ACA and Group Health Plans

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA and Employers >> ACA and Group Health Plans (last updated 12.25.14)

Topic Outline

1 Major Provisions
- 1.1 Permanent Group Health Plan Requirements
- 1.2 Temporary Provisions
2 Resources
3 Research and Analysis
4 News

Major Provisions

Permanent Group Health Plan Requirements

The Affordable Care Act establishes a number of new requirements for group health plans. More information is available on the websites of the Departments of Health and Human Services and Labor and in additional Legal Guidance for Group Health Plan Requirements (IRS). Unless grandfathered, group health plans must comply with all the new rules listed below. These relate to:

Eligibility (Nondiscrimination Provisions, Dependent Coverage of Children to Age 26, 90-Day Waiting Period Limitation, Preexisting Condition Exclusions);
Coverage (Lifetime and Annual Limits, Coverage of Preventive Services);
Patient Protections (Rescissions, Patient Protections, Internal Claims and Appeals and External Review, Federal External Review Process); and
Reporting Requirements (Reporting Value of Employer-Provided Health Coverage, Disclosures of the Summary of Benefits and Uniform Glossary)

The following details each of these requirements and provides links to more detailed information about them.

Grandfathered Health Plans

Nondiscrimination Provisions
- IRS. Notice 2011-1: Affordable Care Act Nondiscrimination Provisions Applicable to Insured Group Health Plans
- IRS. Notice 2010-63: Request for Comments on Requirements Prohibiting Discrimination in Favor of Highly Compensated Individuals in Insured Group Health Plans

Dependent Coverage of Children to Age 26
90-Day Waiting Period Limitation
- IRS. Notice 2012-59: Guidance on 90-Day Waiting Period Limitation Under Public Health Service Act § 2708
Coverage of Preventive Services.
Changes to Flexible Spending Arrangements. Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). IRS
- IRS. News Release IR-2010-95 and questions and answers
- IRS. Notice 2010-59
- IRS. Revenue Ruling 2010-23
Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections.
Internal Claims and Appeals and External Review.
Federal External Review Process
- US DOL. Request for Information • Public Comments
- US DOL. Interim Procedures for Federal External Review. Regulation • Technical Release • Model Notice of Adverse Benefit Determination • Model Notice of Final Internal Adverse Benefit Determination • Model Notice of Final External Review Decision
- IRS. Notice of Availability of Interim Procedure s for Federal External Review and Model Notices Relating to Internal Claims and Appeals and External Review Under the Patient Protection and Affordable Care Act

Reporting Value of Employer-Provided Health Coverage. Starting in tax year 2011, the Affordable Care Act required employers to report the value of the health insurance coverage they provide employees on each employee’s annual Form W-2. However, to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with this requirement, the IRS will defer the reporting requirement for 2011, making that reporting by employers optional in 2011. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. For information, see IRS news release, draft form and guidance. See also New Employer Form W-2 Health Insurance Reporting Requirements in the PPACA (NAHU).
Disclosures of the Summary of Benefits.
- IRS. Regulation (REG-140038-10), Disclosures of the Summary of Benefits and Coverage and the Uniform Glossary for Group Health Plans and Health Insurance Coverage in the Group and Individual Markets under the Patient Protection and Affordable Care Act
- IRS. Treasury Decision (TD 9575): Summary of Benefits and Coverage and Uniform Glossary for Group Health Plans and Health Insurance Coverage in the Group and Individual Markets under the Patient Protection and Affordable Care Act

Temporary Provisions

Early Retiree Health Insurance. PPACA established a temporary program under which the federal government will reimburse retiree health plans for high-cost medical claims. This Early Retiree Reinsurance Program will pay 80 percent of each claim that exceeds $15,000, up to $90,000. The program began in June 2010 and is slated to operate until the end of 2013. It is intended to slow the decline in employer health coverage for retirees and to help tide people over until 2014, when other provisions of the law go into effect. At that point, it will theoretically be easier for early retirees to obtain coverage through new state health insurance exchanges, often with the aid of subsidies.
- US DOL. Early Retiree Reinsurance Program: Regulation • Fact Sheet • Program Web Site
- US DHHS. Early Retiree Reinsurance Program, General ERRP Program Overview, August 2010.
- Health Affairs Policy Brief. Early Retiree Insurance
- NAHU. Reinsurance Program for Early Retirees.
- Employee Benefit Research Institute. The Early Retiree Reinsurance Program: $5 Billion Will Last About Two Years (July 2010).
- Milliman. Health Insurance Exchanges and Early Retiree Coverage (June 2012).

Small Business Health Care Tax Credit. This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. More details at ACA and Small Employers.

Resources

This list is restricted to general resources. For resources focused on large employers, see ACA and Large Employers; for resources for small employers, see ACA and Small Employers.

On-line Resources

American Benefits Council | Health Care Reform. The Council is a preeminent advocate of employer-sponsored benefit programs in Washington, D.C.
Anthem, Making Health Care Reform Work is one-stop resource for reform information for small and large businesses.
HealthReformReport.com, Business provides detailed information about provisions affecting business, listed by topic and providing an implementation timeline focused on these changes.

Research and Analysis

Rescissions were relatively rare even before ACA:
- Douthat, Ross. Does Individual Insurance Work? New York Times. 11.13.2013. In a paper from 2008, Wharton School prof. Mark Pauly and a co-author found that while the employer coverage was more stable than individual-market coverage for Americans with average health, “for people in fair or poor health” the chances of losing coverage are actually lower in the individual market than in the employer-based market.
- Goodman, John. Rescissions: Much Ado About Nothing. 5.13.2010. Rescissions are very rare. They apply only to the individual market (less than 10% of private health insurance) and even then they occur less than 4/10ths of 1% [NAIC data] of the time. Even when it does happen, there is almost always an appeals process where the decision is reviewed by an internal committee and often submitted to outside reviewers. Further, when insurers are wrong – as they may sometimes be – it is the job of state regulators to correct this injustice.
- Harrington, Scott. Fact-Checking the President on Health Insurance. Wall Street Journal, 9.14.2009. Congressional staffers’ analysis of 116,000 pages of documents from three large health insurers…. identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).
How Will PPACA Affect Small, Medium and Large Businesses? (Urban Institute)
U.C. Berkeley, Labor Center. Affordable Care Act: Summary of Provisions Affecting Employer-Sponsored Insurance. Includes a useful table showing how various ACA affect employer plans on the exchange, grandfathered plans, new employer plans and self-insured plans.
Eibner, C., F. Girosi, A. Miller, A. Cordova, E. A. McGlynn, N. M. Pace, C. C. Price, R. Vardavas, and C. R. Gresenz, Employer Self-Insurance Decisions and the Implications of the Patient Protection and Affordable Care Act as Modified by the Health Care and Education Reconciliation Act of 2010 (ACA), Santa Monica, Calif.: RAND Corporation, TR-971-DOL, 2011.
Maxwell, Nan. The Health and Wealth of a Nation: Employer-Based Health Insurance and the Affordable Care Act. Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 2012. 203 pp. $20.00 paper.
80/20 Rule Delivers More Value to Consumers in 2012 Centers for Medicare and Medicaid Services. June 2013.