Provisions Taking Effect in 2014
Although some of the provisions of the Affordable Care Act have been delayed, many provisions went into effect in 2014. Employers and insurers have been aware of these provisions for some time and have taken steps to ensure compliance by January 1, 2014. Provisions that took effect January 1, 2014 include:
- No limits on annual coverage;
- Essential health benefits – policies offered in the Exchange and plans sold in states’ small group and individual markets must provide coverage for 10 categories of benefits; cost sharing on these plans is limited to $6,350 for individual coverage and $12,700 for family coverage (2014 limits);
- Out-of-pocket maximums are limited to $6,350 for individual coverage and $12,700 for family coverage (2014 limits);
- Annual deductible limits – $2,000 for single coverage and $4,000 for family coverage (2014 limits);
- Waiting periods for coverage cannot exceed 90 days; and
- Guaranteed availability and renewability of insurance coverage regardless of health status (no pre-existing condition exclusions).
In addition, several ACA provisions regarding individual coverage went into effect on January 1, 2014. As of that date the individual mandate requires all individuals to have qualifying coverage. In addition, the ACA provisions providing for health insurance premium and cost-sharing subsidies became effective. These programs provide premium subsidies for families with incomes between 133% and 400% of the federal poverty level. Cost-sharing subsidies are provided for those with income up to 250% of the federal poverty level. The health insurance “exchange” also went into effect to allow individuals to purchase qualifying coverage to meet the individual mandate.
Looking Ahead to 2015
The most publicized ACA provision scheduled to go into effect in 2015 is the employer mandate, more commonly known as “pay-or-play”. This provision was originally scheduled to go into effect in 2014. However, its effective date was delayed until January 1, 2015 giving employers additional time to determine whether they are covered by the mandate and, if so, bring their plans into compliance. One important determination for employers is measuring their employees’ hours of service to determine whether they are “full-time” employees (working more than 30 hours). The proposed regulations issued with regard to the employer mandate contained a transitional rule regarding stability periods and measurement periods. Generally, employers establish a measurement period during which employee hours are tracked to determine whether they qualify as a full-time employee. The employer will also establish a stability period following the measurement period during which an employee’s status as full-time or part-time (as determined during the preceding measurement period) is set. Generally, a stability period cannot be longer than the measurement period. The transitional rule in the proposed regulations allowed employers intending to use a 12-month stability period for 2014 to use a measurement period that is less than 12 months. The purpose of the transitional rule was to allow employers to use a 12 month stability period for 2014 even though there was not sufficient time after the proposed regulations were issued to establish policies and procedures to measure employees’ hours for a 12-month measurement period prior to January 1, 2014.
Now that the implementation of the employer mandate has been delayed, the timing issue which brought about the transitional rule is no longer present. Employers have sufficient time to establish policies and create procedures to measure hours of service during a full 12-month measurement period. Employers should not anticipate that the IRS will issue a similar transition rule for 2015. An employer that wishes to use a 12-month stability period beginning January 1, 2015 may need to use a measurement period that begins sometime in October or November of 2013, depending on the length of the administrative period.
For example, if an employer wishes to use a 12-month stability period for 2015 (January 1 through December 31, 2015) and an administrative period of 45 days prior to the beginning of the 2015 plan year (October 15 through December 31, 2014), the measurement period for that employer for the 2015 plan year will have to be October 15, 2013 through October 14, 2014.