidelity Assurance Company nor American Fidelity Administrative Services provides tax or legal advice and, given the complexity of these laws, we always recommend working with your legal counsel on how the laws impact your specific situation. 

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