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GAO releases report on employer-sponsored coverage in the ACA

Posted on August 14, 2012 | No Comments

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Key Developments

The Government Accountability Office (GAO) released a report yesterday which reviews estimates of the impact of the Affordable Care Act (ACA) on employer-sponsored coverage. According to some researchers, the ACA’s Medicaid expansion and subsidized coverage for low- and moderate-income people who buy health insurance through Exchanges beginning may discourage employers from offering coverage. However, other researchers believe that the financial penalties imposed by the ACA will actually encourage employers to offer coverage. The GAO report examines 27 studies published between January 1, 2009 and March 30, 2012 that offer estimates regarding changes in employer-sponsored health coverage as a result of the ACA.

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The Department of Labor (DOL) issued a final rule regarding excepted benefits and stand-alone dental and vision plans. In the original proposed rule if the wraparound coverage met a number of requirements, it would have been considered an excepted benefit that would not disqualify the employee from getting subsidized coverage on the exchanges. However, this language is excluded from the final rule issued. The DOL said it intends to publish regulations on the topic of wraparound coverage in the future, taking into account the extensive comments received on the topic.
Today, the US Department of Health and Human Services (HHS), the Internal Revenue Service (IRS) and the Employee Benefits Security Administration (EBSA) released a final rule concerning the 90-day waiting period limitation. The final rule states that group health insurance plans cannot apply a waiting period that exceeds 90 days after the employee has been approved for coverage. The rule further states that small group plan orientation periods, the time it takes from hire to when the plan deems the employee is eligible for coverage, cannot exceed one month.
The US Department of Health and Human Services (HHS), the Internal Revenue Service (IRS) and the Employee Benefits Security Administration (EBSA) released several rules today concerning the 90-day waiting period limitation before insurance coverage can become effective. The final rule states that group health insurance plans cannot apply a waiting period that exceeds 90 days beginning January 2015. The proposed rule clarifies the 90-day limitation in terms of the length of employment-based orientation periods, stating that one month is the reasonable limit for employment-based orientation periods.
New guidance released by the Internal Revenue Service (IRS) explains Affordable Care Act (ACA) market interactions on health reimbursement arrangements (HRA), flexible savings accounts (FSA), and other employer-related options. The guidance states that group health plans used to purchase coverage on the Marketplaces, such as HRA and FSA, will not be considered as integrated for the purposes of determining annual dollar limits or preventive service requirements. Moreover, the IRS guidance states that employers not offering insurance coverage may try to use "excepted only benefits" HRA plans to count toward employee compensation.
The Internal Revenue Service (IRS) released two proposed rules concerning employer coverage requirements under the Affordable Care Act (ACA). The first rule addresses reporting requirements employers must satisfy in order to be deemed compliant with the ACA. Businesses with more than 50 full-time equivalent employees must offer affordable insurance, statutorily defined as less than 9.5% of the employee's income. This provision of the ACA was delayed until 2015, but the IRS is encouraging employers to comply in the interim. The second proposed rule described the method by which employers offering minimum essential coverage will report the type and period of coverage they offer to their employees. The IRS will use this provided information to determine if the employer has satisfied the coverage requirements under the law.
The Internal Revenue Service (IRS) published new guidance concerning the implications of delaying the employer shared responsibility provision of the Affordable Care Act (ACA). The guidance states a streamlined version of the rules will go in place at the onset of 2015. In the interim, IRS is encouraging employers to offer coverage and report the relevant income and insurance data, although they will not be penalized for non-compliance. Additionally, the guidance states that individuals not receiving affordable coverage from their employer will be able to obtain insurance from the Exchanges and will be subsidy-eligible based upon their income.
In a letter addressed to Rep. Paul Ryan, the Congressional Budget Office (CBO) stated that the administration's decision to delay the employer shared responsibility (employer mandate) provisions of the Affordable Care Act (ACA) would cost the government $12 billion over 10 years. CBO estimated that around $10 billion would be lost from the one-year delay in collecting penalties from employers that did not offer comprehensive, affordable coverage. An additional $3 billion is projected to be lost from the government over-allocating subsidies to individuals qualifying for premium assistance. CBO did, however, project the delay to generate around $1 billion in savings as a result of taxable compensation from people enrolling in Exchanges that would have otherwise received employer-sponsored coverage.
A new Urban Institute report explains how the employer shared responsibility payment, or employer mandate, has substantially less impact on the success of the Affordable Care Act (ACA) than the individual mandate. It’s No Contest: The ACA’s Employer Mandate Has Far Less Effect on Coverage and Costs Than the Individual Mandate, funded by the Robert Wood Johnson Foundation, details how Urban Institute utilized their Health Insurance Policy Simulation Model to compare coverage distribution with the full ACA, ACA without the employer mandate, and ACA without the individual mandate. The Urban Institute purports that although the delay of the employer mandate will have little appreciable impact on cost and coverage associated with the ACA, delaying the individual mandate would remove a pillar of the ACA, thereby inhibiting fulfillment of the law's overarching intent.
ADP Research Institute released their inaugural annual report highlighting how companies are preparing for the implementation of the Affordable Care Act (ACA) and its impact on employer-sponsored coverage. ADP Annual Health Benefits Report: 2013 Benchmarks and Trends for Large Companies analyzes health care premiums and demographic variations in eligibility and participation. Important findings from the initial report include:
  • Between 2010 and 2013, eligibility and participation in employer-sponsored plans remained relatively steady. Around 88% of full-time employers offer health insurance, and 65% of employees accept it.
  • Premium costs rose moderately for all age groups, leveling off more so in the last two years. Increases were greatest for employees under 30, half of whom accepted employer-sponsored coverage.
  • Employees with higher incomes had higher premiums, attributable to these individuals also having more dependents. Premium contributions as a percentage of income was also higher for employees earning lower wages.
According to a study recently released by the Urban Institute, capping the tax exemption for employer-sponsored coverage could generate $264 billion in revenue by 2023. Limiting the Tax Exclusion of Employer-Sponsored Health Insurance Premiums: Revenue Potential and Distributional Consequences, funded by the Robert Wood Johnson Foundation, recommends capping the top 25% most expensive health benefits to raise this amount. The study finds such an option would lead to a 16% tax increase for those who file taxes in 2014, and a 20% increase for those who file in 2023.