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Summary: The ACA mandates employers with 50+ employees to provide healthcare, including essential benefits like maternity and mental health services. We explain coverage details, Marketplace plan requirements, and how to navigate the ACA as an employer.
There have been massive impacts in the employee benefits landscape caused by the Affordable Care Act (ACA) of 2010. By requiring coverage, introducing the public marketplace, and expanding Medicaid, the ACA expanded coverage for millions of Americans. It also provided regulations for businesses offering group health plans and has provided employees with more options for their coverage.
Read on to learn how the ACA has impacted employees, the challenges and restrictions it presents for employers, and what it means for Americans navigating their employee benefits.
What is The Affordable Care Act?
The purpose of The Affordable Care Act was to increase access to healthcare, improve the quality and efficiency of care, and expand eligibility for Medicaid coverage. The Affordable Care Act imposed a series of restrictions, requirements, eligibility requirements, and penalties for group health plans for individuals and businesses.
Goal 1: Give more people access to affordable healthcare
All Americans were given access to purchase healthcare through newly created health insurance marketplaces for small businesses and individuals to compare and purchase coverage.
The ACA enacted a coverage mandate, requiring people to have insurance or face a financial penalty. Incentivizing people to have adequate coverage increased participation in plans. The financial penalty has since been rescinded.
The number of uninsured Americans decreased from 45.2 million in 2013 to 26.4 million in 2022.
Goal 2: Expand Medicaid
Medicaid is a joint federal and state program in the United States that provides health insurance coverage to individuals and families with low income and limited resources. The ACA expanded the poverty level of eligible families to receive Medicaid.
Under the new regulations, families at 138% of the federal poverty level became eligible for Medicaid. This extension provided more affordable options with minimum quality requirements to people experiencing financial difficulties.
Goal 3: Improve the efficiency of care and lower costs
Initiatives to lower costs include a cap for out-of-pocket costs for patients, and adding subsidies for low and middle-income Americans. Increasing the number of people with adequate insurance coverage, particularly low-income Americans, decreased the financial burden of unpaid debt on the medical industry.
In the past, people who received medical attention but could not pay for it would leave their bills unpaid and/or incur crippling debt. Making insurance more affordable and increasing the number of people who have coverage reduced the incidents of uncompensated care.
The ACA incentivized innovation by providing states with innovation waivers to test alternative ways to meet healthcare goals and update practices. States can award hospitals for trying different service models to improve patient care and outcomes.
What is Covered
The Affordable Care Act expanded coverage types and eligibility for coverage. Plans have new requirements to be considered minimally viable, and millions more people are on plans that cover their basic needs.
Preexisting Conditions
The ACA requires plans to cover individuals with preexisting conditions without charging more for the plan. This includes pregnant people and those with conditions that will likely require treatment and incur expenses.
In the past, insurance companies could increase the cost of their plans for people who were more likely to use the plan and need expensive treatments. The impact of this practice was many people had to pay high premiums for the same coverage as their healthier counterparts. The higher premiums could make the plans unaffordable, leaving people who need treatment the most unable to access coverage at all.
Some examples of preexisting conditions include:
- Asthma
- Diabetes
- Cancer
- Pregnancy
Requiring providers to offer uniform premiums regardless of preexisting conditions levels the playing field and makes health insurance affordable for millions more Americans than before.
Preventative care
Plans must cover a baseline of Preventative Care including screenings for certain conditions and immunizations. Preventative care can greatly reduce pressure on the medical system and prevent certain issues, conditions, or diseases from becoming bigger problems down the road. There are categories for preventative care for adults, women, and children.
Some examples of covered preventative care for adults include:
- Alcohol abuse screening and treatment
- Depression assessments
- Diet consultations
- Fall prevention
- Age-dependent cancer screenings (such as breast, lung, and colorectal)
- Screening for Hepatitis B and C
- Testing for HIV
- Vaccinations such as:
- Hepatitis A and B
- Human Papillomavirus (HPV)
- Tetanus
- Influenza
- Measles, Mumps, and Rubella
Marketplace Plans Requirements
All plans in ACA marketplaces must offer the following ten components of their plan:
- Outpatient care, also known as ambulatory services
- Emergency care
- Hospitalization such as when patients need to stay overnight or undergo surgery
- Maternity care including pregnancy (before birth) and newborn care (after birth)
- Mental health support including behavioral health, therapy, counseling, and substance use services
- Medications prescribed by a healthcare provider
- Therapies and equipment designed to help individuals with injuries, disabilities, or chronic conditions regain or develop physical and mental abilities
- Diagnostic laboratory testing and services
- Services focused on disease prevention, health promotion, and managing chronic illnesses
- Pediatric care, including dental and vision services for children
- Two additional required benefits:
- Breastfeeding
- Birth control
Affordable Care Act and Employee Benefits
The ACA imposed several requirements on businesses offering group health plans to employees.
All employers
All employers who provide “minimum essential coverage” must file annual return informing the IRS of their plans, and the plan participants. Companies are responsible for providing the IRS with their plan information to show proof that their plans achieve minimum essential coverage statues. Individuals covered by these plans also disclose their coverage to the IRS.
Plans must now allow dependents to remain on their parent’s insurance plans until the age of 26, meaning more employees’ family members were able to take advantage of the family plans for longer.
The ACA’s laws and regulations can be confusing, and ensuring compliance with the regulations can be time-consuming. Eligible businesses must provide adequate coverage and file reports outlining their offerings.
For example, the IRS requires businesses to file Forms 1095-C and 1094-C with meticulous tracking of employee hours, worker types, and benefits eligibility. This type of administrative burden can require businesses to hire consultants or full time staff members to oversee benefits and ensure ACA compliance.
Small businesses
The ACA has had a strong impact on employees at small businesses. The uninsured rate among employees of small businesses dropped from 25.2% in 2013 to 16.3% in 2022. In the same period, 4.9 million small business employees gained insurance.
Small business health care tax credit
The small business healthcare tax credit is designed to offset some of the costs employers incur providing pans that comply with the ACA. Companies under 25 employees eligible for small business health care tax credit. Employee number is calculated using the full time equivalents, meaning two part time employees working 20 hours per week make up one full time employee.
The credit is calculated based on an inverse relationship between employee headcount and credit received. For example, employers with less than 10 FTE employees will receive a higher tax credit than employers with more than 10 FTE employees. The employer must pay at least 50% of the employee-only premium, and offer plans from the Small Business Health Options Program Marketplace.
Small business that do not owe taxes in a calendar year can be carried forward and applied to future tax years.
The Small Business Health Options Program Marketplace
Employers with a FTE headcount of 50 or fewer (or 100 or fewer in some states) are eligible to buy coverage through SHOP Marketplace, the Small Business Health Options Program. Plans are organized into four categories based on how the cost of care will be divided, and who will be responsible for paying each percent of costs.
- Bronze: the insurance company pays 60%, the employee pays 40%
- Silver: the insurance company pays 70%, the employee pays 30%
- Gold: the insurance company pays 80%, the employee pays 20%
- Platinum: the insurance company pays 90%, the employee pays 10%
Medium and Large Businesses
Employers with 50 employees or more are now required to offer affordable health insurance that provides a minimum required value. Businesses that fail to do so face penalties from the Federal Government. Many businesses that did not offer health insurance before this mandate have added coverage to their benefits because of this mandate.
Some costs have gone up because coverage has gone up. Employers who offered little or no coverage before have seen increases in bringing their standards up to the national level.
Use a benefits administration tool
Investing in software solutions can streamline and compile all tracking and reporting requirements for the ACA. Certain partners can assist with shopping for plans on ACA marketplaces. Automated and systematized processes can reduce the risk of error and maintain required documentation for audits or compliance reporting.
Strategic employee communications
Create and implement communications plans with your employees to ensure they are informed of their plans, and know when and how to make their elections. All new employees should be trained on their options and know where to find plan documents, and who to ask if they have issues or questions.
Many companies choose to conduct benefits surveys to understand their employees’ priorities and make changes that comply with the ACA and satisfy their employee priorities. Encourage employees to learn about the Affordable Care Act so they understand the benefits of the law, and how the regulations benefit them and their access to affordable coverage.
Conclusion
The Affordable Care Act has kept good on its promise to expand healthcare for millions of people in this country. It has also ushered in a new era of requirements and compliance regulations that employers must follow when providing group plans to employees. It’s important to understand the way The Affordable Care Act affects businesses big and small to ensure you remain compliant and aware of your rights.