Originally posted by United Benefit Advisors (UBA)
February brought two significant final regulations that affect an employer’s compliance obligations under the Patient Protection and Affordable Care Act (PPACA). The first, on the employer-shared responsibility (“play or pay”) requirements, delays this requirement for many employers with 50 to 99 employees and includes a number of clarifications from the rules described in the proposed regulation. The second, on eligibility waiting period requirements, is very similar to the proposed rule.
Employer-Shared Responsibility/Play or Pay Requirement
The employer-shared responsibility (“play or pay”) requirement obligates employers that are considered large to offer coverage at a certain level to full-time employees or pay penalties. This requirement was originally scheduled to apply starting in 2014, but this summer was delayed to 2015. The final regulation further delays the effective date to 2016 for mid-sized employers that meet certain requirements.
The final regulation provides that non-calendar year plans that must meet the play or pay requirements in 2015 (generally, this is employers that have 100 full-time or full-time equivalent employees) may wait until the start of their 2015 plan year to offer coverage to most of their full-time employees. The IRS has said that it does not intend to provide a similar delay for non-calendar year plans that must first comply in 2016. “Full-time” still means that the employee averages 30 or more hours of work per week. (Any change to this threshold will have to be made by Congress.)
The final regulation also makes it very clear that employers that prefer to count an employee’s hours at the end of each month, instead of using the look-back measurement and stability periods, have that option. Different methods may be used between hourly and salaried employees, those covered or not covered under collective bargaining agreements, and those covered by different bargaining agreements.
Eligibility Waiting Period Requirement
Starting in 2014, a plan may not have an eligibility waiting period that is longer than 90 calendar days. This requirement applies to all plans. The requirement applies as of the first day of the 2014 plan year so an employer that has, for instance, a July 1 plan year does not need to adjust its waiting period until July 1.
The release of the final eligibility waiting period regulation and the partial delay of the play or pay requirements for some employers do not affect, or in any way delay, the requirement that all group health plans reduce their waiting period to 90 days as of the first day of their 2014 plan year. If, however, a state insurance law has a shorter allowable period, like California does, insured plans in that state must meet the shorter period.
Question of the Month
Q: I know there are new out-of-pocket maximum rules beginning in 2014. Can you explain them?
A: Beginning with the 2014 plan year, plans may not have an out-of-pocket maximum greater than $6,350 for single coverage and $12,700 for family coverage. The out-of-pocket maximum must include copays (which is a change for many plans), coinsurance and deductible. It does not include premiums. The out-of-pocket maximum only needs to apply to in-network essential health benefits for covered services.
To help plans adjust to the new requirements, there are two limited exceptions:
- For 2014 only, a plan that has different providers (such as one provider for major medical and another provider for prescription drug benefits) may simply apply the out-of-pocket maximum to the major medical benefit. If the separate (often prescription drug) benefit has an out-of-pocket maximum, it cannot exceed $6,350 for single coverage and $12,700 for family coverage.
- For years after 2014, a plan that has different providers may divide the out-of-pocket maximum among the benefits provided by the different providers, as long as the total does not exceed the maximum.
Example: In 2015, the out-of-pocket maximum is expected to be $6,750 for single coverage and $13,500 for family coverage. An employer could use, for instance, a $5,000 deductible for single and a $10,000 deductible for family major medical coverage and a $1,750 deductible for single and a $3,500 deductible for family prescription drug coverage.
PPACA does not override mental health parity requirements, so separate out-of-pocket maximums may not be used for mental health coverage.