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EXECUTIVE SUMMARY
ACA UPDATE: RETURN OR EXCHANGE
AUGUST 21, 2013
Employers have much to do – and much to monitor – as Affordable Care Act (ACA) deadlines draw near and state and
federal governments prepare to launch insurance exchanges.
John Barlament, partner, employee benefits group at Quarles & Brady LLP, and Cristine Vogel, associate director at
Navigant Consulting, shared their insights on the latest developments at The Alliance Learning Circle “Health Care Reform:
Return or Exchange” at Monona Terrace on Aug. 21.
John Barlament: ACA Overview
Barlament provided good advice for employers despite some remaining
“open issues” that are subject to forthcoming regulations.
For example, the law requires that employers with more than 200 employees
must “auto-enroll” full-time employees in health coverage, but Barlament
said there’s no guidance available to cover many details related to how
it should be accomplished. The provision will not take effect until the
regulations are released.
Barlament encouraged employers to continue to monitor developments but
offered advice for several ACA issues.
1. The federal government’s model exchange notices may need to be tweaked.
››
By Oct. 1, 2013, all employers must distribute notices to all current employees about federal and state
exchanges that sell insurance plans. Barlament shared a sample notice. Some information in the proposed
notices is optional, so employers can choose to delete or modify some sections. Barlament suggested
employers avoid the model notice statement about affordability of coverage unless they are certain it applies
to all employees that will receive the notice now and in the future.
››
Employers may need to revise these notices to insert information about when the marketplace takes effect if
it is delayed, and will need to insert information about who to contact with questions.
››
The federal government has also supplied an updated model Consolidated Omnibus Budget Reconciliation Act
(COBRA) notice.
2. In 2014, self-funded plans must comply with out-of-pocket limits for essential health benefits (EHBs).
››
EHB focuses on the 10 key things most health plans cover.
››
Limits on EHB deductibles do not apply to self-funded plans. Separate out-of-pocket limits may apply if
separate vendors provide services in 2014 (for example, for prescription drug benefit and major medical
benefits). But beginning in 2015, one limit must apply to all health benefits.
Links to More Information
Link to materials: http://www.the-alliance.org/events/past-events
Link to webinar recording: https://www1.gotomeeting.com/register/423985624
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John Barlament: Open Issues Abound, continued:
3. Employers should put into writing as soon as possible which definition of the EHB will be used
by their health benefits.
››
Self-funded plans are not required to cover EHBs, but if they do then they must not subject them to annual
and lifetime limits.
››
EHB regulations allow employers to use any available benchmark option, such as a specific state’s EHB.
››
Since EHB definitions vary from state to state, employers should pick the definition that best matches
their plan.
››
Beginning in 2014, there are limits on out-of-pocket maximums for EHBs.
4. Be aware of changes related to the Summary of Benefits and Coverage (SBC), fees and provider
non-discrimination rules.
››
The government has tweaked SBC rules and provided an updated SBC template online.
››
Form 720 has been developed to allow employers to report their Patient-Centered Outcomes Research
Institute (PCORI) fee of $1 per covered life.
››
Self-funded employers must also pay a reinsurance fee of $63 per covered life that will probably be due at the
end of 2014 or beginning of 2015.
››
Rules that forbid “discriminating” against licensed providers are subject to interpretation. An example is
failing to cover massages from a licensed massage therapist but covering them when delivered by a physical
therapist. Barlament urged employers to review their health plans to find these situations and address them.
››
A rule requiring coverage of clinical trials for “covered individuals” is unclear.
5. Review insurance plans to make sure waiting periods meet the rules.
››
A waiting period of exactly 90 days is used for eligible employees; three months is not acceptable as a
substitute. Coverage must begin on the 91st day.
››
The “hours of service” eligibility requirement is capped at 1,200 hours.
6. Be aware of new wellness plan rules.
››
Regulations issued June 3, 2013, contain significant changes.
››
Incentives or disincentives worth 30 percent of the annual total cost of individual premiums can be offered,
which increases to 50 percent if it relates to tobacco usage.
››
Rules differ based on whether a health-contingent wellness plan is built on participation, such as a walking
program, or on outcomes, such as lowering cholesterol. Be prepared to offer a reasonable alternative to
outcome-based wellness program requirements so all employees can earn the incentive.
7. Health reform regulations impact Health Insurance Portability and Accountability Act (HIPAA) rules intended
to safeguard “protected health information” about individual’s health and health claims.
››
Make sure agreements with vendors and other business associates comply with HIPAA rules.
››
Employers must certify by year-end that they comply with HIPAA rules.
››
If a breach occurs, follow the new rules to notify authorities. Document any type of breach where protected
information leaves the organization.
››
Update policies and procedures; the notice of privacy rights; and agreements with business associates to
follow the latest rules for maintaining and sharing information.
PO Box 44365 | Madison WI 53744-4365 | 800.223.4139 | 608.276.6620 p | 608.276.6626 f | www.the-alliance.org
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John Barlament: Open Issues Abound, continued:
8. The U.S. Supreme Court’s “Windsor” decision that overturned the
Defense of Marriage Act on June 26, 2013, offers new rights to
same-sex couples.
››
Federal law now defers to state law to recognize which
individuals are in a “marriage” and who is a “spouse.” Samesex
marriages are recognized in 12 states and the District of
Columbia.
››
There is still some confusion about which state laws apply in
specific situations and whether employers in specific situations
are required to offer benefits to same-sex couples.
››
Expect additional lawsuits and guidance to provide more
information. Barlament predicted that a “liberal interpretation of
who is married” could emerge.
››
Employers may need to adjust how they handle taxes, COBRA notices and other benefits.
››
Employers can prepare by reviewing their plan’s definition of a spouse or domestic partner;
selecting a clear definition of a spouse; updating plan documents; and working with vendors to
implement changes.
Cristine Vogel: Exchanges Are An Emerging Insurance Marketplace
Recognizing Same-Sex Marriage
Same-sex marriages are recognized in:
California
Connecticut
Delaware
District of Columbia
Iowa
Maryland
Maine
Last-minute scrambling is the way Cristine Vogel describes state and federal insurance exchanges that will serve as
“Marketplaces” for individuals and small employers under the ACA. Vogel said there’s still “an awful lot of rearranging”
taking place in the individual and the Small Business Health Options Program (SHOP) Marketplaces, otherwise known as
the public exchanges.
Purchasers will have private insurance options both “inside” and “outside”
the state and federal Marketplaces, but subsidies will only be available from
“Qualified Health Plans” approved to sell inside the exchange. That applies
to every state except Vermont, which is aiming for a single payer plan and so
will not have an “outside” market. Each state may also require that insurance
providers offer specific benefits through its EHB, which is used to standardize
health plans within each state so people know which core benefits are covered.
ACA rules apply to both qualified health plans offered inside the SHOP
Marketplace and to plans from outside sources, with the exception of
grandfathered plans that are exempt from certain ACA provisions as long as they
remain unchanged.
1. While exchanges are aiming to begin enrolling individuals on Oct. 1, she “wouldn’t be surprised
if that was delayed.”
››
A short delay would have minimal impact since coverage does not take effect until Jan. 1, 2014.
››
Open enrollment in 2015 will be held Oct. 15 to Dec. 7; special rules will allow people who lose
work-related benefits to apply outside the open enrollment period. Those that enroll by Dec. 15
will have plans that begin on January 1.
Massachusetts
Minnesota
New York
New Hampshire
Rhode Island
Vermont
Washington
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Exchanges: An Emerging Insurance Marketplace, continued:
2. SHOP Marketplaces are still in development, including the infrastructures to support them.
››
Eighteen states will have state-based marketplaces. The federal government has yet to certify
most of these marketplaces, although many have obtained state-level Department of Insurance
approvals that may be an indicator of their ability to gain federal certification.
››
Seven states have “partnership” marketplaces that will be run with U.S.Department of Health and
Human Services (HHS) oversight and preparation, including Illinois and Iowa.
››
Twenty-six states, including Wisconsin, have federal-facilitated marketplaces, which again have
HHS oversight.
3. An eligibility process determines whether individuals will receive federal subsidies.
››
Eligibility is based on income, whether the individual is incarcerated, whether employer-based
coverage is available and whether the applicant lives within a specific marketplace.
››
Some individuals may be directed into Medicaid. If they are eligible for Medicaid and choose to
instead go to the marketplace, they are ineligible for federal subsidies for coverage.
››
Individuals that are not offered affordable employer coverage will receive a premium tax credit
if their income is between 100 and 400 percent of the federal poverty level. A cost-sharing
reduction is available for people with an income of 100 to 250 percent of the federal poverty level
who are enrolled in a silver plan. Special rules cover individuals with American Indian status.
››
Individuals who are eligible for SHOP-qualified health plans must work for an employer with less
than 50 FTEs.
››
Only individuals who meet certain criteria can
purchase a catastrophic-only insurance plan. These
individuals must be under age 30 and must have
certified that they are exempt from the individual
mandate. These exemptions are granted by the HHS
for religious beliefs or financial hardship and are likely
to be hard to obtain, Vogel said.
4. Actuarial Value (AV) standards will help consumers
compare health plans.
››
Vogel said it’s hard for consumers to shop for
insurance today; AV will make it easier by helping them
truly compare plans.
››
Non-grandfathered individual and small group plans
inside and outside the marketplace must meet specific
AV targets and grouped by “precious metal” category.
››
The percentage of total average cost that must be
covered is 60 percent for a bronze plan; 70 percent
for silver; 80 percent for gold; and 90 percent for
platinum.
››
Premium tax credits will be based on each exchange’s
silver plan with the second-lowest cost.
EHB Required Categories
Essential Health Benefits (EHBs) can vary by state,
but they must all provide a minimum package of
benefits that covers these categories:
››
Ambulatory patient services
››
Emergency services
››
Hospitalizations
››
Maternity and newborn care
››
Mental health and substance use
disorders
››
Rehabilitative and habilitative services
and devices
››
Laboratory services
››
Prescription drugs
››
Preventive and wellness services and
chronic disease management
››
Pediatric services, including oral and
vision care
Source: Cristine Vogel, Navigant Consulting
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PO Box 44365 | Madison WI 53744-4365 | 800.223.4139 | 608.276.6620 p | 608.276.6626 f | www.the-alliance.org

Exchanges: An Emerging Insurance Marketplace, continued:
5. There will still be an insurance coverage “gap” and some individuals are likely to have difficulty
complying with ACA rules.
››
Some people will earn too much to qualify for Medicaid and yet fail to qualify for the subsidy
because they earn under 100 percent of the federal poverty level. For these individuals, the
only option would be to go to the marketplace and apply for a certificate of exemption from the
individual mandate to obtain insurance coverage.
››
When individuals qualify for a tax credit for insurance it is paid directly to the insurance issuer
each month. If consumers fail to report/update their actual income for each family member,
they could end up owing money to the Internal Revenue Service. Low-income tax filers who have
simple returns are most likely to be impacted.
Vogel noted that much hinges on the individual mandate that requires nearly every American to have health insurance
beginning in 2014. She called this the “glue” for the ACA. Yet it is proving difficult to get the word out to individuals about
the need to enroll in the exchanges. That is just one of the many challenges linked to implementing the ACA by Jan. 1, 2014
for individuals and employers alike.
Individual Mandate Penalties
The penalty for individuals who are not exempt and who
fail to get insurance coverage is the greater of either:
››
A percentage of income.
»»
1 percent in 2014
»»
2 percent in 2015
»»
2.5 percent in 2016 and beyond
››
A flat dollar amount paid on each taxpayer and
dependent, which will be adjusted for inflation.
»»
$95 in 2014
»»
$325 in 2015
»»
$695 in 2016 and beyond
»»
Capped at 300 percent of the annual flat amount
for the total family
››
The penalty for noncompliance cannot exceed the
national average for a bronze-level plan.
Source: Cristine Vogel, Navigant Consulting
PO Box 44365 | Madison WI 53744-4365 | 800.223.4139 | 608.276.6620 p | 608.276.6626 f | www.the-alliance.org
The Alliance moves health care forward by controlling costs, improving quality, and engaging individuals in their health. An employer-owned, not-for-profit
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