Impact of healthcare reform on employers

Whether you are part of a small business or large group, healthcare reform will bring changes to your business.

It's important to note that the federal definition of a large employer is one with 101 or more employees. A small employer is defined as 1 – 100 employees. States can modify the definition of a large employer to 51 or more employees, and small employer to 1 – 50 employees until January 1, 2016.

Healthcare changes that matter to your business and your employees

How is Healthcare Reform impacting your business? What can you do to help your company better prepare for 2014.

Healthcare Reform Resources

Online Educational Webinars

Humana hosts webinars for small and large employers to offer education on the new requirements of healthcare reform and what you need to do to prepare for changes to your benefit programs.

Watch for upcoming webinars here and register in advance, or view our recently archived webinars on-demand.

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Learn what is happening around the country on Health Reform. View highlights from coast to coast.

Review the Affordable Care Act provisions

For more detailed information on the provisions already in effect and those upcoming, as well as what Humana is doing to support our customers. See our Healthcare Reform Provisions Timeline.

Below reviews upcoming reform provisions and support documents which affects Small Business, Large Groups and occasionally both.

Small Business

Small Employer is defined as having 1-99 employees.

Essential benefits

Individual and small group plans offered inside/outside the exchange must provide the essential benefits package. The minimum benefit package applies to individual and small group new business in 2014 and non-grandfathered existing business. It includes: Ambulatory patient services, Emergency services, Hospitalization, Maternity and newborn care, Mental health & substance abuse, Prescription drug, Rehabilitative & habilitative services/devices, Lab services, Preventive/wellness, Disease management and Pediatric services including oral & vision care.

Merged markets

States are allowed to merge together individual and small group markets if the state determines it is appropriate.

Rating restrictions

Rating restrictions go into effect for new individual and fully insured small group plans. Insurance companies cannot base premiums on health status, claims experience or gender. Premiums can only vary by age, geography, family size, or tobacco use (no more than 1.5:1).

Adjusted Community Rating – the basics (1-99 employees): Watch video | Download PDF (82.7 Kb)
Healthcare Reform eBook (1-99 employees): Download PDF (1.69 Mb)

Healthcare Reform Benefits Decisions Roadmap: Download PDF (990 Kb)
A guide to understanding employer benefits options

Large Groups

A large employer is defined as one with 99 or more employees.

Comparative effectiveness fee

Employers sponsoring group health plans started paying $1 per participant in 2012. This fee increases in 2013 to $2 per participant. Thereafter the amount will be indexed to national health expenditures. This fee phases out by 2019. Revenue from the fee will fund research to determine the effectiveness of various types of medical treatments.

Comparative Effectiveness Fee – the basics (99+ employees): Watch video | Download PDF (84.8 Kb)

Employer Form 5500

Large employers will be subjected to expanded 5500 reporting requirements to include information on the health insurance coverage of their employees.

Transitional reinsurance program

A transitional reinsurance program will be established for the individual market and funded by individual and group health plan assessments (totaling $25 billion between 2014 – 2016). This program will provide payments to plans in the individual market that cover high-risk individuals.

Transitional Reinsurance Fees - the basics (99+ employees): Watch video | Download PDF (220 Kb)
Healthcare Reform eBook (99+ employees): Download PDF (1.69 Mb)

Small Business and Large Groups

Employer reporting requirements

Employers with 250 or more W-2s must show employees the total cost of their group health benefit plan coverage on their W-2 forms starting with the 2012 tax reporting year.

In 2013 employers will be required to notify employees:

  • About the availability of the Exchange
  • They may be eligible for a subsidy under the Individual Exchange if the employer’s plan’s share of the total allowed cost of benefits provided is less than 60% of such costs
  • If the employee purchases coverage in the Individual Exchange, he or she will lose the employer’s coverage contribution

All employees need to be notified by later summer or early fall of 2013 based on a recent update from the U.S. Department of Labor (DOL). It is expected that DOL will issue future guidance on complying with this requirement.

In 2014, large employers will be subjected to expanded 5500 reporting requirements to include information on the health insurance coverage of their employees.

Flexible spending account contributions

Contributions to flexible spending accounts for medical expenses are limited to $2,500 per year.

Flexible Spending Accounts (FSAs) - the basics (all businesses): Watch video | Download PDF (175 Kb)

Cost-sharing limits

For 2014, the out of pocket maximums are the same as the maximum out-of-pocket limits applicable to HSA-compatible high deductible health plans under IRS Code (note that the 2012 maximums are $6,050 for self-only coverage and $12,100 for family coverage). For future years, the 2014 limits are increased by the premium adjustment percentage - the percentage increase in the average per capita premium for health insurance coverage. These limits impact individual, small group and large group new business in 2014 and existing non-grandfathered business.

Guaranteed availability of insurance

Also known as "guaranteed issue," with this provision health insurers must accept every individual and employer who applies for coverage.

Health insurance Exchanges

Exchanges are online marketplaces. Insurance Exchanges will be created, along with Small Business Health Options Program (SHOP) Exchanges. In 2014, individuals and small businesses with up to 100 employees can purchase health insurance on these Exchanges. States can allow large employers to participate beginning in 2017.

No annual limits on coverage

Annual limits on essential health benefits are prohibited. However, this does not apply to grandfathered individual plans.

Pre-existing conditions

Individual and group health plans can no longer impose pre-existing condition exclusions for any person of any age. This includes children under the age of 19 and does not apply to grandfathered individual plans.

Wellness programs

The law permits employers to offer employee rewards of up to 30% of the cost of coverage for participating in a wellness program and meeting certain health-related standards.

Employer Shared Responsibility

PROVISION DELAYED. NOW Effective Jan. 1, 2015: Employers with 50 or more full-time employees or full-time equivalents will pay an assessment if they don’t offer adequate and affordable coverage. For more information, visit

The U.S. Treasury Department released final regulations on Employer Shared Responsibility in February 2014. It will take effect Jan. 1, 2015, for employers with 100 or more full-time or full-time equivalent employees. Employers with between 50 and 99 full-time employees (including full-time equivalents) are exempt from the Shared Responsibility penalty until 2016, if the employer provides an appropriate certification and meets certain conditions.

Beginning in 2015 for employers with 100 or more full-time employees (including full-time equivalent employees) and beginning in 2016 for employers with 50 or more full time employees (including full time equivalent employees) must offer coverage that meets the requirements below to full-time employees (those working 30 hours a week or more) and their dependent children or face potential penalties:

  • Meets the definition of minimum essential coverage (MEC)
  • Offers a plan that will pay for at least 60% of expected costs for an average person or family (this is 60% actuarial value, also known as minimum value)
  • Ensure that the coverage is affordable by limiting an employee’s share of the premium contribution to no more than 9.5% of the employee’s income for that employer
  • Make the coverage available to at least 70% of its full-time employees and their dependent children in 2015; this will increase to 95% in 2016

How do you know if you meet the requirements?

Minimum essential coverage (MEC) is defined by the ACA as an employer-sponsored plan offered in a state (including a self-funded plan) or health coverage provided by the government. However, a plan consisting solely of “excepted benefits” such as stand-alone dental coverage is not MEC. Since you are offering a group health plan through Humana or a self-funded plan for which Humana is the administrator, the MEC requirement is satisfied.

Minimum value: All of Humana’s standard plans meet the minimum value requirement.

Affordability*: There are three safe harbor methods for determining affordability:

  • 9.5% of an employee’s W-2 wages (not reduced for salary reductions under a 401(k) plan or cafeteria plan)
  • 9.5% of an employee’s monthly wages (hourly rate x 130 hours per month)
  • 9.5% of the Federal Poverty Level for a single individual

What are the penalties for not meeting the requirements?

If an employer does not offer minimum essential coverage for any calendar month, and any full-time employee obtains a premium subsidy or cost-sharing reduction through the Federal Marketplace or a state-based exchange, the penalty will be $2,000 per year multiplied by the number of full-time employees for each calendar month of the year, minus the first 80 full-time employees (this number decreases to 30 in 2016).

If an employer offers minimum essential coverage but it doesn’t meet the minimum value or affordability guidelines and any full-time employee obtains a subsidy or cost-sharing reduction through the Federal Marketplace or a state-based exchange, the penalty will be the lessor of $3,000 per each full-time employee certified as eligible to receive a premium tax credit or cost-sharing subsidy or $2,000 per year for each full-time employee, minus the first 80 employees (this number decreases to 30 in 2016). This penalty will be calculated calendar month to calendar month.

What is the compliance date?

For employers with a plan year on a calendar year basis, it is 1/1/15. Whether an employer needs to comply as of 1/1/15 or on its plan year date (for those with non-calendar year plan years), depends on whether it qualifies for transition relief that would enable a delay until the plan year date. For more information, consult the final rule posted here.

Non-discrimination rules for employers

The non-discrimination rules that currently apply to self-funded health plans are expanded to group fully insured health plans. Plans cannot base an employee's eligibility or continued eligibility for coverage on hourly or annual salary. Employer-provided insurance may not discriminate between employees. This will prevent employers from providing enhanced insurance benefits based on an employee's length of service. Under the new rules, plans may be subject to penalties of up to $100 per enrollee per day for violating the requirements.

Note: HHS has delayed application of the non-discrimination rules to fully insured health plans until additional regulations or other guidance are issued. The recent guidance makes clear that the Treasury Department will not apply the penalties until additional guidance or rules are issued on the nondiscrimination requirements.

What employers are expecting from healthcare reform

Rising healthcare costs are creating the need for employers to review their health plan offerings. And with healthcare reform, even more changes are on their way. Learn what other employers are saying about how they plan to address these challenges.

What others are saying

In 2012, the Kaiser Family Foundation reported that the average premium for single and family coverage rose by a modest 3% and 4% respectively between 2011 and 2012. Interestingly, the growth in premiums has outpaced increases in inflation (2.3% since 2011 and 28% since 2002).

As reported in the 2012 Deloitte survey of U.S employers:

  • 32% of employers will consider dropping employee benefits if premium costs continue to rise faster than inflation
  • 69% of employers plan to increase employee cost-sharing (deductibles and co-payments) in the next 3-5 years, while 68% plan to increase employee premium contributions

The state of the workplace

For employers, the task of managing premium cost-sharing is not simple. And with employees who vary widely in income and health, it gets even harder to predict what's in store. In 2014, for example, employers could be penalized if they have employees whose coverage is subsidized through state insurance Exchanges because these employee's group premiums exceed a percentage of their household income.

And that's just one example of how complex managing healthcare reform can be for your company.

What can you do?

By preparing yourself and your organization with information, you can manage healthcare reform successfully.

According to a Towers Watson survey, some companies are already taking steps to inform and educate themselves on healthcare reform. Here are some steps you can take right away:

  • Consider healthcare reform in the context of your total business. How can healthcare reform impact your business on a macro and micro level?
  • Keep up with final regulations, as well as those that go into effect in the meantime.
  • Take a long view, but take short-term steps now. How does healthcare reform affect the business financially in the long term? How do healthcare costs affect my employees right now?
  • Keep up with your numbers. They may change over time. Keep a close eye on your business' healthcare costs and monitor them for increases or decreases.
  • Balance cost-sharing tactics with other options.
  • Evaluate your retiree medical strategy. Pensions? Retirement benefits? Coverage? Consider it all.
  • Don't assume that any provision will go away. It's best to plan for the current law. If it happens, you're ready. If not, you can modify your strategy.

Where do we go from here?

The only constant is change.

The best thing you can do to protect your employees from this kind of uncertainty is to stay informed. Keep on top of the latest healthcare reform news at websites such as those from the Kaiser Family Foundation or the George Washington University and the Robert Wood Johnson Foundation