Health Care Reform


If you’re still unclear on what’s going on with healthcare reform, you’re not alone.  A recent study reports more than four in 10 Americans don’t even know the Affordable Care Act has been enacted and is in effect.1

The fact is, quite a few changes have already taken place and there are more to come.   The federal government keeps an updated healthcare reform webpage that you may want to visit at  

Key changes already in effect that you should know about:

·   You can now get preventive services like vaccinations and certain screenings through your health plan without a copay or coinsurance when you use an in-network provider.

·   Young adults are now able to stay on their parents’ insurance until they turn 26 years old.

·   Dependents younger than 19 years of age with pre-existing health conditions can’t be denied healthcare coverage.

·   There used to be a cap on the amount of money an insurer would pay while it covered you and your family. That can no longer be the case. There are no more limits on a health plan’s lifetime essential health benefits.

What’s coming
While 2014 will be the biggest year for healthcare reform-related changes, you’ll likely need to make decisions this year to plan for those changes. You’ll want to pay close attention during your benefits enrollment to understand your plan options. Here are some of the parts of the Affordable Care Act that take effect in 2014:

·   The Individual Mandate: With a few exceptions, U.S. citizens will be required to have coverage or pay a penalty. The penalty will be either $95 for each adult and $47.50 for each child in your family to a maximum of $285, or 1 percent of your family income, whichever is greater. This penalty will rise in the years after 2014. If you receive qualified coverage through your employer, you will not have to pay this penalty.

·   People not covered under an employer’s plan don’t have to worry that they’ll be denied healthcare coverage even if they have pre-existing conditions, like chronic illnesses. Insurance carriers will sell and renew plans to individuals regardless of a person’s health, and rates won’t be affected by health status or gender.

·   Waiting periods before an employer-sponsored health plan takes effect are limited to 90 days.

·   There’s now no annual limit on what your plan pays for your essential benefits, although daily and frequency limits may still apply.  Essential health benefits that small businesses must cover include:  
o Ambulatory patient services
o Emergency services
o Hospitalization
o Maternity and newborn care
o Mental health and substance use disorder services, including behavioral health treatment
o Prescription drugs
o Rehabilitative and habilitative services and devices
o Laboratory services
o Preventive and wellness services and chronic disease management
o Pediatric services, including oral and vision care

·   As of 2013, the most money you can put into a Flexible Spending Account is $2,500. In future years, this amount will be indexed by the Consumer Price Index, a measure of inflation. In addition, starting in 2015, companies with 50 or more employees must offer qualified health insurance to their workforce or pay a penalty.

Visit to learn more about the Affordable Care Act.

This material provided is a general summary and does not address all specific issues of healthcare reform.  This material is for informational purposes only.  It is not intended or written to be used, and it cannot be used, as legal advice or a legal opinion.  It should not be relied upon in lieu of consultation with your own legal advisors.  Insurance and tax laws and interpretations of those laws are complex and subject to change. None of the information herein is intended or written to be used, and it cannot be used, for the purpose of avoiding taxes or penalties that may be imposed.

1 Martin et al. Health Affairs, 31, no 1 (2012):208-219.  Bureau of Economic Analysis, assessed April 2012.




Government Regulations Describe Minimum Benefits That Must Be Included
in Most Health Plans.
A major part of the Affordable Care Act (ACA) is the requirement that nongrandfathered health insurance plans offer an essential health benefits package that provides a comprehensive set of services. In February 2013, the U.S. Department of Health and Human Services issued final regulations defining the services that must be included in most health plans, beginning in 2014.
What are essential health benefits?
Essential benefits appear in 10 broad categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
The final rule also clarifies that insurers cannot charge patients a co-pay for a colonoscopy if a polyp is found and removed. Previously, consumers may not have paid for the screening, but
would receive a charge for removing a polyp during the procedure.
Also starting in 2014, all types of health insurance plans will include an annual limit on out-of-pocket cost sharing for individuals and families. While the limits haven't been set for 2014, a comparable limit for self-only coverage in 2013 is $6,250.
In addition, beginning in 2014, nongrandfathered plans must come within certain categories based on "actuarial value," or the average share of total plan benefits covered by the plan. For example, if a plan has an actuarial value of 70%, a consumer can expect to be
responsible for 30% of the costs of all covered plan benefits. The categories will be defined by four "metal levels." Bronze plans will cover 60% of health-care costs; silver plans, 70%; gold plans, 80%; and platinum plans, 90%. The metal levels are intended to help
consumers compare plans with similar levels of coverage.
Does it apply to all health plans?
These rules apply to nongrandfathered individual and small group health plans, as well as plans offered through state-based health Exchanges. Grandfathered plans, to which these requirements do not apply, include health plans created on or before March 23,
2010. However, some ACA provisions apply to all plans (i.e., grandfathered plans), including the prohibition from applying lifetime dollar limits to key health benefits, the requirement that plans can't be cancelled except in cases where the applicant provided
intentionally false information, and the extension of dependent coverage to adult children until age 26.






Older patients typically utilize more, and higher cost health care services than younger patients. One way states can ensure that coverage remains aordable for everyone is to use age rating bands that spread premium costs over a range of age groups. Currently, in a state with a 5:1 age band, the ratio limits the amount an older individual will pay to no more than five times what a younger individual pays in premium dollars. Right now, 42 states have age rating bands that are 5:1, some are more.
On January 1, 2014 the federal health care law limits a state’s age rating bands to 3:1.
Effects of Age Rating Band Change from 5:1 to 3:1*
For Example...
This 24-year-old’s annual health
insurance premium is
currently $1,200.
This 60-year-old’s annual health
insurance premium is currently $6,000.
5:1 Age Rating Band
On January 1, 2014 the Health Care Law Limits Age Rating Bands to 3:1
3:1 Age Rating Band
Overnight, the younger individual’s
premium increases to $1,800 annually.
The older individual pays an
annual premium of $5,220.
50% MORE for the younger individual in premiums
10% LESS for the older individual in premiums
If the younger person’s premium becomes unaffordable, they will choose to not
purchase coverage. If young, healthy people drop health insurance coverage, premiums rise
for everyone.
There are additional cost drivers that will raise premiums even more in 2014 and beyond. Such as:
• Loss of SIC Code discount • Unisex rates • Smokers rated up 50%
• Community rating for health • Health insurance industry fee • Insurance assessment fee
• Federally facilitated exchange fee • Restricted plan designs
• Patient-Centered Outcomes Research Institute fee
Employers who have 50 or fewer employees will have at least the following options in 2014:
•Offer a fully insured plan through either:
•A SHOP exchange – Employer may be eligible for a temporary two-year tax credit to offset part of the employer premium contribution
•The off-exchange market
•Offer an ASO plan, if allowed by state law, where EHB and metal level requirements don’t exist
•Stop offering coverage and let employees buy through the Individual market
•Combine ownership to be able to purchase through the large group market
•Offer “non-affordable” coverage to some employees to make them eligible for subsidies on Individual Exchanges

This mandate has been delayed until 2015

50 or more full-time employees (full-time = working 30 or more hours per week)
Combination of full-time and part-time employees that equals 50 “full-time equivalent employees”
•Status is determined based on actual hours worked by employees in prior calendar year
•Companies are combined together for purpose of determining employee count
•Use established “controlled group” test in Internal Revenue Code Sec. 414
•Thus, a smaller employer might need to comply if it is part of a controlled group
•Aggregation rules are not applied to companies for purpose of determining potential liability and payment under the Employer Mandate
•30-employee reduction is applied across the companies, not to each company
An employer with 50 or more full-time employees will be subject to a nondeductible excise tax penalty if either:
The employer does not offer health coverage to least 95% of its full-time employees (and their dependents*), and any full-time employee receives a premium tax credit (subsidy) for coverage on the Exchange
The annual penalty is $2,000 times total number of FTEs, minus the first 30 employees
The monthly penalty is 1/12 of $2,000 times total number of FTEs, minus the first 30 employees
Large Group Employer Mandate
*Dependents = children to age 26, but not spouse
The employer offers health coverage to at least 95% of its full-time employees (and their dependents*), but at least one full-time employee receives a premium tax credit (subsidy) for coverage on the Exchange.
The annual penalty is $3,000 per employee receiving a subsidy
The monthly penalty is 1/12 of $3,000 per employee receiving a subsidy
This penalty cannot exceed the penalty imposed if an employer did not offer coverage at all.
Large Group Employer Mandate
*Dependents = children to age 26, but not spouse
•Plan coverage must provide minimum value (MV) by covering at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan
•HHS/IRS will provide an MV calculator, similar to the AV calculator, to be used to determine whether the plan provides minimum value
•Plan must be affordable, defined as an employee-only plan premium less than 9.5% of employee’s household income (may look only at employee’s income from employer)
•Three safe harbors
**Contact us for a worksheet on how to calculate FTE's**



Full Time Employee

Whether an employer is required to offer health coverage is based on the number of full time employees. PPACA defines a full time employee as someone who works on average at least 30 hours/week.

•The guidance by the IRS sets forth safe harbors that employers may use, but are not required to use, to determine which employees are treated as full-time employees for purposes of PPACA. The safe harbors help employers avoid the need for month-to-month determinations of full-time employment status. Guidance is provided for determining ongoing employees, new variable hour employees and new seasonal employees. This Interim guidance will remain in effect through at least 2014.

•Although this takes effect 1/1/14, plan sponsors of health plans need to plan and test using the current guidelines as soon as possible. 

A full-time employee is one who works an average of at least 30 hours per week. Part-time employees are counted as full time equivalent employees. Seasonal workers are excluded unless they work for an employer for more than 120 days.


•To determine the total number of full time and full time equivalent employees for a particular month for purposes of determining if the employer is a “large employer,” the employer must add together:

–(a) the total number of full time employees for the month, plus

–(b) a number that is equal to the total number of hours worked in a month by part time employees, divided by 120.

–For example, if there are 45 full time employees and 30 part time employees who work 80 hours per month each:

•30 X 80 hours = 2400 hours/120 hours = 20 FTE

•45 full time + 20 FTEs = 65 full time/FTEs – meaning this is a large employer subject to pay or play.

The mandate defines a full-time employee as one who works 30 or more hours per week over a period set by the employer.

Here are the steps that must be taken to determine how many full-time employees you have:

Determine the period in time you are going to review (3-12 months)

Define how you are going to measure hours of services:

Hourly employees – must use actual hours of service, including paid vacation, jury duty, paid sick time, etc.

Non-hourly employees – can count actual hours of service, use a days worked equivalency (for instance, 8 hours for every day worked), or a weeks worked equivalency (crediting 40 hours for each week worked)


HSA's:  What's Changing??

Maximum deductibles for small group HSA plans will be $2000/individual & $4000/family.

Deductibles for individual plans and large group plans will be unaffected.

IRS Contribution limits will continue to trend upward.


30 hours per week is now considered full time

Employers can have a maximum of a 90 day waiting period to enroll new hires for benefits.

Nothing in PPACA requires an employer to offer coverage to spouses, just dependent children.

Small Groups in Colorado are now defined as 100 EE's or less.