AFFORDABLE CARE ACT
Summary of Provisions Affecting
Employer-Sponsored Insurance
Johnny R. Allen
MBA 6600 Section: DS
Class: Healthcare Law
Teacher: Jim Morgan
Date: 08/13/2013
AFFORDABLE CARE ACT
Summary of Provisions Affecting
Employer-Sponsored Insurance
Much of the public discussion about the Affordable Care Act (ACA) has focused on the expansion of coverage to the uninsured through subsidies to individuals and the expansion of Medicaid. The law will also result in changes for some of the 150 million Americans who are covered through an employer-sponsored plan. This summary addresses common questions from unions and employers about the law’s impact on employer-sponsored insurance. This summary reflects the interpretation of the ACA statute and regulations that have been released to-date by the Department of Treasury, Department of Health and
Human Services and Department of Labor.
What is the exchange and who can utilize it?
The law creates a new health insurance exchange, a marketplace that will offer a choice of plans that meet standards for coverage and that will provide information to consumers and employers to help them make educated choices about the policies they are purchasing. Small employers can participate when the exchanges open by 2014. States have the option to define small employers as up to 50 or 100 employees through 2015, and must define small employers as up to 100 employees beginning in 2016. States can choose to expand exchanges to larger businesses beginning in 2017. Citizens and legal residents may purchase coverage through the exchange. The coverage will be subsidized for individuals in families with income not exceeding 400 percent of the Federal Poverty Level ($46,000 for an individual and $94,200 for a family of four in 2013) who are not eligible for Medicare, Medicaid, the Children’s Health Insurance Program, or affordable employer-sponsored insurance. For purposes of determining eligibility for exchange subsidies, affordable employer-sponsored insurance is defined as requiring an employee contribution of less than 9.5 percent of household income for an employee-only plan that covers at least 60 percent of medical costs on average (“minimum value”). If self-only coverage costs less than 9.5 percent of household income, then both employees and their family members are ineligible for subsidies regardless of whether or not family coverage is affordable.
Employers of all sizes may also continue to purchase coverage outside of the exchange.
Are employers required to provide coverage? Employers are not required to provide coverage to any employee or dependent, but large employers with at least one full-time employee enrolling in subsidized coverage in the Exchange are subject to a penalty, beginning in 2014. Large employers not offering coverage or offering coverage to less than 95 percent of its full-time employees pay $2,000 multiplied by the total number of full-time employees minus 30. This penalty only applies if at least one full-time employee receives subsidies in the exchange. Beginning in 2015, the $2,000 penalty also applies to employers that do not offer coverage to the children (under age 26) of full-time employees, regardless of whether or not the coverage offered to children is affordable. Large employers offering coverage to at least 95 percent of its full-time employees pay the lesser of $3,000 multiplied by the number of full-time employees receiving subsidies, and $2,000 multiplied by the total number of full-time employees minus 30. This penalty may occur because an employer did not offer coverage to a full-time employee or because the coverage offered was unaffordable or did not provide minimum value.
Applicability of the penalties: Large employers are those with at least 50 full-time equivalent non-seasonal employees. Affiliated members of a controlled group of large employers are treated as a single employer for purposes of determining
