ACA Compliance Checkup (2014 Strategies Deployed)

As the 2014 open enrollment season comes to a close (bringing an overwhelming sense of relief and joy to HR professionals and Benefits Brokers/Consultants throughout the land!), I thought I’d review the major Affordable Care Act (ACA) related compliance issues addressed in preparation for the new (benefits) year.
  1. Early plan renewal – 12/1/13: Since many of the ACA related changes affect plans “on their first plan anniversary date on or after January 1, 2014”, several health insurers offered (and many employers accepted) to change plan anniversary dates to 12/1/13.  Doing so delays many ACA provisions (e.g., community rating, essential health benefits, guaranteed issue, removal of pre-existing condition limits, out of pocket limits, health insurance tax, etc.) until 12/1/14.
  2. Premium cost sharing changes: As employers face increasing cost pressures related to ACA mandated changes, the methods historically used to cost share premiums with employees demands a review.  The percentage allocation for employee coverage and dependent coverage (or the flat dollar amount) may need to change.  IMPORTANT: Employers seeking to maintain ACA grandfather status need to keep in mind that changes that exceed the permissible percentage could jeopardize grandfather status.
  3. Plan related out of pocket changes: The implementation of numerous ACA provisions affecting individual and fully insured small group plans has resulted in insurers increasing plan related out of pocket levels. In many cases, the combined out of pocket maximum (i.e., copays + deductible + coinsurance) is increasing to the 2014 ACA cap of $6,350 (individual)/$12,700 (family).  Such a dramatic shift in cost to covered plan members deserves thorough communication and engagement, if not assistance in helping them face these increased costs, which leads to the next item…
  4. Establish Spending Accounts/Increase Employer Contribution Amounts: In order to help employees face higher out of pocket limits, employers are establishing spending accounts (e.g., HSA, HRA, FSA), and/or increasing the amount of employer level contribution to existing accounts.  Remember, HSAs are the only tax favored spending account that requires a specific type of health plan to accompany it (i.e., an IRS compliant, qualified high deductible health plan).  Both HRAs and FSAs can accompany any type of Group health plan design.  IMPORTANT: recent IRS guidance affecting so called premium reimbursement arrangements (PRAs) specify that HRAs and FSAs cannot accompany Individual health plans.
    See previous blog post addressing this guidance – http://sstevenshealthcare.blogspot.com/2013/12/health-insurance-and-tax-code.html
  5. Eligibility changes: Higher costs and the approaching employer mandate (in 2015) have resulted in a need to review plan eligibility.  In recent years, employers have increasingly decided to eliminate retirees from eligibility.  The ACA is causing employers to review eligibility of part time employees, spouses, and the definition of full time.  Employers are modifying spousal coverage eligibility, requiring spouses that have coverage available through another employer to pay more for coverage.  In extreme cases, employers are not allowing spouses on their plan at all, or limiting spousal eligibility to only those spouses that don’t have employer coverage available to them.
  6. Funding change (fully insured to self funded): Because several of the ACA related provisions affecting plans in 2014 (e.g., community rating, minimum loss ratio, 10 essential health benefits, health insurance tax) do NOT apply to partially self funded plans, employers are exploring, if not implementing, this change.  A previous blog post addressed the specific ACA provisions that do not apply to partially self funded plans.  Click here to access this post – http://sstevenshealthcare.blogspot.com/2013/08/aca-compliance-understanding.html
  7. Defined Contribution: The recent formation of so called “private health insurance exchanges/marketplaces” has resulted in a shift away from the traditional defined benefit (DB) approach to defined contribution (DC).  Much in the same fashion that employers transitioned their retirement plan constructs away from DB to DC in the 80’s, resulting in an explosion of 401(k) plans, a similar trend is emerging in the health insurance space.  Many recognizable large employers have announced a shift to DC for 2014 (e.g., Walgreens, Sears, Darden Restaurants).
  8. Narrow PPO networks: In what may seem like history repeating itself for those of us who have been around the healthcare/health insurance world dating back to the 1980’s, PPO networks are shrinking!  And the emergence of the ACA’s so called Accountable Care Organizations (ACO), which place a major focus on patient healthcare quality, outcomes and cost, could lead to an increase in the formation of narrow networks.  In short, employees seeking the lowest out of pocket costs on their health plan will need to receive care from contracted providers that are in the lowest (or best) tier.  And employers seeking to reduce health insurance costs, especially those with partially self funded plans, will consider implementing lower cost, narrower provider networks.
  9. Calculate “employer mandate” penalty and plan accordingly:  With the approaching reemergence of the ACA’s employer shared responsibility provision in 2015, it will become increasingly important to understand and calculate so called “pay or play” penalty exposure, and plan accordingly for 2015.  Such exposure could also influence strategies addressed in this post (Nos. 2, 5, and 7).  A previous blog post thoroughly reviewed the ACA’s employer mandate/shared responsibility provision.  Click here to access this post – http://sstevenshealthcare.blogspot.com/2013/06/understanding-employer-shared.html
    Another strategy worth considering in the interest of penalty avoidance is the design and implementation of so called “bare bones” plans.  Such a plan provides ACA “minimum essential coverage” along with a limited medical plan. This strategy is particularly beneficial to certain industries that employ a large number of employees that work at least 30 hours per week, and/or a large number of part-time employees (e.g., restaurants, nursing homes, hotel chains, healthcare organizations, etc.).  A previous blog post addressed this concept/strategy –   http://sstevenshealthcare.blogspot.com/2013/08/aca-compliance-strategy-bare-bones-plan.html
  10. Fees/Taxes/Deductions: A couple of new, ACA related taxes/fees apply in 2014 – the health insurance tax (or HIT), and the transitional reinsurance fee. The former is calculated at approximately 2.5% of annual premium, and the later, $63 per covered member, per year.  Also, the Patient Centered Outcomes Research Institute fee (or PCORI) increases from $1 to $2 per covered plan member, per year.  In addition, higher wage earners continue to face an increase in the amount of their Medicare payroll tax.  And finally, affected employers need to include the cost of health insurance on employees’ W-2 forms.

    11. Disclosure Notices/SBC’s:  There are a number of ACA required disclosure notices and of course, the Summary of Benefits and Coverage (SBC), that may need to be reviewed, revised, and re-distributed to employees.  In particular, if a plan continues to maintain grandfather status, the employer must provide a notice to all eligible plan members indicating this plan status.  Also, if there are any changes to the benefit design of any offered plan option, a new SBC will need to be created and distributed to all plan eligible employees.  Keep in mind that traditional benefit plan designs that include copays will need to start accumulating copays toward the plan out of pocket maximum in 2014.  Such a change in and of itself will require a new SBC.

This list of compliance considerations and strategies is certainly not intended to be all inclusive, as there are potentially several more ideas worthy of consideration.  I encourage readers and stakeholders to collaborate, research, and review creative ways to balance ACA compliance with benefits offerings and costs.

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