Brass Tacks = Employers and Health Care Reform (ACA)

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We’ve had a lot of employers request a simple, at-a-glance way to see all the PPACA requirements that apply to their business. This is no easy task given group size, SHOP exchanges and self-funding variables! Let’s just look at a few provisions that are effective for the plan year beginning on or after 1/1/2014:


Here’s what (non-grandfathered) large group insured plans (more than 50 employees) should be focused on:

  •  Eligibility waiting period maximum of 90 days
  • Pre-ex not permitted on anyone
  • Annual dollar limits prohibited on essential health benefits
  • Protections for those in clinical trials
  • Out of pocket may not exceed $6,350/$12,700
  • Guarantee issue and renewal apply
  • Revised wellness program rules

If you are a (non-grandfathered) small group (50 or fewer employees) insured plan, keep a watch on the following requirements that apply BOTH inside and outside the SHOP exchange:

  • Modified community rating applies
  • Essential health benefits (EHBs) must be offered
  • Deductible generally may not exceed $2,000/$4,000
  • Out of pocket may not exceed $6,350/$12,700
  • Must meet metal levels (60%, 70%, 80%, 90%)
  • Guarantee issue and renewal apply (subject to participation)
  • Single risk pool
  • Revised wellness program rules
  • Eligibility waiting period maximum of 90 days
  • Pre-ex not permitted on anyone
  • Annual dollar limits prohibited on essential health benefits
  • Protections for those in clinical trials

If you are a small OR large self-funded plan, the following requirements should be on your radar:

  • Eligibility waiting period maximum of 90 days
  • Pre-ex not permitted on anyone
  • Annual dollar limits prohibited on essential health benefits
  • Protections for those in clinical trials
  • Out of pocket may not exceed $6,350/$12,700
  • Revised wellness program rules
  • Transitional reinsurance fee, including reporting

If you need any additional clarification, do not hesitate calling us at 916-932-2864 as we’re here to help!


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CA Maximum eligibility waiting period is 60 days


California AB 1083,(Chaptered Sept. 30, 2013)  enacts various provisions of the federal Affordable Care Act (ACA) into California state law and applies these provisions to insured health plans and HMO contracts in California, effective for plan years beginning on or after January 1, 2014. Most of the provisions in AB 1083 mirror those in the ACA, but one very important difference is that California’s maximum eligibility waiting period is 60 days after date of hire rather than 90 days.

Maximum 60-day Waiting Period Applies to both Small and Large Insured Plans

Initially it was widely believed that California’s maximum 60-day waiting period applied only to “small group” health insurance coverage, because AB 1083 primarily amends only the “small group” provisions in the California Insurance Code and the Health & Safety (H&S) Code. In recent months, however, California regulators (the California Department of Insurance and the Department of Managed Health Care) have confirmed that the maximum 60-day waiting period applies to large insured plans as well as to small insured plans. The AB 1083 provisions that limit the waiting period to 60 days are included not only in sections of the bill that amend California small group law, but also in sections that amend and replace California law that applies to all size health insurance and managed health care products (Health & Safety Code section 1357.51(c) and Insurance Code section 10198.7(c)).

Note that the requirements apply to insurers and HMOs, rather than to employers, so insurance contracts issued for 2014 should include the 60-day waiting period limit.

What Plans are Not Subject to the 60-day Waiting Period Limit?

California’s 60-day waiting period limit does not apply to self-insured plans nor to insured plans issued, renewed or delivered in other states. Such plans must comply with the ACA’s 90-day maximum waiting period, and insured plans in other states must comply with any state law limits in the applicable states. California’s 60-day limit also does not apply to insured dental or vision plans issued in California, although employers may elect to use the same waiting period for dental and vision as for medical plans.

Can a Plan Use “First of the Month after 60 days” rather than just 60 Days?

No, under both the California and federal waiting period limitations, the waiting period maximum requires coverage to be available as of the specified day (60th or 90th), not as of the first of the month following that day. Additionally, both the California and federal rules take all calendar days into account, not only business days. Since carriers generally allow enrollment only as of the first of the month, California employers may be required to offer coverage as of the first of the month following 30 days of employment, in order to meet the 60-day limit. At least one carrier has said informally that it is working on changing its enrollment systems to allow enrollment as of the 60th day after date of hire, but it remains to be seen whether this will be implemented and whether most carriers will take this approach.

The waiting period limitation does not include periods during which an individual could have been enrolled, but was not due to the individual’s failure to take the appropriate actions. For example, a plan or policy will be compliant if it allows an individual to enroll by the 60th day following date of hire if the individual submits a completed enrollment form, but an individual does not actually enroll until a later date because the individual fails to submit the completed enrollment form.

When in 2014 does the New 60-Day Limit Apply?

The new 60-day waiting period limit (and the federal 90-day waiting period limit) apply as of the first day of the “plan year” beginning on or after January 1, 2014. Thus, a calendar-year plan must comply as of January 1, 2014, and a July 1 plan year must comply as of July 1, 2014.

Small employers who are not required to file Form 5500s often do not specify their plan year. An issue may arise as to whether the plan year is the calendar year or the contract/policy year, especially if a small employer renews early (most carriers are offering “early renewal” as of December 1, 2013 to delay the effective date of certain ACA provisions). California AB 1083 refers to the federal definition at 45 CFR 144.103, which says “plan year” is:

  • The plan year specified in the plan document, or
  • If no plan year is specified in documents or there is no plan document, the plan year is the deductible or limit year used under the plan ( which is likely to be the calendar year for many health insurance contracts), or
  • If the plan does not impose deductibles on a yearly basis, the plan year is the policy year, or
  • In any other case, the plan year is the calendar year.

We conducted an informal poll of five health insurers that cover most of the small group market in California. They all said that any group renewing early will not be subject to the shorter waiting period limit until their 2014 renewal. So, a group that renews early December 1, 2013 will not have to comply with the 60-day waiting period limit until December 1, 2014. As of the date of this article, we have not heard otherwise from the California regulators. A word of caution: it appears—from the definition above—that if no plan year is specified and the deductible year is the calendar year, the regulators might be able to require compliance with the new 60-day limit as of January 1, 2014, even if the contract renewal date was December 1, 2013. We will keep you informed if we get additional information on this.

What is the Penalty for Non-Compliance? 

The penalties can be steep for carriers and others engaged in the business of insurance.  These penalties do not apply to employers.  Per Insurance Code section 10753.18, a  carrier who fails to comply with the 60-day limit on waiting periods could be subject to a fine of $2,500 for the first violation and $5,000 for each subsequent violation.  The penalty increases to $15,000 -$100,000 per violation, if the carrier repeatedly violates these requirements “with a frequency that indicates a general business practice or commits a knowing violation.”  Additionally, individuals or entities who are not carriers but who are  “engaged in the business of insurance” may be fined not more than $250 for the first violation, and $1,000-$2,000 for each subsequent violation or for a knowing violation.

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IMPORTANT HCR UPDATE: Employer Mandate Delayed until 2015

Have you heard the news? The ACA has been postponed!

Let’s talk details:

1. What’s Been Delayed

The play or pay provision requires employers with 50 or more employees to do the following to avoid penalties:

  1. Offer minimum essential coverage to 95 percent of full-time employees
  2. Offer minimum value (60 percent) coverage to full-time employees
  3. Offer affordable (less than 9.5 percent of income) coverage to full-time employees
  4. Consider employees who average 30 or more hours per week full-time for purposes of their health plan
  5. Count employees’ hours to determine whether they average 30 or more hours work per week
  6. Because of the delay, employers will not need to meet these requirements for 2014.

2. What’s Still Required

The delay in the play or pay requirement does not affect the insurance market reforms.  This means that these requirements are still scheduled to go into effect as of the start of the 2014 plan year (with penalties of up to $100 per person per day for non-compliance).  These requirements apply to all plans except as noted:

  1. Waiting periods cannot be more than 90 days from the date the employee becomes eligible
  2. All pre-existing condition limitations must be removed
  3. The out-of-pocket maximum cannot exceed $6,350 for individual and $12,700 for family coverage
  4. Essential health benefits may not have annual dollar limits
  5. Grandfathered plans must cover dependent children to age 26 even if the child has access to his/her own employer-provided coverage
  6. The new wellness program requirements
  7. For small insured plans, whether in or outside the exchange/marketplace, coverage must include the essential health benefits, at the bronze, silver, gold or platinum level, with a deductible of not more than $2,000 for individual and $4,000 for family coverage
  8. For small insured plans, whether in or outside the exchange/marketplace, modified community rating (rating classes are limited to age, tobacco use, family size and geographic area), guaranteed issue and guaranteed renewal (with some limitations) will apply

3. What other PPACA requirements must employers also meet:

  1. Reporting and payment of the PCORI fee by July 31, 2013 for plans that ended Oct. 1, 2012 through Dec. 31, 2012
  2. Timely distribution of any MLR rebates the plan may receive
  3. Providing a Summary of Benefits and Coverage (SBC) as part of open enrollment
  4. Distributing the DOL notice regarding the exchange by Oct. 1, 2013
  5. Reporting health care costs on the employee’s W-2 (the exemption for employers that issued fewer than 250 W-2s in the prior year or that contribute to a multiple employer plan will continue for the 2013 W-2)
  6. Paying the transitional reinsurance fee, due in January 2015

4. What’s Next?

The government stated in the delay announcements that the exchanges are still expected to begin open enrollment on Oct. 1, 2013.  It is unclear at this point how the delay of the play or pay requirement will affect determination of employee eligibility for subsidies.  Presumably the official guidance that Treasury has promised to provide next week will address this issue.

If you have questions about how this will impact you, never hesitate to contact us.

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Less than 50 Employees – Does Health Care Reform apply to me??

(Most of these do not apply to grandfathered plans)

Text Highlighted in Red = Requires action by the employer

o Mandate to cover specific benefits in the small group market – preventive, no preexisting for children, no lifetime limit, limitedannual maximum, no rescission, dependent to age 26 – 2010

o Existing plans grandfathered as of date of enactment from some, but not all, of the new plan requirements – 2010

o Non-discrimination requirements for insured plans – 2010

o An internal and external appeals process – 2010

o No prior authorization for emergency services – 2010

o Plans must allow designation of a primary care provider – 2010

o Small employer tax credits (for those who qualify) – 2010

o FSA, HSA, HRA definition of medical expenses – 2011

o Increase to 20% penalty for non-health withdrawals from an HSA or Archer MSA – 2011

o Wellness grants ‐ 2011 through 2015

o Increase Medicare payroll tax by 0.9% on earned income in excess of $200,000/$250,000 (unindexed); wages received after December 31,   2012

o Impose fee on health insurance and fully self-funded employer plans to fund comparative effectiveness research – 2012

o 3.8% investment tax on unearned income for taxpayers with AGI in excess of $200,000/$250,000

(unindexed) – taxable years after December 31, 2012

o Uniform explanation of coverage – November 1, 2012 (Fully Insured Clients – Carrier

o Notice of material modifications – September 2010 

o Elimination of tax deduction for retiree drug subsidies to employers – 2013

o Employee Notification of the Exchange – March 1, 2013 (This regulation was delayed as of 1/23/13 – ETA late 2013)

o Limit salary deferrals to FSAs to $2,500 – 2013, then indexed to inflation

o Eliminate deduction for Medicare Part D employer subsidy – 2013

o Raise 7.5% adjusted gross income (AGI) floor on medical expense deduction to 10% – 2013

o No preexisting condition exclusions for all participants – 2014

o Guaranteed issue – 2014

o Guaranteed renewability – 2014

o Must cover minimum benefit package – 2014

o Allows HIPAA wellness discount up to 30%(50%at Secretaries’ discretion) – 2014

o Limits on out-of-pocket cost sharing, maximum deductibles – 2014

o Coverage of routine costs associated with clinical trials – 2014

o Prohibition on waiting periods more than 90 days – 2014

o Must provide a minimum actuarial value for benefits – 2014

o File an annual report with HHS on employer and plan information – 2014

o Eliminate annual limits on benefits – 2014

o Limits premium underwriting – 2014

o Plan disclosure of claims payment policies and rating practices – 2014

o New SHOP Exchange for small-group and individual markets – 2014

o Limits on underwriting – 2014

o W2 reporting – 2013 tracking to be reported 2014; > 250 W-2’s

o IRS reporting – 2014

o 40% excise tax on high-cost plans – 2018

As always, confused?  Have questions?  Not sure what applies? 

Call your Health Care Reform Experts at 916-932-2357.

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Exchange Model Notices – EMPLOYER ACTION REQUIRED!

On May 8, the U.S. Department of Labor issued employer notices regarding the Health Insurance Exchanges (Marketplaces).

In a nutshell, employers have until October 1, 2013 to decide whether they will offer or not offer insurance coverage to their employees.

Below are links to two forms: one for employers offering coverage and those which will not. The notice text must be used and there are penalties for not distributing them by October 1, 2013, the date open enrollment in the exchanges is set to begin.

        Notices were also released regarding COBRA:

Please contact us if you have any questions, we’re happy to assist!

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Covered California Takes A Major Step To Launching SHOP


Contract Awarded to Pinnacle Claims Management, Inc. to Administer Innovative, Affordable Marketplace

Sacramento, Calif. — The Covered California Board has approved Irvine-based Pinnacle Claims Management, Inc. (PCMI) to administer its Small Business Health Options Program (SHOP). The program will offer approximately 375,000 California small businesses unprecedented access to a considerable array of affordable health coverage options for its employees. California is one of a few states nationally that will be able to offer small businesses an array of health insurance options for their employees come this fall.  This contract is supported by federal funds provided under the Affordable Care Act, and continued funding will be provided by Covered California administrative revenue starting in 2015.

“We are excited to partner with PCMI in this historic moment when we can help thousands of small businesses provide affordable health care for their employees,” said Peter V. Lee, Executive Director for Covered California. “PCMI has demonstrated the requisite knowledge of California’s small business community and has shown us they can move quickly and effectively in providing all the services we require to help Covered California get up and running this fall.”

Small employers participating in the SHOP will be able to provide their employees with a broader choice of health plans that generally has only been available to large employers. Certain small businesses — those with 25 or fewer full-time equivalent employees paid an average annual wage of less than $50,000 — may be eligible to receive a 50 percent small business health care tax credit for coverage purchased through the SHOP.

Through SHOP, employers will be able to pick the level of support for their employees, and in turn employees will be able to pick from those options the specific health plan that is right for them and their families. All plans will provide a standardized set of benefits and cost sharing to make it easy for employers and employees alike to make apples-to-apples comparisons.

PCMI and its affiliates have more than 15 years of experience providing employer- sponsored health benefit management services, with a current client base of some 800 small employer groups in California and Arizona.

The contract with PCMI will cost an estimated $50 million over the three year term and includes the initial implementation of the program’s administration functions and ongoing operating costs. PCMI will provide eligibility, enrollment, marketing and fulfillment services, as well as agent and general agent sales management, financial management and the small business call center services.

“PCMI is thrilled to work with Covered California on this endeavor and to be part of this historic change in health care. We are looking forward to helping Covered California provide the services that will support employers and their employees as they enroll in the health plans offered through Covered California,” said David Zanze, President of PCMI.

Covered California will provide for health plan selection, certification and ongoing management of plan relationships, lead marketing efforts and provide policy guidance.

About Covered California

California was the first state to create a health benefit exchange following the passage of federal health care reform. Covered California is charged with creating a new insurance marketplace in which individuals and small businesses can get access to health insurance. With coverage starting in 2014, Covered California will help individuals compare and choose a health plan that works best for their health needs and budget. Financial help will be available from the federal government to help lower costs for people who qualify on a sliding scale. Small businesses will be able to purchase competitively priced health plans and offer their employees the ability to choose from an array of plans and may qualify for federal tax credits.

Covered California is an independent part of the state government whose only job is to make the new market work for California’s consumers, and is overseen by a five-member board appointed by the Governor and Legislature.

For more information on Covered California, please visit


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Affordable Care Act – Unsure of Personal Impact

The majority of Americans are still unsure how the Affordable Care Act (ACA) will impact them. These are the findings from Kaiser Family Foundation’s March 2013 Health Tracking Poll. Here are the highlights of the March poll.

Affordable Care Act – Unsure of Personal Impact

According to the poll, two-thirds of the uninsured and a majority (57%) of Americans overall say they have too little information to know how the Affordable Care Act will impact them.

How ACA Will Impact Americans

Affordable Care Act – Unaware of Medicaid Expansion & Insurance Marketplaces

Generally, the public is not aware or knowledgable on the decisions states are making about ACA Medicaid expansion and establishing state insurance marketplaces. The poll found 78% did not know enough about their state’s decision to participate in Medicaid expansion, and 48% knew nothing about their state’s decision for the health insurance marketplace.

ACA Exchange Information

 Affordable Care Act – Favorable/Unfavorable

According to the poll, the country remains fairly evenly divided on the ACA, with 40% holding an unfavorable view of the law and 37% holding a favorable one.

How ACA will impact americans

Affordable Care Act – Future Personal Impact

Looking ahead, the public’s expectations about ACA’s likely impact on their own families tends to be more negative than positive, with 29% saying the ACA will make them worse off, 21% saying it will make them better off, and four in ten saying it won’t make much difference.

ACA Impact on Americans

Affordable Care Act – Most Popular Provisions

The most popular provisions of the ACA, including tax credits to small businesses and the closure of the Medicare drug coverage gap known as the “doughnut hole,” remain among its least widely recognized, while the law’s least popular provision, the individual mandate requiring most people to obtain health coverage, is its most widely recognized.

ACA Impact on Americans

Read the full Kaiser Family Foundation Health Tracking Poll here.

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