On the Horizon: Health Reform Changes for Fully Insured Small Group Employers

Employers will see an impact on the health coverage they

offer their employees as a result of some of the changes

under the Patient Protection and Affordable Care Act. This

brief summary covers several of the provisions and health

plan changes that have the greatest impact to employers.

In addition, the Affordable Care Act contains a number of

fees and taxes as well as product and benefit requirements

that will affect the cost of health care for employers during

the next several years. While the exact cost may differ for

each employer based on location and plan design offered, on

average employers are expected to see a substantial increase

in costs.


Overview of Taxes and Fees Affecting Employers


Patient-Centered Outcomes Research Institute Fee

(PCORI) – Beginning with plan years that end after

September 30, 2012, the Affordable Care Act imposes a

new fee on commercial health insurers and self-insured

plans. This fee is $1 per covered life for the first year,

$2 per covered life for the second year, and indexed to

medical inflation thereafter. The fee helps to fund research

on the comparative effectiveness of medical treatments

conducted by the new Patient-Centered Outcomes

Research Institute (PCORI).


Insurer Fee – Collected from insurers based on certain

net premium revenues for fully insured groups. The new

fee is expected to total $8 billion in 2014 for all insurers,

increasing to $14.3 billion in 2018, and increasing by the

rate of premium growth thereafter. Based on industry

estimates, the impact on premium is approximately 2.3%.


Transitional Reinsurance Fee – For years 2014 to

2016, the Affordable Care Act imposes a fee on insurers

to finance reinsurance payments for individual market

coverage. The fee will be assessed on a per capita basis.

It is estimated that these fees will total $12 billion in

2014, $8 billion in 2015 and $5 billion in 2016. States

are permitted to increase these fees at their discretion.

Based on industry estimates, the average projected cost is

approximately $6 per member/per month in 2014, which

then decreases each year for the subsequent two years.


Employer Mandates – Beginning in 2014 employers may

be subject to a non-deductible excise tax penalty if they do

not provide benefits to employees or if the benefit offering

does not equate to Minimum Essential Coverage offering.


Other Health Care Fees – The Affordable Care Act also

generates new revenue through:


• Annual fee on pharmaceutical manufacturers (2011) and

excise taxes on medical devices (2013) may increase claim

expenses to your plan.


• Excise tax imposed (40 percent) on the value of health

insurance benefits exceeding a specified threshold (2018).


Other Changes Affecting Small Group Employers


From 2012 through 2014 additional changes and impacts

to coverage and requirements will also affect small group

employers. Some of the more prominent include:


Summary of Benefits and Coverage (SBC) – By

September 23, 2012, UnitedHealthcare will provide

members with a concise, plain-language document

detailing information about the health plan’s benefits and

coverage, specific to the plans offered by the employer

to the member, including covered benefits, cost-sharing

provisions, coverage limitations and exceptions. In

addition, a new standardized health plan comparison tool

for individuals known as “coverage examples” must be

included, which illustrates the cost of care covered by the

plan for a few medical conditions. In addition, there are

specific requirements when these SBCs must be delivered.


Adjusted Community Rating and Market Restriction

Health insurance in the individual and small group markets

will only be able to vary premiums by family size, geography,

tobacco use and age. Other rating factors currently used

such as gender, industry, group size, health status and

medical history will be prohibited. The impact of age factors

will be limited to a range of 3 to 1. Tobacco users may also

have their premium varied by up to 50 percent higher than

non-tobacco users. As a result of these changes, a significant

number of employers will realize more substantial increases

than under current requirements.



Fully Insured Small Group Employers


Minimum Essential Coverage – PPACA does not explicitly

mandate an employer to offer employees acceptable health

insurance. However, certain employers with at least 50 full-time

equivalent employees will face penalties, beginning in 2014, if

one or more of their full-time employees obtains premium tax

credit through an exchange. An individual may be eligible for

a premium credit either because the employer does not offer

coverage or if the employer offers coverage that is either not

“affordable” or does not provide Minimum Essential Coverage

(MEC). An employer-sponsored plan that satisfies the

Affordable Care Act’s reform requirements must:


• Be affordable to the employee (premium may not exceed 9.5

percent of household income)


• Provide minimum value, which is at least 60 percent of the

total allowed cost of benefits.


Employers will need to evaluate their offerings to determine

whether they meet these minimum value requirements; if they do

not, they will need to evaluate alternative plan options and/or the

impact of paying assessments.


Essential Health Benefits (EHB) No limits – Beginning in

2014, small group employers are required to provide Essential

Health Benefits.


Prohibition of Pre-existing Condition Exclusions for All Ages

Beginning in 2014, pre-existing condition exclusions must be

removed for all members, not just those under age 19.


Other Benefit Requirements – Employers will need to adjust

plan design and offerings based on rules going into effect in

2012 through 2014.


• Beginning August 2012, preventive benefits will be expanded

for a number of services for women including additional

screening, prenatal office visits, breast-feeding support and

some contraceptives.


• Beginning in 2013, employee salary reduction contributions to

health FSAs will be limited to $2,500 per year, with indexed

increases allowed in future years to adjust for inflation.


• Beginning 2014, plan design deductibles may not exceed a

$2,000 (self-only) or $4,000 (other than self-only) annual

limitation provided under the Affordable Care Act.


• Beginning 2014, the out-of-pocket maximums for all plans will

be capped at the same level at which HSA plans are capped. In

2013, these levels are $6,250 for single coverage and $12,500

for non-single coverage.


• Beginning 2014, all cost-sharing toward services including flatdollar

copays that are defined as Essential Health Benefits must

accumulate to a plan’s out-of-pocket maximum.


• Beginning March 2013, employers must provide written notice

to current and new employees at the time of hire to inform

them of the exchanges and the circumstances under which an

employee may be eligible for a premium tax credit and a cost

sharing reduction.


• Beginning October 2014 plans meeting the definition of a

controlling health plan (CHP) will be required to obtain a

health plan identifier.


For more information on group health insurance for Colorado, contact Group Insurance Analysts, Inc at 888-423-3232 ext 100 or visit www.e-gia.com. You can also email us at info@e-gia.com.


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