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
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
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
• 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
• Beginning October 2014 plans meeting the definition of a
controlling health plan (CHP) will be required to obtain a
health plan identifier.