Affordable Care Act Updates (Benefit Minute)
This post summarizes recent regulatory and judicial activity impacting the Affordable Care Act (ACA).
Contraceptive Coverage Mandate
The Supreme Court ruled that the federal government violated the Religious Freedom Restoration Act by requiring closely-held for-profit faith-based employers to provide contraceptive coverage as part of ACA’s preventive care requirements for group health plans. The Religious Freedom Restoration Act provides that the federal government shall not substantially burden a person’s exercise of religion unless the burden is the least restrictive means to further a compelling government interest.
The Court determined that the contraceptive coverage mandate imposes a substantial burden on the exercise of the sincerely held religious beliefs of the owners because failure to comply would result in significant penalties to the employer. The Court also determined that there is a less restrictive way to accomplish the government’s interest of providing contraceptive services without cost-sharing by referring to the accommodation already provided to non-profit religious organizations. However, this accommodation has already been challenged by non-profit religious organizations who object to completing a form to qualify for the accommodation. Therefore, it is not clear what process, if any, a closely-held for-profit faith-based employer must follow in order to exclude some or all contraceptive services from group health plan coverage.
In response to these developments, the Department of Labor issued an FAQ stating that if an ERISA plan excludes all or a subset of contraceptive services, the SPD or SMM must describe the extent of the limitation or exclusion.
Premium Tax Credits
Premium tax credits are available to individuals with household income up to 400% of FPL who purchase coverage in a Health Insurance Marketplace. ACA speaks specifically to a Marketplace “established by the State”. Currently, 16 states (CA, CO, CT, HI, ID, KY, MD, MA, MN, NV, NM, NY, OR, RI, VT, and WA) and the District of Columbia have established a Marketplace. The remaining states are using the federally-facilitated Marketplaces (through healthcare.gov).
Recently, two separate courts rendered conflicting rulings on whether premium tax credits can be provided when health insurance is purchased in the federal Marketplaces. The D.C. Circuit Court ruled that the plain language of ACA only allows premium tax credits in state Marketplaces, so the IRS exceeded its authority by allowing them to be offered through the federal Marketplaces. Conversely, the Fourth Circuit determined that the language of ACA is ambiguous and gave deference to the IRS to interpret how the premium tax credits were intended to apply.
The federal government has requested a rehearing by the full D.C. Circuit Court and has indicated that premium tax credits will remain available in federal Marketplaces in the meantime. It is possible that this issue could ultimately be resolved by the Supreme Court.
ACA Reporting Forms
The IRS has issued draft versions of the following forms that will be used by insurers, employers and individuals to report information to the IRS that is necessary to administer the individual mandate, premium tax credits and employer shared responsibility requirements:
- Form 1095-A, Health Insurance Marketplace Statement
- Form 1094-B, Transmittal of Health Coverage Information Returns
- Form 1095-B, Health Coverage
- Form 1095-B, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
- Form 8962, Premium Tax Credit
- Form 8965, Health Coverage Exemptions
Maximum Individual Mandate Penalty
Individuals who do not maintain minimum essential coverage must pay a penalty for each month of noncompliance with the mandate. For 2014, the annual penalty is the greater of $95 per individual ($285 for a family) or 1% of income above the tax filing threshold. The penalty cannot exceed the national average premium for a Bronze plan for the relevant family size. The IRS recently announced that the maximum penalty for 2014 is $2,448 per individual, up to a family total of $12,240. These maximums will only impact high wage earners who choose to go uninsured.
Orientation Period Final Regulations
For plan years beginning in 2014, ACA prohibits waiting periods in excess of 90 days for group health plans. Final regulations have been issued that allow for a reasonable and bona fide employment-based orientation period of up to one calendar month before the 90-day waiting period begins. The final regulations describe the orientation period as a period during which the employer and employee will evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes will begin.
The orientation period will allow employers to require a new employee to wait more than 90 days before health coverage begins. However, employers subject to the employer mandate will still have to provide coverage by the first day of the fourth full calendar month of employment to avoid penalty exposure.