Former President Obama signed the Patient Protection and Affordable Care Act (ACA) on March 23, 2010, and that law was generally upheld by the Supreme Court in 2012. A companion statute known as the Healthcare and Education Reconciliation Act was signed into law one week later. Collectively, these laws are referred to as the Affordable Care Act (ACA). This sweeping legislation has been phased in over a period of years. Set forth in this chapter are some of the more important provisions affecting employers. Efforts to repeal the ACA have not been successful, but Congress eliminated the individual penalty on those who do not buy insurance. In addition, certain regulatory requirements were rolled back by the Trump Administration. While legal challenges are likely to continue, none to date have invalidated the entire law, and the ACA remains enforceable.
Reforms already enacted
- Employers must provide “reasonable break time” for breastfeeding working mothers. (Employers with 50 or fewer employees have a narrow undue hardship defense.) See Wages and hours.
- Employees also are protected from any form of discrimination or retaliation if they report or help government authorities investigate possible violations of the ACA or if they decline to perform tasks that they “reasonably believe” violate the law. See Termination.
- Group health plans that seek grandfather status must maintain records documenting the terms of the plan in effect as of March 23, 2010, and any other documents that will be required to verify or explain its status.
- Grandfathered health plans will be able to make routine changes to their policies and maintain their status. These routine changes include cost adjustments to keep pace with medical inflation, adding new benefits, making modest adjustments to existing benefits, voluntarily adopting new consumer protections under the new law or making changes to comply with state or other federal laws.
- Plans will lose their grandfathered status if they choose to make significant changes that reduce benefits or increase costs to consumers. If a plan loses its grandfathered status, then consumers in these plans will gain additional new benefits including:
- coverage of recommended prevention services with no cost sharing
- patient protections such as guaranteed access to OB-GYNs and pediatricians.
Failure to provide these benefits in a non-grandfathered plan can subject to employer to substantial penalties.
- Under the ACA, these requirements are applicable to all new plans and existing plans that choose to make the following changes that would cause them to lose their grandfathered status:
- Cannot significantly cut or reduce benefits. For example, if a plan decides to no longer cover care for people with diabetes, cystic fibrosis or HIV/AIDS.
- Cannot raise co-insurance charges. Typically, co-insurance requires a patient to pay a fixed percentage of a charge (for example, 20% of a hospital bill). Grandfathered plans cannot increase this percentage.
- Cannot raise co-payment charges. Frequently, plans require patients to pay a fixed-dollar amount for doctor’s office visits and other services. Compared with the co-payments in effect on March 23, 2010, grandfathered plans will be able to increase those co-pays by no more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points. For example, if a plan raises its co-payment from $30 to $50 over the next two years, it will lose its grandfathered status.
- Cannot significantly raise deductibles. Many plans require patients to pay the first bills they receive each year (for example, the first $500, $1,000 or $1,500 a year). Compared with the deductible required as of March 23, 2010, grandfathered plans only can increase these deductibles by a percentage equal to medical inflation plus 15%.
- Cannot significantly lower employer contributions. Many employers pay a portion of their employees’ premiums for insurance, and this is usually deducted from their paychecks. Grandfathered plans cannot decrease the percentage of premiums the employer pays by more than five percentage points (for example, decrease their own share and increase the workers’ share of premium from 15% to 25%).
- Cannot add or tighten an annual limit on what the insurer pays. Some insurers cap the amount that they will pay for covered services each year. If they want to retain their status as grandfathered plans, plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one, unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees).
- Cannot change insurance companies. If an employer decides to buy insurance for its workers from a different insurance company, this new insurer will not be considered a grandfathered plan. This does not apply when employers that provide their own insurance to their workers switch plan administrators or collective bargaining agreements.
- Dependent children are permitted to remain on their parents’ insurance plan until their 26th birthday.
- Insurers are prohibited from excluding preexisting medical conditions for children younger than the age of 19.
- Group health plans are prohibited from rescinding coverage once an individual is enrolled under the plan, except in the case of a person who performed an act of fraud or made a misrepresentation of material fact.
- Insurers are prohibited from charging co-payments or deductibles for certain types of preventive care and medical screenings on all new insurance plans.
- Insurers’ ability to enforce annual spending caps are restricted.
- Insurers are prohibited from dropping policyholders when they get sick.
- Companies that provide early retiree benefits for individuals aged 55 to 64 are eligible to participate in a temporary program that reduces premium costs.
- Employers must disclose the value of the benefits they provided for each employee’s health insurance coverage on the employee’s annual W-2 forms.
- Health benefit plans are required to distribute a standard summary of benefits and coverages (SBC) that includes standard terms and provisions. The document must be provided annually and at least 60 days prior to a change. Health insurance carriers are responsible for developing the SBC for fully insured plans, while the plan sponsor or designated administrator must develop the SBC for a self-insured plan. Failure to comply with the SBC requirement can result in significant penalties.
- A group health plan or health insurance carrier must provide an SBC to:
- participants or beneficiaries upon request, as soon as practicable but in no event later than seven days following the request
- special enrollees within seven days of a request for enrollment pursuant to a special enrollment right under HIPAA.
- A participant or beneficiary with respect to each benefit option for which the participant or beneficiary is eligible no later than the first date the participant is eligible to enroll (or with any written application materials distributed prior to enrollment).
- If a material modification is made to the terms of the plan that would affect the content of the SBC, the plan or carrier must provide notice of the modification to enrollees not later than 60 days prior to the date on which the notification will become effective. The SBC requirement can be satisfied electronically. Significantly, the SBC must also be provided in languages other than English if 10% or more of the population residing in the county of the participant's home address are literate only in the same non-English language.
- All employers covered by the Fair Labor Standards Act (FLSA) must provide information about the health insurance marketplaces (also called the Health Insurance Exchanges) to current employees and to new employees within 14 days of their start date. Model versions of these notices can be found online at:
- Set a maximum of $8,550 annual deductible for a plan covering a single individual or $17,100 annual deductible for any other plan (subject to certain adjustments).
- Set a $2,750 limit on tax-free contributions to flexible spending accounts. FSA accounts may either be set up on a use-it-or-lose-it basis or as permitting a carryover. Those accounts that operate on a use-it-or-lose-it basis may allow participants a “grace period” of two-and-one-half months to spend down their balance from the prior year. On October 31, 2013, the U.S. Treasury Department announced another exception to the use-it-or-lose-it rule. FSA plans may now adopt a provision allowing employees to carry over up to $500 of their FSA balance into the following plan year. FSA plans are not required to permit a carryover and may limit permitted carryovers to less than $500. The amount carried over does not count toward the $2,750 annual cap on employee contributions. The carryover option is not available to plans that have a grace period.
- A tax penalty is imposed on employers with more than 50 “full-time equivalent” employees who do not offer health insurance or who offer unaffordable insurance to their full-time workers.
Individual coverage health reimbursement account
Effective January 1, 2020, employers of any size may sponsor an individual coverage health reimbursement account (ICHRA). ICHRAs reimburse employees’ premiums for major medical insurance purchased in the individual market and other qualified medical expenses. ICHRAs generally must be offered on the same terms and conditions to all employees within a class and cannot be offered to employees who are also offered coverage under a “traditional” group health plan. However, employers can offer traditional group health coverage to one class of employees and an ICHRA to another class – employees just can’t have an option between the two. Permitted classes of employees include full-time employees, part-time employees, salaried employees, hourly employees, temporary employees, employees covered by collective bargaining agreements and others.
To obtain reimbursement, employees must provide proof that they are (or will be) enrolled in either individual, nonexcepted benefit coverage purchased in the individual market or Medicare. ICHRAs are not subject to ERISA if the purchase of insurance is completely voluntary for participants and beneficiaries, the employer does not select or endorse any particular insurer or coverage or receive any consideration in connection with the employee’s selection or renewal of coverage, and participants are notified annually that the coverage is not subject to ERISA. Employers sponsoring an ICHRA must also provide a notice to eligible employees at least 90 days before the beginning of each plan year describing the terms of participation and other required information.
Where to go for more information
This chapter is intended as a brief overview of some of the requirements and obligations of the Affordable Care Act (ACA) imposes on employers. It is by no means exhaustive.
For more information about the Patient Protection and Affordable Care Act, visit: