2014 Affordable Care Act Compliance Checklist

[highlight type=”dark”]This Compliance Checklist is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.[/highlight]

The Affordable Care Act (ACA) was signed into law in March 2010 and installs a horde of health coverage reforms with effective dates stretched primarily over a period of four to five years. Many ACA reforms are already in effect for employers and their group health plans, but many of ACA’s key reforms will become effective in 2014.
Key ACA reforms that will affect employers in 2014 include health plan design changes, increased wellness program incentives, and a new transitional reinsurance fee. The employer “pay or play” mandate and accompanying additional reporting requirements previously scheduled for 2014 have been delayed for a 2015 implementation. In preparation for 2014 ACA reforms, employers should review upcoming requirements and ensure they have an action plan in place.


1. Confirm Grandfathered Plan Status
Applicable to: Grandfathered plans
Effective: Annual and ongoing
Description: A grandfathered plan is one that was in existence when healthcare reform was enacted on March 23, 2010. If changes are made to the plan that go beyond permitted guidelines, the plan will no longer be grandfathered.

Action Steps:
If you have a grandfathered plan:
„„Determine whether the plan will maintain its grandfathered status for the 2014 plan year (see checklist); and,
„„If you move to a non-grandfathered plan, confirm that the plan has all of the additional patient rights and benefits required by ACA including those effective prior to 2014. This includes, for example, coverage of preventive care without cost-sharing requirements.

2. No Annual Dollar Limit on Essential Health Benefits
Applicable to: All group health plans, including health reimbursement accounts (but not medical flexible spending accounts)
Effective: Plan years beginning on or after January 1, 2014
Description: Group health plans may no longer impose annual or lifetime dollar limits on essential health benefits. (Lifetime dollar limits were prohibited starting for plan years on or after September 23, 2010. Restrictions on annual limits have been allowed to be phased in over a three-year period.)

Action Steps:
Take the following steps:
„„Confirm that no annual limit will be placed on essential health benefits for the 2014 plan year and beyond
„„Consider converting existing dollar limits to visit or occurrence limits
„„Create required plan amendments

Tips:
„„Health Reimbursement Accounts may violate this requirement unless the HRA is integrated with other group health plan coverage that satisfies this rule. An employer-sponsored HRA will not be treated as integrated if it provides benefits to employees who do not enroll in the other coverage. Amounts credited to an HRA before January 1, 2014 are not subject to these rules. Employers with HRA concerns are encouraged to consult with their HRA administrator or legal counsel for additional guidance.
„„Annual limitation exclusions are specific to essential health benefits. However, as generally any medical service could be designated as either “hospitalization” or “ambulatory patient services” (two of the ten “essential health benefits”), one recommendation is that self-insured clients avoid all annual or lifetime maximum benefits, and reduce plan exposure if desired through allowed plan exclusions and visit-type limits.

3. No Pre-Existing Condition Exclusions
Applicable to: All group health plans and non-grandfathered individual health plans
Effective: Plan years beginning on or after January 1, 2014
Description: Group health plans may not impose any pre-existing conditions exclusions (PCEs) regardless of age. PCEs for enrollees under 19 already were eliminated for plan years on or after September 23, 2010.
Action Steps:
Confirm that PCEs will not be imposed on any enrollees for the 2014 plan year and beyond, and create Plan amendment if needed.

4. Applicable to: All group health plans
Effective: Plan years beginning on or after January 1, 2014
Description: Group health plans now will have to extend eligibility to all children until age 26, even if they are eligible for other employer-sponsored coverage. Previously, grandfathered plans were not required to cover adult children under age 26 if they were eligible for other employer-sponsored group health coverage.

Action Steps:
If your plan is grandfathered, confirm that it will make coverage available to adult children up to age 26, regardless of whether they are eligible for other employer-sponsored group health coverage and create plan amendment if needed.

5. Eliminate Excessive Waiting Periods
Applicable to: All group health plans
Effective: Plan years beginning on or after January 1, 2014
Description: Plans no longer will be allowed to impose waiting periods for eligibility which are longer than 90 days. An employee also must be allowed to enter the plan by the 91st day, after satisfying that eligibility requirement.

Action Steps:
If your plan has a waiting period for coverage, confirm that the waiting period is 90 days or less for the 2014 plan year and beyond, and create a plan amendment if needed.

Tips:
90 days is a strict limit. For instance, eligibility may not be determined as the first of the month following 90 days.

6. Coverage for Clinical Trial Participants
Applicable to: Non-grandfathered group health plans
Effective: Plan years beginning on or after January 1, 2014
Description: Non-grandfathered group health plans must cover certain clinical trial costs, may not limit, deny, or require additional conditions on coverage of routine patient costs for services and items furnished in connection with the trial, and may not discriminate against individuals who participate in qualified clinical trials.

Action Steps:
If applicable, remove any exclusion or limitation for required clinical trials from the plan document. Also, evaluate stop-loss for possible exclusions for required clinical trial coverage.

7.Limits on Cost-Sharing
Applicable to: Non-grandfathered health plans
Effective: Plan years beginning on or after January 1, 2014
Description: Non-grandfathered health plans are subject to limits on cost-sharing or out-of-pocket costs, currently defined as the limits applicable to coverage for HSAs. For 2014, these limits are $6,350 for individual coverage, $12,700 for family coverage, and may be applied to medical and pharmacy benefits separately. These maximum limits apply to all in-network claims and include member deductibles, coinsurance and copays. Beginning January 1, 2015, out-of-pocket expenses for medical and pharmacy benefits must apply to a combined maximum out-of-pocket limit.

Action Steps:
If you are a non-grandfathered plan:
„„Review existing plan out-of-pocket limitations and revise if not in compliance;
„„Discuss compliance requirements on prescription drugs with pharmacy benefit manager (PBM); and,
„„Create plan amendment if needed.

Tips:
Limits are indexed to inflation and increased in increments rounded to the nearest $50. As such, these may increase annually. Plan designs that are intended to remain at the highest possible limits may require annual amendments.

8. Non-Discrimination Against Healthcare Providers
Applicable to: Non-grandfathered health plans
Effective: Plan years beginning on or after January 1, 2014
Description: Plans cannot discriminate with respect to plan participation or coverage against any class of healthcare provider acting within the scope of that provider’s license or certification. Plans can still require a provider to abide by its terms and conditions and establish varying rates of reimbursement based on quality or performance matters.

Action Steps:
If needed, eliminate any discriminatory plan language and/or operational requirements of the plan as it relates to this rule.

9. Wellness Program Incentives
Applicable to: All employers
Effective: Plan years beginning on or after January 1, 2014
Description: For 2014 plan years, the maximum reward for health-contingent wellness programs increases from 20 percent to 30 percent, this amount may be increased to a maximum reward of 50 percent for wellness programs designed to prevent or reduce tobacco use.

Action Steps:
For health contingent wellness programs, confirm programs comply with current law and consider increasing 2014 rewards.

10. Other 2014 Reforms Affecting The Insured, Small Group and/or Individual Markets

Comprehensive Benefits Package
Starting in 2014, insured plans in the individual and small group market must cover each of the essential benefits categories listed under ACA. This requirement does not apply to grandfathered plans, self-funded plans or insured plans in the large group market.

Deductible Limits
For plan years beginning on or after January 1, 2014, annual limitation on plan deductibles is $2,000 single/$4,000 family. This requirement does not apply to grandfathered plans, self-funded plans, or insured plans in the large group market.

Essential Health Benefits
For plan years beginning on or after January 1, 2014, insured plans in the individual and small group market must cover, without annual or lifetime limits, each of the essential benefits categories listed under the ACA. This requirement does not apply to grandfathered plans, self-funded plans, or insured plans in the large group market.

Non-Discrimination Based on Health Status
For plan years beginning on or after January 1, 2014, non-discrimination requirements applicable to group health plans are now applicable to health insurers offering individual coverage.

Fair Health Insurance Premiums
For plan years beginning on or after January 1, 2014, insurers may only vary premium rates with respect to a plan based on coverage category, rating area, age, and tobacco use.

11. Transitional Reinsurance Fees
Applicable to: Health insurance issuers and self-funded group health plans
Effective: 2014 calendar year
Details: Health insurance issuers and self-funded group health plans must pay fees to a transitional reinsurance program for the first three years of health insurance exchange operation (2014-2016). The fees will be used to help stabilize premiums for coverage in the individual market. Fully insured plan sponsors do not have to pay the fee directly. The U.S. Department of Health and Human Services has provided an estimation of $63 per covered member for 2014.
Certain types of coverage are excluded from the reinsurance fees, including HRAs that are integrated with major medical coverage, HSAs, health FSAs and coverage that consists solely of excepted benefits under HIPAA (such as stand-alone vision and dental coverage).

2014 Requirements Now Postponed Until 2015

12. New Definition of Full-Time Employee Equivalents Related to Health Plans
Applicable to: All employers
Effective: January 1, 2015 (possibly the first plan year thereafter; unsure until further guidance is issued)
Description: In the application of shared responsibility rules and related tax-penalties, the definition of a full-time employee as it relates to healthcare coverage is defined as a person who works “on average” 30 hours per week.
Action Steps: Evaluate plan language related to full-time coverage eligibility and create plan amendment if needed.
Tip:
ACA “FTE” does not impact:

  • „Overtime
  • „„Work rules
  • „„Other collective bargaining definitions
  • „„Other benefits which are not group health plans

Reporting of Health Insurance Coverage
Applicable to: Insurers, employers that self-insure and large employers
Effective: Coverage provided on or after January 1, 2015 (but first forms will not be filed until 2016)
Details: Entities who provide “minimum essential coverage” during a calendar year must provide specific information to the IRS. In addition, large employers are required to report to the IRS and full-time employees whether they offer full-time employees and their dependents the opportunity to enroll in minimum essential coverage.

Employer “Shared Responsibility” Mandate
Applicable to: Employers with more than 50 full-time employees (see new full-time employee definition below)
Effective: January 1, 2015
Description: Beginning in 2015, employers with more than 50 full-time employees may be subject to a penalty if they do not offer affordable Minimum Essential Coverage (MEC) that provides minimum value.
The penalty is calculated as follows:

  • Employers Not Offering Coverage: If an employer does not offer MEC and one or more full-time employees receive a premium credit or cost-sharing subsidy through the Exchange, the penalty is $2,000 per year per full-time worker, excluding the first 30 full-time workers.
  • „„Employers Offering Coverage: If an employer offers MEC and one or more full-time employees receive a premium credit or cost-sharing subsidy through the Exchange, the penalty is $3,000 per employee (excluding the first 30 full-time employees) who receives a premium credit or cost-sharing subsidy.

An employer-sponsored plan that satisfies the ACA’s reform requirements must:

  • „„Be affordable to the employee (i.e., required share of the employee’s premium for self-only coverage exceeds 9.5 percent of his or her W-2, Box 1 income); and,
  • „„Provide minimum value (i.e., the plan must pay more than 60 percent of medical costs across a typical population).

Action Steps:
If you are a large employer, take the following additional steps:
„„Employers will want to consider whether they need to make changes to the cost and quality of the coverage offered to avoid penalties that will apply if that coverage is considered unaffordable or low in value;
„„Determine whether health coverage is offered to substantially all (or 95 percent of) full-time employees and dependents;
„„Assess the affordability of the health coverage under one of the IRS’ affordability safe harbors (Form W-2, rate of pay or federal poverty line);
„„Review whether the plan provides minimum value by using one of the three available methods (minimum value calculator, safe harbor checklists or actuarial certification); and
„„If you have a fiscal year plan, be on the lookout for guidance regarding when fiscal year plans must comply with the rule.

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This article was originally published by AmWINS Group, Inc., a leading wholesale distributor of specialty insurance products and services. AmWINS publishes The Edge, a monthly email with informative and timely articles for P&C and benefits insurance agents and brokers. To sign up to receive The Edge or for more information about AmWINS, visit amwins.com.
Legal Disclaimer: Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
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