Healthcare Reform: 2014 Update for Employers

Healthcare Reform: 2014 Update for Employers

By Christine Moehl

In the spring of 2013, I wrote an article for the Healthy Business Journal entitled “Healthcare Reform: Employer Action Items for 2013.” Although the article was accurate at that time, it has become a bit outdated. Over the past year there have been many modifications and delays to certain provisions of the law, most of them stemming from the difficulties of implementing such sweeping reforms. In addition, some new provisions of the law have become effective. As a result, it’s time to update employers on the changing landscape of healthcare reform. This article will address the significant developments for 2014.

Delay of “Play or Pay” Penalties:

In July of 2013 the Obama administration announced that it would delay the implementation of employer penalties until January 1, 2015. These penalties were initially scheduled to take effect in 2014. The penalties were delayed in order to give employers and the Obama administration more time to prepare for implementation of this significant provision. Starting on January 1, 2015 Play or Pay penalties will apply to all employers with 100 or more “full-time equivalent employees” that do not offer a group health insurance plan to their full-time employees and their dependents. The penalties will also apply to employers that offer group health insurance that is considered “unaffordable” or does not meet “minimum essential coverage” standards discussed in my earlier article. Starting on January 1, 2016 Play or Pay penalties will apply to all employers with 50 or more “full-time equivalent employees” who do not offer the requisite group health insurance.

Cover Oregon Enrollment Issues:

Cover Oregon, Oregon’s health insurance exchange, experienced significant setbacks when it opened for enrollment on October 1, 2013. It continued to struggle to enroll individuals and families in health insurance coverage throughout the winter and, as of the end of January 2014, was still not yet fully functional. Despite these issues, many individuals and families were able to secure health insurance coverage through Cover Oregon in late 2013 and early 2014, and the enrollment process is gradually getting smoother. In order to sign up for health insurance coverage through Cover Oregon for 2014, individuals and families must apply for coverage on or before March 31, 2014. After March 31, 2014, individuals must have a “qualifying life event” (e.g., moving to a new state, certain changes in income, changes in family size, etc.) in order to enroll in health insurance coverage through the exchange. For coverage in future years, open enrollment for Cover Oregon will occur during the October 15 to December 7 period immediately preceding the year of coverage.

SHOP Delay and the Effect on the Small Business Tax Credit:

The Small Business Health Options Program (SHOP) Marketplace is an exchange that small businesses (under 50 employees) can use to purchase group health insurance. In Oregon, SHOP was intended to open for business on October 1, 2013, along with the individual health insurance exchange. However, due to the difficulties with the individual exchange, the opening of Oregon’s SHOP marketplace has been delayed indefinitely. The delay of Oregon’s SHOP marketplace raises an interesting issue for small businesses that wish to qualify for the Small Business Tax Credit in 2014. This tax credit can be up to 50% of the health insurance premiums that certain small employers pay on their employees’ behalf. The law provides that to be eligible for the credit in 2014, employers must purchase their group policies through the SHOP marketplace. Informal guidance from the Obama administration suggests that small businesses that do not have access to a SHOP marketplace will be allowed to qualify for the credit in 2014 if they have group health insurance that is purchased outside of the exchange. Further official guidance is expected on this topic.

Limited Transition Relief for the Individual Mandate:

The individual mandate provides that individuals will pay a penalty for each month that they do not have health insurance coverage for themselves, their spouses, or their dependents. The individual mandate initially became effective on January 1, 2014 and applies to most Americans, with limited exceptions.However, for this first year of the individual mandate, the IRS published transition relief for individuals who are eligible for non-calendar year employer-sponsored group health plans. The guidance provides that if these individuals enroll in the group health plan during open enrollment in 2014, they will not be subject to the individual mandate penalties for the months that they are uninsured. For example, if an employer had a group health plan with a plan year of July 1 to June 30, employees enrolling in the plan for coverage to begin on July 1, 2014 would not pay individual mandate penalties for the months that they were uninsured in 2014 (i.e., January through June).
2014 Plan Design Changes. Finally, for plan years beginning on or after January 1, 2014, new plan design changes became effective. Those changes are as follows:

  • Maximum Out of Pocket Expenses. For all plans the maximum out of pocket cost for “in-network” medical expenses will be capped at $6,350 for an individual and $12,700 for a family, which includes the deductible, co-insurance, co-payments and prescription costs. “Out of network” expenses are not limited to these amounts.
  • No Pre-existing Conditions Exclusions. Group health plans can no longer apply pre-existing condition exclusions, regardless of age.
  • No Annual Limits. Group health plans may not establish annual limits on the dollar amount of essential health benefits for any individual. Plans are not prohibited, however, from placing annual dollar limits on specific covered benefits that are not essential health benefits.
  • Prohibition on Excessive Waiting Periods. Plans are prohibited from applying a waiting period for enrollment that exceeds 90 days.

Employers are finding that keeping up with the changing landscape of healthcare reform can be difficult and time-consuming. Employers should work with their plan advisors to stay abreast of the changes in the law and to construct a comprehensive healthcare reform action plan that ensures compliance with these complicated rules. If you would like assistance in developing a healthcare reform action plan that is tailored to the specifics of your business, please contact a member of the Saalfeld Griggs’ Employee Benefits & Executive Compensation group at 503-399-1070.