Generally, the Patient Protection and Affordable Care Act (ACA) seeks to increase access to healthcare coverage through an expansion of public programs such as Medicaid and through changes to rules governing private health insurance for employers, employees and individuals. This section is an overview of the ACA. In 2018, Nebraska voters approved a ballot initiative to expand Medicaid coverage in the state. In 2019, an additional 90,000 Nebraskans became eligible for Medicaid coverage.
Under the ACA, some employers are required to offer health coverage meeting certain minimum standards or the employers will face fines. In general, employers subject to the mandate must either pay a fine (employer shared responsibility payment) or offer affordable healthcare coverage meeting the minimum essential coverage provisions of the law (minimum value) to 95% of their full-time employees (FTEs). Whether employers are covered by the mandate depends on the number of FTEs. The employer mandate went into effect for all employers with 50 or more full-time and/or FTE employees on January 1, 2016.
Employer-sponsored health insurance coverage is the most common source of private insurance coverage for individuals and families, so employers will need to continue to track the ACA and proposed changes. The complexity of these laws is daunting, so many employers will need to consult legal counsel and benefits consultants to ensure compliance with complex questions. Employers should also check:
The 21st Century Cures Act permits a small employer, which does not offer its employees a group health plan, to reimburse its employees for medical expenses as part of a qualified small employer health reimbursement arrangement (QSEHRA). A small employer is defined as an employer with fewer than 50 employees. These programs are separate from the ACA, which means that even if the ACA were repealed, this option would likely remain available for small employers. There are many requirements for employers to issue these reimbursements and exclude them from the employee’s gross income, such as:
Some of the ACA’s key requirements for employer provided health benefit insurance coverages include:
Spouses do not count as dependents, so coverage does not have to be offered to spouses.
The ACA provided one of the largest expansions of mental health and substance use disorder coverage in a generation, by requiring that most individual and small employer health insurance plans cover mental health and substance use disorder services. Also required are rehabilitative and habilitative services that can help support people with behavioral health challenges.
Under the ACA, health plans are required to provide coverage for certain preventative services, including certain immunizations, screenings for children and well-woman care. Plans may impose no cost-sharing provisions (copayments or coinsurance) for these services. Plans can only vary premium rates by geographic area, age and tobacco use. Employers should be sure that they have contracted with a reputable insurance company to follow these rules.
An affordable insurance exchange is a competitive health insurance marketplace where individuals and small businesses can shop for and buy affordable private health insurance. Currently, tax credits and subsidies are available for many individuals, families and businesses to help them purchase coverage in the exchange. The ACA provides incentives for states to establish and operate two types of exchanges:
American health benefit exchanges (individual exchanges), which are to help people purchase individual health insurance.
Small business health option program exchanges (SHOP exchanges), which help qualified employers purchase group health insurance coverage.
Nebraska elected to not develop its own healthcare insurance exchanges; and instead it is relying on a federal exchange, which is a consolidated exchange created for both individuals and small employers. It can be found at:
This exchange is referred to as the marketplace or SHOP exchange. It sells only “qualified health plans,” which are health insurance plans that cover essential health benefits and that meet specific cost-sharing rules and satisfy actuarial value requirements.
The SHOP exchange allows small business employers to create insurance pools to buy insurance, thus making insurance more affordable for small businesses. It provides a way for small employers to offer their employees a choice of health plans like those offered by large employers and gives small employers and their employees greater bargaining power, a bigger risk pool and choices among affordable health plans. In such an exchange, employers can choose the range of plans they want to offer and decide on a contribution toward the coverage; employees then select the plan that best meets their needs and resources. Employers can offer plans from several insurance companies but will receive a single bill and write a single check, reducing administrative expenses.
Enrollment in the SHOP portion of the exchange is offered anytime during the year. For more information, visit:
or call the SHOP call center Monday through Friday, 9 a.m. to 7 p.m. EST at:
An employer can also use the SHOP FTE calculator to determine if it meets the size requirements for SHOP.
All employers are required to comply with the Affordable Care Act (ACA). The obligations vary by the number of employees and what those employees earn. Generally, an employer with 50 or more FTEs or equivalents will be considered a “large employer,” or an “applicable large employer” (ALE) and must offer qualifying affordable health insurance coverage or pay a fine. Employers with 49 or fewer employees are considered a “small employer” and may offer coverage through the SHOP exchange. Small employers with fewer than 25 FTEs may also qualify for tax credits.
In determining how many FTEs to count, employers should know that an FTE is an individual employed on average at least 30 hours of per week or 130 hours per month. Service hours are counted, and these include not only hours when work is performed but also hours for which the employee is paid and/or entitled to payment when no hours are worked (such as vacation and paid leave). Employers can hit the applicable FTE threshold with a combination of full- and part-time employees that is equivalent to the number of FTEs triggering the various rules. New hires expected to meet these hours should also be included. When determining hours and wages, sole proprietors, partners in a partnership, shareholders owning more than 2% of an S-corporation and any owners of more than 5% of other businesses are disregarded, as are their family members. Special rules apply for foreign based employees, as well.
Employers should also be aware that certain affiliated employers with common ownership or part of a controlled group must aggregate the employees to determine the workforce size. Because of the complexity of the regulations and potential consequences, employers are strongly encouraged to consult legal help to determine if the facts of the affiliation or common ownership require aggregation.
Although all employers are subject to the ACA, approximately 96% of employers are small businesses with fewer than 50 FTE workers and are exempt from the employer responsibility (mandate) provisions.
Employers with fewer than 24 FTEs or equivalents are not fined for failing to offer health insurance. Such employers are eligible to purchase qualifying insurance through the SHOP exchange; but it is not mandatory that they do so. There is no employer shared responsibility payment at this level, but employers of this size that offer health insurance coverage must offer plans that meet certain benefit and actuarial standards, or else the employees may still be subject to a penalty for failing to meet their individual duty to get adequate insurance coverage.
For those companies that do offer qualifying insurance coverage, small employer tax credits may be available to help subsidize health coverage. These credits are offered for small employers with fewer than 25 FTEs that offer qualifying health coverage, but only if the employees earn an average annual salary of $54,000 or less (indexed for inflation), and only if the employer provides at least 50% of the health insurance premium cost at the single “employee only” rate. The specifics of this credit are:
Employers with 25 to 49 FTEs are not subject to the employer shared responsibility payment and so are not fined or penalized for failing to offer health insurance. Employers of this size that do offer health insurance coverage must offer plans that meet certain benefit and actuarial standards, or else the employees may be subject to a penalty for failing to meet their individual duty to get adequate insurance coverage. Such employers are eligible to purchase qualifying insurance through the SHOP exchange. No tax credit is available. Employers should monitor their FTE and equivalent numbers closely because having 50 or more without realizing it can result in high penalties for the employer.
A qualifying small employer may elect for their employees to be eligible for a health plan offered through a SHOP exchange and may permit employees to pay for the coverage on a pre-tax basis through a simple cafeteria plan. A qualifying small employer is one that employs 100 or fewer employees on average during the prior calendar year.
As of January 1, 2016, an ALE (an employer with 50 or more full-time employees or equivalents) must offer quality, affordable health insurance to at least 95% of its full-time employees or pay the excise tax penalty described previously. Employers with 100 or more FTEs or equivalents cannot currently use the SHOP exchanges.
Note: Part-time employees are taken into account by converting their hours into full-time equivalents to calculate whether an employer has 50 or more employees; a full-time equivalent is calculated by taking the total number of hours during a month and dividing by 120.
An ALE is subject to the employer shared responsibility payment and must offer coverage or pay an excise tax (called “pay or play”) if even one full-time employee gets a premium assistance tax credit or cost-sharing subsidy from the federal government to purchase health insurance on their own through an exchange.
That tax began at $193.33 per month (1/12th of $ 2,320) for each full-time employee but not counting the first 30 full-time employees. The amount of the tax is indexed for inflation and is $214.17 for 2020 (1/12th of $2,570).
Example - An employer with 100 employees, one of whom qualifies for a subsidy through an exchange, will pay a fine of $14,991.90 (calculated as 100 - 30 = 70; 70 x 214.17 per month = $14,991.90) per month for not providing adequate coverage.
Note: The calculation of a full-time employee for this penalty purpose does not include the part-time employees counted as full-time equivalents.
If there are no employees certified to the employer as having purchased at an exchange with a premium tax credit or cost-sharing subsidy, then there is no penalty. In other words, if no full-time employees have low enough income to qualify for a subsidy when purchasing a health plan in the SHOP exchange, the employer will not pay a “pay-or-play” penalty.
If an ALE, which is those employers with 50 or more FTEs, does offer coverage, the employer can still be subject to an excise tax, if at least one employee receives a premium assistance tax credit subsidy to buy insurance on a SHOP exchange, because the employer provided insurance does not meet the requirements of minimal essential coverage or the coverage is “unaffordable.” “Unaffordable” coverage means that the employee contribution exceeds 9.78% of the employee’s household income or that the coverage consists of a plan under which the plan’s share of benefits is less than 60%.
In that case, the excise tax for 2020 will be the lesser of $321.67 per month ($3,860/year) for each such employee receiving the credit or $214.16 per month (1/12th of $2,570/year) for each full-time employee (but not counting the first 30 full-time employees). Employers will not be taxed in relation to a “qualified employee” if they:
Employers with 50 or more FTEs are also subject to the direct Internal Revenue Service (IRS) reporting requirements, discussed herein.
The Affordable Care Act (ACA) imposes significant information reporting requirements, requiring certain employers to provide information to the IRS about coverage they offer (or do not offer) to employees and provide statements to their full-time employees about the same. The IRS uses the information provided on the information return to administer the employer shared responsibility provisions, and both the IRS and employees use the information to determine whether the employee is eligible for a premium tax credit. The reporting requirements are complex, and employers are encouraged to consult with their attorneys or tax advisors prior to attempting compliance if they have not already done so.
Insurance companies will do the reporting for small employers (fewer than 50 FTEs), unless the employer is self-insured, in which case such employers should consult their attorney for advice on filing. For small employers where the filing is done by the insurance company, the filing information will include the name, address and Social Security number (or birth date) of employees and family members with coverage under the plan.
Direct reporting requirements to the IRS are imposed on ALEs that are subject to the employer shared responsibility provisions of the ACA and small self-insured employers. An ALE is an employer that employed an average of at least 50 full-time employees on business days during the preceding calendar year. A full-time employee generally includes any employee who was employed on average at least 30 hours per week and any full-time equivalents.
Example - 40 full-time employees employed 30 or more hours per week on average plus 20 employees employed 15 hours per week on average are equivalent to 50 full-time employees.
ALE reporting also applies if smaller employers are members of a controlled or affiliated service group (common owners providing services for each other or working together to provide services to others) with at least 50 FTEs.
ALEs file reports on each employee participating in the employer sponsored healthcare plan using IRS Form 1095-C, whether or not the employee is full or part time. Also, the form must be filed for all other full-time employees not participating in the health insurance plan offered by the employer. Form 1095-C is only not prepared for part-time employees who are not in the plan. The information sent to the IRS on each such employee (Form 1095-C) includes:
The employer must also provide each employee the information given to the IRS regarding that particular employee. The information sent to the IRS on the employer (transmittal filing) must include:
The information reporting system is similar to W-2 reporting, since an information return is done for each employee and a single transmittal filing form for the employer. Electronic filing is required for employers filing 250 returns or more. Employers must file these returns annually by January 31. Therefore, employers must have filed these forms for the 2019 calendar year by January 31, 2020. A copy of the form filed for each employee (or a substitute statement) must be given to each employee by January 31 of each year. Electronic delivery with employee consent is allowed, but it is recommended that electronic receipt be requested.
Employers are subject to penalties of up to $550 per return for failure to file or deliver copies to employees.
The ACA requires all employers to report the cost of coverage under an employer sponsored group health plan to its employees using the W-2 form. Reporting the cost of healthcare coverage does not mean the coverage is taxable. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their healthcare coverage.
Employers that provide “applicable employer sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.
The value of the healthcare coverage will be reported in Box 12 of the Form W-2, with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. An employer is not required to issue a Form W-2 solely to report the value of the healthcare coverage for retirees, or current or former employees to whom the employer would not otherwise provide a Form W-2. For guidance on the reporting requirements and what must be reported employers should review further information and notices available on the website:
The Fair Labor Standards Act (FLSA) has also been amended to prohibit employers from taking adverse action against any employee because the employee:
There are no requirements to cover part-time employees. However, if a health insurance plan provides coverage for part-time employees the expanded coverage requirements will apply, including those pertaining to coverage of adult children to age 26, limiting preexisting condition exclusions and lifetime and annual dollar benefit maximums.
The law makes a distinction regarding employees who must be offered insurance in companies with 50 employees or more. Only employers with more than 50 “full-time” employees (or equivalents) must offer health insurance to its “full-time” employees under the pay-or-play mandate provisions. Hours of service of part timers are counted to calculate the more than 50 full-time employee status of an employer, but to be an employee who must be offered coverage, the employee’s full-time status is determined monthly and requires averaging more than 30 or more hours per week during the month.
The automatic enrollment requirement for employers with 200 employees or more does not apply to part-time employees.
Any insurance policy in place before the Affordable Care Act (ACA) was signed into law on March 23, 2010, has “grandfather status.” Plans can lose their grandfather status if they change certain benefits. If an employer has a grandfathered plan and wants to keep it, it can do so, but only if it meets certain benefits requirements, which must be changed to conform to new requirements in the ACA. These changes include:
Cost-sharing for preventative services (co-pays) will be allowed to continue, as will annual limits on coverage.
Employers wishing to continue plans in grandfather status will need to fully assess the changes required and whether it will make sense to do so. Notably, market forces will make this a reasonable option only for the largest employers that typically have plans that already meet these criteria. Small employers and those typically purchasing commercial plans from year to year will likely find premium increases too dramatic without access to a competitive market.
Cafeteria plans must provide that an employee’s annual salary reduction contributions to a health flexible spending arrangements (FSA) may not exceed $2,750 for plan years beginning on or after January 1, 2020. (This cap is indexed for inflation.)
Under the ACA, the cost of an over-the-counter medicine or drugs cannot be reimbursed from FSAs or health reimbursement arrangements (HRAs) unless a prescription is obtained. The ACA does not prohibit reimbursement for insulin, even if purchased without a prescription or other healthcare expenses such as medical devices, eyeglasses, contact lenses, co-pays and deductibles.
Distributions from an HSA or Archer MSA must be used for qualified medical expenses or be subject to a penalty income tax. The ACA penalty for misuse is 20% for HSA and MSA accounts.
On December 20, 2018, the EEOC rescinded previously published guidance concerning Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA) compliance. However, the remaining regulations state that a wellness program complies with the ADA and GINA, as long as the program is voluntary. All employers with wellness programs should evaluate their program to and decide what level of incentive they will offer as part of the program, if any. Following the rescission of previous guidance, many employers may choose to eliminate any incentives for programs that require employees to reveal health information in order to receive the incentive. Currently, that is the only way to be certain that a program complies with the ADA and GINA. The guidance summarized in the sections Program design and Protecting confidentiality is still in effect. The section titled Wellness programs outlines the rescinded guidance and what that means for employers.
The ADA rule requires that employers give participating employees a notice that tells them what information will be collected as part of the wellness program, with whom it will be shared and for what purpose, the limits on disclosure and the way information will be kept confidential. GINA includes statutory notice and consent provisions for health and genetic services provided to employees and their family members. A sample notice for ADA compliance can be found here:
Both rules prohibit employers from requiring employees or their family members to agree to the sale, exchange, transfer or other disclosure of their health information to participate in a wellness program or to receive an incentive.
The EEOC recommends some best practices for ensuring confidentiality, such as adopting and communicating clear policies, training employees who handle confidential information, encrypting health information and providing prompt notification of employees and their family members if breaches occur.
The ADA and GINA state that all health contingent wellness programs must be voluntary. A health contingent wellness program is one that awards incentives only when an employee completes a health questionnaire or achieves a health outcome. The EEOC previously issued guidance rescinded it in 2018. The EEOC is expected to issue new guidance and this manual will be updated online to reflect that guidance once the EEOC issues it.
Employers who want to continue their health contingent wellness programs must now decide if they want to offer no incentive, offer some incentive well below the EEOC’s previously suggested limit of 30% of the employee’s cost of coverage or continue to use the rescinded guidance as insight into what constitutes a permissible incentive in a voluntary program. The safest of these three is to offer no incentive to ensure that the wellness program is voluntary.
A better option for many employers is to change their wellness programs so that they are no longer health contingent programs subject to the voluntary requirement. Employers can do this by tying the incentive to something that does not reveal any health information about employees or their spouses and dependents. For example, a program that rewards gym use is not a health contingent plan, and there is no limit on that type of incentive. Any wellness program that requires individuals to submit health information or undergo a health screening is a health contingent plan that must be voluntary.
The ACA created a type of cafeteria plan that certain small employers may adopt. An employer with an average of 100 or fewer employees during either of the previous two years is eligible to establish a simple cafeteria plan. If administered according to the rules, a simple cafeteria plan will be treated as automatically meeting otherwise-applicable cafeteria plan nondiscrimination requirements. The nondiscrimination rules that otherwise apply to group-term life insurance plans, self-insured medical reimbursement plans and dependent care assistance plans will be deemed satisfied. To qualify, a plan must provide for employer nonelective contributions for each eligible non-highly compensated and non-key employee. Employers may meet this requirement by contributing:
A simple cafeteria plan must also satisfy certain eligibility and participation requirements.
The U.S. Department of Health and Human Services (HHS) has a website that allows small businesses to compare health plans available in their area. The website:
has more than 530 participating providers and 2,700 benefit plans nationwide from which to choose, but those offered in a particular state are much more limited.
Health plans are required to provide participants with a standardized summary of plan benefits and coverage. The summary must provide specific information and be in a standardized format that HHS has developed and is available at:
This summary will not be a substitute for the summary plan description required under the Employee Retirement Income Security Act (ERISA). Plans must provide notice to participants of any material modification to plan terms or coverage no later than 60 days before the effective date of the modification.
Within 14 days of new employees’ start date, all employers covered by the Fair Labor Standards Act (FLSA) must provide new employees (including part time) with written notification of the employer’s intent to provide (or not provide) coverage and the existence of health insurance exchanges and available subsidies. The required notice must include:
Model versions of these notices can be found online at:
Note: If applicable, the notification must also include Consolidated Omnibus Budget Reconciliation Act (COBRA) notices with the alternatives offered through the marketplace exchange. See Chapter 25: Health insurance continuation coverage for more information and model COBRA notices.
Under the Affordable Care Act (ACA), employers are responsible for withholding an additional 0.9% hospital insurance tax (from 1.45% to 2.35%) on employees with incomes of more than $200,000 for single filers and $250,000 for married joint filers. The tax applies only to wages in excess of these thresholds. If an employer fails to withhold this amount, the liability for the tax will rest with the employee, not the employer. The employer portion of the tax remains unchanged at 1.45%.
Under the Affordable Care Act (ACA), health insurers must spend at least 80% of premium dollars on medical care rather than administrative costs. Those that do not meet this percentage must provide rebates to their policyholders, which are typically employers providing group health plans. Employers receiving rebates must determine whether the rebates constitute plan assets and if so, determine a reasonable and fair allocation of the rebate. Further information can be obtained from the IRS and tax professionals.
Policies and Forms
Chapter 14: Health insurance reform