A Comprehensive Breakdown of the Affordable Care Act
On March 23, 2010, former President Barack Obama signed the Patient Protection and Affordable Care Act (ACA or more commonly Obamacare) into law. The legislation revolutionized the health insurance industry, establishing new rules on how medical coverage could be provided and obtained.
While much of the focus of this law has been placed on the impact to individual consumers and employees, the Affordable Care Act also had a number of ramifications for American businesses and how they provide coverage for employees.
Although it’s future is uncertain with the election of President Donald Trump, the Affordable Care Act is currently the law of the land and establishes a number of regulations regarding how your business should provide healthcare coverage to your employees.
Employer Requirements for the ACA
Mandated Health Insurance
One of the major, business-focused provisions of the Affordable Care Act was the requirement of all companies to provide health coverage to their employees that was “affordable” and that provided a “minimum value.” If an organization fails to meet these criteria, it can expect to owe a “shared responsibility payment” to the Internal Revenue Service.
According to current federal policy, companies with fewer than 50 full-time employees will not be forced to pay the shared responsibility payment.
Further, you must offer this medical coverage to new employees within 90 days of their hiring date.
Increased Information Sharing
Employers must also routinely provide staff with a benefits summary that clearly explains what the offered health plan covers and corresponding costs. The U.S. Department of Labor provides a number of sample forms and more detailed instructions that can be used to better identify the level of information that must be conveyed to employees.
In addition, most employers are required to report on the health coverage of their employees to the Internal Revenue Service. Additional details regarding the frequency, information, and requirements of the reporting can be found here.
The Affordable Care Act also established a number of new guidelines to programs that intersected with health insurance plans. These changes affected:
To encourage increased employee health, and cut down on insurance and care costs, a number of businesses have introduced workplace wellness programs designed to reward staff for positive life choices, such as reimbursing gym memberships or offering incentives to reduce tobacco use.
The ACA increased the reward limits for wellness programs contingent upon an employee’s health from 20 percent to 30 percent of the total cost of health coverage. And this reward can increase to 50 percent of coverage costs if the program is designed to prevent or reduce tobacco use.
Flexible Spending Accounts (FSAs)
The Affordable Care Act limits employee contributions to a flexible spending account to no more than $2,600 in a single year. While unused funds were previously lost if not spent during the year, employers now have the option of either allowing employees to carry over up to $500 from the previous year or offer a two and a half month grace period to use the funds.
Per current provisions, health insurance companies must use at least 80 percent of their collected premiums on medical care. For those insurers that do not meet this requirement in a given year, they are legally mandated to issue medical loss ratio rebates to their policyholders, which are routinely employers that offer group health plans.
Should your business receive one of these rebates, there a number of rules regarding appropriate reimbursement policies.
Not only did the Affordable Care Act help extend medical coverage to the previously uninsured, it fundamentally altered how Americans access the insurance marketplace and the role that employers play in that exchange.
And while significant changes to the ACA are expected, your business must continue to comply with its various mandates until such changes are signed into law.