The Large Business Guide
to Health Care Law
Large Businesses (100 or more employees)
Most employers have already felt some of the effects of the health care law. Although many major provisions of the law will now go into effect in 2015, some significant parts of the law had earlier implementation dates.
One of the most important things for you to know about the health care law is that you can incur penalties if you do not provide your employees with health care coverage or the right level of coverage, or if the coverage you offer is considered unaffordable to some employees. Some describe this situation for large employers as “pay or play.” Whether or not your plan is eligible for “grandfathered” status also will have a major impact on how the health care law affects your business.
How can you avoid penaltiesYou can avoid incurring penalties that will start being assessed in 2015 by meeting these requirements:
- Your health plan must meet certain coverage requirements. The minimum value of your health plan contribution must be 60 percent of the total cost. This means that the plan (i.e., employer) pays at least 60 percent of costs and that your employee cost-sharing does not exceed 40 percent of the cost of covered services. The federal government has developed a calculator that you can use to determine the minimum value of your health plan.
- As a large employer, you are not required to offer essential health benefits. But if you do offer any of the essential benefits, you cannot impose any annual or lifetime dollar maximums on those services.
- The annual out-of-pocket maximum that employees pay for your health plans cannot exceed the health savings account/high deductible health plan qualified limits. For 2014, the limits are $6,350 per individual and $12,700 per family. This amount will be indexed annually.
- You must offer health coverage to all full-time employees who work 30 hours a week or more. Beginning in 2015, you must offer coverage to full-time employees and their dependent children (not spouses), though you are not required to pay for those dependents.
- Your health benefits must be affordable. Under the health care law, affordability is determined by the single employee contribution amount for the lowest-cost plan offered. If the contribution for a single premium exceeds 9.5 percent of an employee’s W-2 wages, then the plan is considered unaffordable for that employee. There are other safe harbor measures available to groups to determine their affordability that look at a percentage of rate of pay or percentage of federal poverty level.
What penalties will I have to pay
There are two possible penalties that the federal government could charge an employer that has 50 or more full-time equivalent employees:
- The Mandate Penalty ($2,000) applies if an employer does not offer group health coverage. The penalty is calculated on all full-time employees, less the first 30. At least one employee has to purchase subsidized coverage on the Marketplace for this penalty to apply.
- The Qualification Penalty ($3,000) applies if the employer fails to offer a qualifying plan (minimum and affordable) to any employee. If any of those employees purchase subsidized coverage through the Marketplace, the penalty applies. This penalty is assessed based on the number of employees that are not offered qualifying coverage and who subsequently purchase subsidized coverage through the Marketplace.
New reporting requirements
Beginning in 2015, large employers will have to submit annual reports to the U.S. Department of Health and Human Services on the terms and conditions of health care coverage provided to their full-time employees. The report should include: duration of waiting period, the monthly premium for the lowest cost option offered to employees, employer’s premium share, and a list of employees.
One factor that may have a significant impact on how the law will impact your business and your employees’ health plan depends on whether or not you meet the criteria to qualify as a “grandfathered” health plan. If you have grandfathered status, some — but not all — provisions of the health care law will be optional for you.
Large groups may be allowed on the marketplace
States will have the option of allowing large companies with more than 100 employees to buy health insurance through state-based health insurance marketplaces. Initially, only individuals who buy their own insurance and small businesses will be able to use these online portals when they open in the fall of 2014. The marketplaces will make it easier for those purchasing health insurance to compare products and prices.
What we’re doing to help
At Independence Blue Cross (IBC), we’re following implementation of the health care law closely. We have already made major changes in our plans and will be making additional changes to make sure your plans comply with the law. We already have met many requirements of the health care law, and we adopted other provisions prior to the dates when they took effect.
For example, no changes need to be made to your coverage in the following areas because IBC already included these provisions in its plans:
- Coverage for in-network emergency room visits
- The ability to select a pediatrician as a primary care physician
- Direct access to OB/GYN physicians
- No preexisting-condition exclusions for children
Here are some of the changes we’ve made to comply with the health care law. All IBC plans now include these benefits:
- 100 percent coverage for designated preventive care services
- Coverage of employees’ dependents to age 26
- No lifetime dollar maximums on essential benefits (this eliminates limits, such as $1 million lifetime maximums for out-of-network care) EHBs aren’t in effect until 2014
- No annual dollar maximums on essential benefits (this eliminates limits, such as the $2,500 annual limit for durable medical equipment) EHBs aren’t in effect until 2014
- No rescission (cancellation) of coverage except in cases of fraud, intentional misrepresentation of material facts, or nonpayment of premiums
- No preexisting condition exclusions for children under 19
- Enhanced internal appeals and external review processes
We’ll also incorporate other key provisions of the health care law into many of our plans. For 2014, we will be adding the following:
- No pre-existing condition exclusion for people of any age
- No lifetime or annual dollar limits for essential health benefits
- New maximum out-of-pocket limits for non-grandfathered plans (these limits in 2014 will be $6,350 for individual plans and $12,700 for family coverage)
Checklist for large groups
Here are some of the things that are already required or that you may need to do in the future to comply with the new health care law:
- Determine your group size.
- Determine whether your health plan continues to quality for grandfathered status.
- Assess your current offerings. Do they meet the health care law’s actuarial value, affordability and waiting period requirements?
- Identify changes you need to make and implement remedies as needed.
- Address new administrative duties:
- Perform discrimination testing (new for non-grandfathered, fully insured groups) - Date TBD
- Implement higher Medicare Part A payroll taxes for high-wage earners - 2013
- Issue notice of Marketplace to employees - 2013
- Implement health flexible spending account maximum - 2013
- Include the aggregate value of health coverage on employees’ W2 forms - 2013
- Create and submit health care coverage report to the Department of Health & Human Services - 2015
- Manage new taxes and fees
- Discontinue any tax deduction for Medicare Part D subsidy amounts - 2013
- Calculate and pay patient-centered outcomes fee (self-funded plans only) - 2013
- Calculate and pay reinsurance contribution (self-funded plans only) 2014