What is a small employer?
The ACA doesn’t have a consistent answer for that. An employer might be considered “small” for one rule, but not another. For this Toolkit, a small employer is one that has fewer than 50 employees.
Most of the sections in this guide apply to these small employers. Certain sections of this Toolkit briefly describe some of the rules for large employers. Those sections can help you understand which ACA provisions apply to your company now, and which ones may apply in the future if your business grows
Effective for plan years beginning on or after Jan. 1, 2014, health plans may not place annual dollar limits on essential health benefits (EHBs). However, plans may impose annual limits on specific covered benefits that are not EHBs. “Restricted annual limits” were permitted for EHBs for plan years beginning before Jan. 1, 2014. However, restricted annual limits are no longer allowed.
EHBs are a core set of items and services intended to reflect the scope of benefits covered by a typical employer. Each state selects a benchmark insurance plan and, as a general rule, the items and services included in a state’s benchmark plan comprise the EHBs that insured health plans in the state’s individual and small group markets must cover.
Limit on Cost-sharing (Non-GF Plans Only)
Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered group health plans are subject to limits on total enrollee cost-sharing for essential health benefits (EHBs), known as an out-of-pocket maximum.
- For 2018, out-of-pocket expenses may not exceed $7,350 for self-only coverage and $14,700 for family coverage.
- For 2019, out-of-pocket expenses may not exceed $7,900 for self-only coverage and $15,800 for family coverage.
- For 2020, out-of-pocket expenses may not exceed $8,150 for self-only coverage and $16,300 for family coverage.
- For 2021, out-of-pocket expenses may not exceed $8,550 for self-only coverage and $17,100.00 for family coverage.
- For 2022, out-of-pocket expenses may not exceed $8,700 for self-only coverage and $17,400.00 for family coverage.
- For 2023, out-of-pocket expenses may not exceed $9,100 for self-only coverage and $18.200.00 for family coverage.
Excessive Waiting Periods
A group health plan or issuer may not impose a waiting period that exceeds 90 days. A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll becomes effective.
Eligibility conditions that are based solely on the lapse of time are permissible for no more than 90 days. However, other conditions for eligibility are permissible, as long as they are not designed to avoid compliance with the 90-day waiting period limit. Permissible eligibility conditions include:
- Being in an eligible job classification;
- Achieving job-related licensure requirements specified in the plan’s terms; or
- Satisfying a reasonable and bona fide employment-based orientation period.
Pre-existing Condition Exclusions
Effective for plan years beginning on or after Jan. 1, 2014, group health plans and health insurance issuers may not impose pre-existing condition exclusions on any covered individual, regardless of the individual’s age. Prior to the 2014 plan year, pre-existing condition exclusions were already prohibited for individuals under age 19. A pre-existing condition exclusion is a limitation or exclusion of benefits related to a condition based on the fact that the condition was present before the individual’s date of enrollment in the employer’s plan.
Nondiscrimination for Fully-Insured Plans
(Non-GF Plans Only)
Non-grandfathered fully-insured group health plans will have to comply with federal nondiscrimination rules related to compensation, which prohibit discrimination in favor of highly-compensated employees. Under the ACA, these plans will have to follow rules similar to the nondiscrimination rules currently applicable to self-funded plans (found in Internal Revenue Code Section 105(h)), which require plans to pass both an eligibility test and a nondiscrimination test.
Because these rules will apply only to non-grandfathered plans, grandfathered plans that discriminate in favor of highly compensated employees may wish to retain their grandfathered status.
Compliance with the new nondiscrimination rules will not be required until after guidance is issued. Therefore, this nondiscrimination requirement has been delayed indefinitely, pending the issuance of regulations.
Additional Medicare Tax
Effective Jan. 1, 2013, the Medicare Part A (hospital insurance) tax rate increased by 0.9 percent (from 1.45 percent to 2.35 percent) on wages over $200,000 for individual taxpayers, and $250,000 for married couples filing jointly.
An employer must withhold the additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. An employer has this withholding obligation even though an employee may not be liable for the additional Medicare tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. Any withheld additional Medicare tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040).
Notice of Exchange
Employers must provide all new hires and current employees with a written notice about the ACA’s health insurance exchanges (Exchanges). Employers were required to provide the notice to current employees no later than Oct. 1, 2013. As an ongoing requirement, employers must provide the notice to each new employee at the time of hiring.
In general, the notice must:
- Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
- Explain how employees may be eligible for a subsidy if the employer’s plan does not meet certain requirements; and
- Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes.
The DOL also provided model Exchange notices for employers to use, which require some customization. The notice may be provided by first-class mail, or may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met.
According to the DOL, there is no fine or penalty under the ACA for failing to provide the notice. This means that employers cannot be fined for failing to provide employees with notice about the Exchanges.
Summary of Benefits and Coverage
Health plans (both insured and self-funded) must provide a Summary of Benefits and Coverage (SBC) to participants and beneficiaries. The SBC is a succinct document that provides simple and consistent information about health plan benefits and coverage in plain language. For insured plans, issuers must provide an SBC to the plan sponsor and may also send the SBC to participants and beneficiaries on behalf of an insured health plan.
Plans and issuers were initially required to provide the SBC to participants and beneficiaries for plan years beginning on or after Sept. 23, 2012. In addition, ongoing requirements for providing the SBC also apply. For group health plans, there are two different scenarios under which the SBC must be provided: (1) by a group health insurance issuer to a group health plan; and (2) by the issuer or plan to participants and beneficiaries.
A health insurance issuer must provide an SBC to a group health plan (or the plan’s sponsor):
- Upon application for health coverage;
- By the first day of coverage, if there was any change in information required to be in the SBC that was provided upon application and before the first day of coverage;
- When the issuer renews or reissues the policy; and
- Upon request.
A health insurance issuer or health plan must provide an SBC to participants and beneficiaries with respect to each benefit package for which the participant or beneficiary is eligible. The SBC must be provided:
- As part of any written application materials that are distributed by the plan or issuer for enrollment;
- If the plan or issuer does not distribute written application materials, no later than the first date that the participant is eligible to enroll in coverage;
- By the first day of coverage, if there was any change to information required to be in the SBC that was provided upon application and before the first day of coverage;
- To special enrollees, no later than the deadline for providing the summary plan description (SPD) (that is, within 90 days of enrollment);
- Upon renewal, if participants and beneficiaries must renew in order to maintain coverage; and
- Upon request (the uniform glossary must also be provided upon request).
Notice of Patient Protections and Selection of Providers (Non-GF Plans Only)
Non-GF group health plans and health insurance issuers that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children). Non-GF group health plans and issuers that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.
Plan administrators or issuers of these plans must provide a notice of patient protections/selection of providers whenever the summary plan description (SPD) or similar description of benefits is provided to a participant. The first notice should have been provided no later than the first day of the plan year beginning on or after Sept. 23, 2010.
Patient-Centered Outcomes Research Institute (PCORI) Fees
Health insurance issuers and self-funded group health plans were required to pay fees to finance comparative effectiveness research. These research fees were called Patient-Centered Outcomes Research Institute fees (PCORI fees), although they were also called research fees, PCOR fees or comparative effectiveness research (CER) fees. The fees were scheduled to apply for plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. However, on Dec. 20, 2019, President Trump signed into law a spending bill that prevented a government shutdown and extended the PCORI fees to apply to fiscal years 2020-2029. The PCORI fees are due by July 31 of the calendar year following the plan year to which the fee applies.
Preventive Care Services (Non-GF Plans Only)
Effective for plan years beginning on or after Sept. 23, 2010, non-GF health plans must cover specific preventive care services without cost-sharing requirements. The covered preventive care services include:
- Evidence-based items or services that have in effect a rating of A or B in the current recommendations of the United States Preventive Services Task Force;
- Immunizations for routine use in children, adolescents and adults that are currently recommended by the Centers for Disease Control and Prevention (CDC) and included on the CDC’s immunization schedules;
- For infants, children and adolescents, evidence-informed preventive care and screenings provided for in the Health Resources and Services Administration (HRSA) guidelines; and
- For women, evidence-informed preventive care and screening provided in guidelines supported by HRSA (for plan years beginning on or after Aug. 1, 2012).
The complete list of recommended preventive services that must be covered can be found at https://www.healthcare.gov/coverage/preventive-care-benefits/.
Dependent Coverage Up to Age 26
Effective for plan years beginning on or after Sept. 23, 2010, group health plans and health insurance issuers that provide dependent coverage of children must make coverage available for adult children up to age 26, regardless of the child’s student or marital status. There is no requirement to cover the child or spouse of a dependent child.
This requirement applies to GF and non-GF plans. However, prior to the 2014 plan year, GF plans were not required to cover adult children who were eligible for other employer-sponsored coverage, such as coverage through their own employer.
ACA also added a tax provision related to health insurance coverage for these adult children. Effective March 30, 2010, amounts spent on medical care for an eligible adult child can generally be excluded from taxable income. In addition, all states should now be in conformity with this federal tax law change.
Patient Protections (Non-GF Plans Only)
The ACA imposes three new requirements on group health plans and health insurance coverage that are referred to as “patient protections.” These patient protections relate to the choice of a health care professional and requirements relating to benefits for emergency services.
- Non-GF group health plans and health insurance issuers that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children).
- Non-GF group health plans and health insurance issuers that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.
- Non-GF group health plans and health insurance issuers that provide hospital emergency room benefits must provide those benefits without requiring prior authorization, and without regard to whether the provider is an in-network provider. Also, the plan or issuer may not impose requirements or limitations on out-of-network emergency services that are more restrictive than those applicable to in-network emergency services. Cost sharing requirements, such as copayments or coinsurance rates imposed for out-of-network emergency services, cannot exceed the cost-sharing requirements for in-network emergency services.
Effective for plan years beginning on or after Sept. 23, 2010, health plans and health insurance issuers are prohibited from imposing lifetime limits on the dollar value of essential health benefits.