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First Quarter Affordable Healthcare Act Update

Whether you love it or hate it, absent a significant political shift, the ACA is here to stay, at least for the foreseeable future.

The Patient Protection and Affordable Care Act (“ACA”) was signed into law by President Obama on March 23, 2010, and the Supreme Court largely upheld its provisions on June 28, 2012. Whether you love it or hate it, absent a significant political shift, the ACA is here to stay, at least for the foreseeable future.

The purpose of this column is to provide practical, accessible information about the ACA to businesses trying to navigate its provisions. Each quarter, I will explore a portion of the ACA, with an emphasis on identifying those sections most likely to impact Memphis businesses and employers. If you are too impatient to wait, you can read the 2,400 pages of the ACA for yourself by clicking here.
 
Although many of the provisions of the ACA are not yet effective, much has already changed as a result of the law. The following are a few of the major changes that are already in place or will be put in place, pending release of the relevant regulations:
 

Big Changes for the Insurance Industry

 
The ACA imposes new requirements on insurance companies to provide expanded coverage:
  • Dependent Coverage Up to Age 26
  • Applies to sons, daughters, stepsons and stepdaughters (but not to grandchildren)
  • Preventative Care without Co-Pays or Deductibles
  • Includes certain types of screenings, immunizations, routine pediatric care, and certain types of preventative care and screenings related to women’s health
  • No Exclusion for Preexisting Conditions
  • No Lifetime Dollar Limits (in connection with Essential Health Benefits)
 
In addition, insurance companies are now required to spend a certain percentage of premiums collected for medical claims or certain quality improvement initiatives. If these spending requirements are not satisfied, insurers must rebate a portion of premiums collected.
 

Individual Mandate

 
The ACA also imposes a new requirement on individuals. As of January 1, 2014, all citizens and legal residents must have “minimum essential coverage.”
  • Most employer-sponsored health plans will satisfy the requirements of the individual mandate.
  • In 2014, those without minimum essential coverage are subject to a penalty of the greater of 1% of income or $95 per uninsured family member.
  • The penalty will increase in future years.
 

Subsidies

 
To assist people in satisfying the requirements of the individual mandate, subsidies are available through the healthcare exchanges.
 
The eligibility criteria for receiving a subsidy are:
1.       Household income less than 400% of the federal poverty level
a.       For an individual, 400% of the federal poverty level is $45,960
b.      For a family of four, 400% of the federal poverty level is $94,200
2.       Not eligible for certain other government-sponsored programs
a.       E.g., TRICARE, Medicaid, CHIP, etc.
3.       Not eligible for an employer-sponsored plan that is “affordable” and provides “minimum                      value”
a.       “Affordable” means that the premiums paid by the employee consume less than 9.5% of income
b.      “Minimum Value” means that the plan covers at least 60% of healthcare costs
 

Employer Mandate

 
The employer mandate was scheduled to become effective on January 1, 2014. Last year, however, the effective date of the employer mandate was extended to January 1, 2015.
 
In general terms, the employer mandate requires large employers (50 or more full-time equivalent employees) to provide employees with access to health insurance that is both affordable and provides minimum value.
  • The calculation of the number of “full time equivalent” employees involves a formula that accounts for hours worked by part-time employees.
 
Large employers that fail to provide access to the required coverage are subject to penalties. These penalties are triggered when a full-time employee seeks, and qualifies for, a subsidy.
  • If the employer does not offer an eligible plan, the penalty is $2,000 per full-time employee (less the first 30 employees).
  • If the employer offers an eligible plan, but it is not affordable to one or more employees, the penalty is the lesser of:
  • $3,000 per full-time employee receiving a subsidy
  • $2,000 per full-time employee (less the first 30 employees)
 
It is strongly recommended that all large employers immediately take steps to evaluate their workforce and healthcare costs to evaluate how best to respond to the employer mandate.
 
Many of these topics will be covered in greater detail in future posts, but I thought it would be helpful to start with a general overview of the portions of the ACA that will most directly impact companies and employers. I hope that these posts will provide much-needed clarity to this complex area. I am happy to incorporate your questions and/or suggestions into future posts. If you think our Memphis business community would benefit from discussion of a particular question or topic, please contact me at mtauer@glankler.com



Glankler Brown attorney Michael D. Tauer works with clients to prevent and resolve disputes. Michael concentrates his practice in complex litigation, health care regulation, and corporate governance. After graduating from Memphis University School, Michael attended the University of Pennsylvania, where he earned his B.A. in psychology. After college, Michael designed and built sets for plays in Philadelphia, Pennsylvania before moving to Boston, Massachusetts for law school. Michael graduated magna cum laude from Boston University School of Law and was awarded the G. Joseph Tauro Distinguished Scholar Award, the Paul J. Liacos Scholar Award, the Edward F. Hennessey Distinguished Scholar Award, and the Dean’s Award for Contracts. After law school, Michael had the privilege of serving as a law clerk for the Honorable Martha B. Sosman of the Supreme Judicial Court of Massachusetts. Michael is a regular presenter on legal issues involving health law, the Affordable Care Act, labor and employment law, and positive employee relations. He was recently named a Mid South SuperLawyer Rising Star.




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