Health Care Reform – What You Need To Know For 2014

Kelley Drye Client Advisory

While the implementation of the employer mandate and reporting requirements of the Affordable Care Act (“ACA”) – originally scheduled to become effective on January 1, 2014 – have been delayed to 2015, a number of provisions were not affected by the delay and are still scheduled to take effect in 2014.

Supplementing our previous advisories, below is a summary of important ACA deadlines and requirements employers should be mindful of as of January 1, 2014 and a reminder of some of the already effective provisions employers should be complying with.[1]

Effective for All Plan Years Beginning On or After January 1, 2014

  • No Exclusion of Adult Children.  Grandfathered plans will no longer be permitted to exclude adult children over 18 but under 26, even if they have access to other employer-sponsored health care coverage.
  • Pre-existing Conditions.  Group health plans will no longer be able to deny coverage to any individuals on the basis of pre-existing conditions.
  • Waiting Periods Limited.  Group health plans may not apply waiting periods that exceed 90 days to newly eligible employees.
  • Updated COBRA Notice.  Employers need to update COBRA Election Notices to include notice of the new health insurance exchanges/marketplaces (“Marketplace”).  The Department of Labor has issued an updated model COBRA Election Notice to facilitate employers’ compliance with this notice requirement.
  • New Wellness Incentive Rules.  The Health Insurance Portability and Accountability Act (“HIPAA”) generally prohibits group health plans and insurers from discriminating against individual participants and beneficiaries with respect to eligibility, benefits, or premiums based on a health factor.  However, HIPAA provides an exception to this general prohibition that permits group health plans to offer wellness programs providing rewards if the incentive does not exceed 20% of the cost of individual health care coverage.  The ACA modified the HIPAA nondiscrimination and wellness program provisions, such that employers may now offer covered wellness program incentives of up to 30% of the total cost of coverage and up to 50% for programs designed to prevent or reduce tobacco use.
  • Transitional Reinsurance Fees.  Self-insured group health plans and health insurance issuers must contribute to the transitional Reinsurance Program, which will be in place from 2014 to 2016 and is intended to help stabilize premiums for coverage of high risk individuals in the individual market. The amount of the transitional reinsurance fee for 2014 will be $63 annually (or $5.25 per month) per covered life.
  • Annual Dollar Limits.  Group health plans may not impose annual dollar limits on any coverage of essential health benefits.  Essential health benefits include ambulatory care, emergency services, hospitalization, maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including dental and vision care.
  • Coverage of Clinical Trials.  Non-grandfathered group health plans and insurers are now required to provide coverage to qualified individuals participating in approved clinical trials and are prohibited from denying coverage or otherwise discriminating as to coverage on the basis of participation in a clinical trial.

Requirements Affecting Small Market Group Health Plans

  • Essential Health Benefits.  Non-grandfathered health plans in the individual and small group market must now provide coverage for essential health benefits beginning January 1, 2014.  Small groups for this purpose include employers with up to 100 employees, but for plan years starting prior to 2016, states may apply a limit as low as 50 employees.
  • Annual Deductible Maximum.  For plan years beginning on or after January 1, 2014, non-grandfathered health plans in the small group market may not apply annual deductibles that exceed $2,000 for individuals and $4,000 for families.

Reminders of Ongoing Requirements

  • Marketplace Notices.  With open enrollment in the Marketplace beginning in October 2013 for coverage beginning as early as January 1, 2014, employers should have provided all current employees with Marketplace Notices by October 1, 2013.  Going forward, employers must provide all new hires with the Marketplace Notice within 14 days of their start dates.
  • W-2 Informational Reporting.  Employers required to file 250 or more W-2 Forms are already required to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2.  Employers filing fewer than 250 W-2s, multi-employer plans, health reimbursement arrangements, dental and visions plans, and certain plans not subject to COBRA continuation coverage requirements, are still not required to comply with this informational reporting requirement.
  • Summary of Benefits and Coverage.  Plan sponsors must continue to provide participants with a Summary of Benefits and Coverage during the open enrollment period each plan year.
  • Preventive Health Services.  Since the start of plan years beginning on or after August 1, 2012, non-grandfathered group health plans and health care insurers have been required to cover women’s preventive health services, including mammograms, cervical cancer screenings, pre-natal care, contraceptives coverage and other women’s preventive services, without cost-sharing.  Certain religious organizations may be exempt from providing contraception coverage if specified requirements are met.
  • PCORI Fees.  Employer sponsors of certain self-insured health plans must continue to pay required fees to fund the Patient-Centered Outcomes Research Institute (this fee is commonly referred to as the PCORI fee”).

Kelley Drye will continue to monitor the health care reform climate and keep you updated on any new developments.  In the meantime, please contact our Employee Benefits group for any questions or compliance assistance with any ACA requirements..

[1] The individual mandate, requiring individuals to have health insurance or else pay a penalty, goes into effect January 1, 2014.  The 2014 penalty is the greater of a flat dollar penalty of $95 per adult/$47.50 per child (up to $285 for a family), or an amount equal to 1% of family income.