What is the Actuarial Value Calculator and how is it used?
The Department of Health and Human Services (HHS) created the Actuarial Value (AV) Calculator to determine what percentage of coverage non-grandfathered individual and insured small group plan benefits provide. This percentage determines the "plan categories” (or metal levels) for health plans sold both on and off a public Health Insurance Marketplace.
- A Bronze plan covers 60 percent of the full actuarial value of the health plan’s benefits
- A Silver plan covers 70 percent of the full actuarial value of the health plan’s benefits
- A Gold plan covers 80 percent of the full actuarial value of the health plan’s benefits
- A Platinum plan covers 90 percent of the full actuarial value of the health plan’s benefits
HHS initially allowed a plus or minus two percent range for each plan category; effective January 1, 2018, plans are allowed a minimum variation of -4 and +2 percentage points (exceptions exist for certain bronze plans).
The AV Calculator is often confused with the Minimum Value (MV) Calculator. The AV Calculator is used only for determining the actuarial value of individual and insured small group plans for purposes of differentiating the level of coverage they provide. The MV Calculator is used for purposes of determining if employer-sponsored group plans meet the minimum value standards of the employer mandate. More information on the MV Calculator is under the Minimum Value topic of this FAQ page.
The AV Calculator and methodologies are available on the CMS website. It’s important to note there are versions for each year of health coverage since the regulations took effect in 2014.
What are the Administrative Simplification regulations under the ACA, and who needs to comply with these provisions?
The Administrative Simplification rules and guidelines are intended to create a level of uniformity in electronic standards that ultimately should make the health care system more efficient by reducing administrative burdens on all parties. The rules specifically apply to electronic information transactions between insurers, health care professionals, banks, and financial institutions.
The provisions included in this initiative affect parties differently. There are no direct effects to consumers. The majority of the effects are on health care professionals, health insurers, clearinghouses, and banks. Below is a list of provisions that have direct effects on certain employers, depending on how they fund their health plans.
Electronic Funds Transfer and Remittance Advice Transactions
In most cases today, the electronic remittance advice and the health care payment information that health plans send to health care professionals go through banks and clearinghouses in different formats through different networks. Effective January 1, 2014, the Department of Health and Human Services (HHS) required health plans to use a uniform file format to transmit electronic payments of health care funds to financial institutions. New operating rules will make it easier for health care professionals to associate a payment with the matching remittance advice.
With the increased claim payment efficiency, employers should see more real time transparency in cash flow. However, we don’t expect employers will need to take specific steps to comply with this provision.
The Health Plan Identifier
The Department of Health and Human Services (HHS) requires all health plans to obtain a ten-digit unique identifier from a government-sponsored agency. The Health Plan Identifier (HPID) is intended to streamline electronic transactions between carriers, administrators, health care professionals, and financial institutions.
The law requires self-funded employers or group health plans to obtain their own HPIDs. Fully insured plans do not need to do anything to comply with this regulation, as the insuring company will have its own identifier.
In 2014, HHS announced that, until further notice, it would delay enforcement of regulations related to HPID, and on December 18, 2018, HHS issued proposed rules to officially rescind the adoption of HPID.
What are restricted annual limits and lifetime maximums under the ACA?
Under the ACA, lifetime limits on the cost of essential health benefits, known as the lifetime maximum limit, was banned. The ACA also phased out annual cost limits on the value of essential health benefits, known as annual dollar limits, which are increased annually for all employer and new individual health insurance plans. Annual dollar limits ended for most health plans in 2014.
The ACA does allow certain limits such as the cost per visit per hour and the number of visits over a period of days. For example, a person can be limited to three annual visits, but with no cost limits per visit.
Annual and lifetime limits are allowed for non-essential health benefits.
Read more about annual limits
What does the ACA say about appeals?
Under the ACA, an appeals process must include an external appeal. The review must follow a state’s external review law. If there is no state external review law, health insurance carriers must have independent organizations that meet federal rules review their appeals. Cigna complies with the federal external review rules.
Association Health Plans
What are Association Health Plans (AHPs)?
Associations of various types (e.g., professional, fraternal, trade/business) often have the ability to sponsor group health coverage for members of the association. In this arrangement, a small business could potentially simplify the administrative and financial burdens they might otherwise have if they were to sponsor their own small business health plan. State insurance laws allow insurance companies to issue group health insurance policies to associations (if the association meets specified criteria) and to multiple employer welfare arrangements (MEWAs). Most states do not, however, permit associations or MEWAs to self-insure health benefits.
Federal law also has some impact on these arrangements.
How have Federal regulations impacted Association Health Plans?
In September 2011, Centers for Medicare & Medicaid Services (CMS) released guidance that among other things treated insured group health plans – involving associations of individuals (e.g., organizations of like professionals, fraternal, trade/business) – as individual and small group insurance, subject to the Affordable Care Acts requirements for individual coverage, including community-rating.
In June 2018, the Department of Labor (DOL) finalized regulations that allow multiple employers, and now certain self-employed individuals, to join together to form associations that will be treated as a single employer for purposes of ERISA. This will allow associations of individuals to be treated as a single large employer, thereby avoiding individual and small group protections under the Affordable Care Act (mainly the community-rating requirement); specifically, an AHP will be treated as a group health plan for purposes of ERISA at the overall plan level rather than the employer level. However, these Federal regulatory changes do not override state laws, which principally determine whether associations may offer their participants insured or self-insured health plans.
Read the Department of Labor's final rule for more details.
What is the Cadillac Tax?
The Cadillac tax is a 40 percent permanent annual deductible tax on employers that provide high-cost benefits through an employer-sponsored group health plan. Based on changes made in January 2018, the effective date has been delayed until 2022. Read our news alert for more information.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) rule determines benefits that should be taxed. This rule accounts for:
- all employer-sponsored coverage
- flexible spending accounts
- health reimbursement accounts
- health savings accounts
- supplementary coverage
The employer must calculate the tax and report it to the plan administrator, who pays the tax to the Internal Revenue Service.
The original proposed threshold amounts for benefits subject to the tax in 2018 were $10,200 for self-only coverage and $27,500 for family coverage. There are higher benefit limits ($11,850 for self-only coverage and $30,950 for other coverage) for retirees and for people in high risk jobs. All these amounts will be adjusted before the tax takes effect in 2022 and indexed in future years.
U.S.-issued expatriate health plans, vision, dental, accident, disability and long-term health care benefits are not included in the Cadillac Tax.
Read more about Cadillac Tax Fact Sheet
What are cost-sharing limits?
Cost sharing limits were implemented in 2014. These limits apply to group health plans, regardless of size or insurer, unless they have grandfathered status under the ACA.
All in-network copays, deductibles and coinsurance for essential health benefits (EHBs) covered under the same health plan or insurance policy regardless of vendor (e.g., medical, mental health and substance abuse (MHSA), prescription drug, non-excepted dental and vision) must accumulate to a single OOP maximum.
For current limits, visit the cost-sharing limits page.
More questions about this topic
What are the rules for extending dependent coverage to age 26?
The ACA has required all health plans to provide coverage without limits to dependents until their 26th birthday* since 2010.
The rule applies to all health insurance plans, including medical, behavioral and pharmacy benefits. The rule does not apply to “excepted benefits” under the Health Insurance Portability and Accountability Act such as dental or vision benefits offered separately from medical health benefits.
Employee health plans are required to reimburse medical care expenses to any covered dependents until their 26th birthday, or the scheduled termination date determined by the plan (such as end of month or end of year following the 26th birthday). Spouses and children of dependents are not eligible unless the health plan already covered them.
A dependent for purposes of this requirement means a son, daughter, stepson, stepdaughter or eligible foster child of the taxpayer. Young adults qualify for this coverage even if they are eligible for coverage through their own employer, no longer live with a parent, are not a dependent on a parent’s tax return, and/or are no longer students. Both married and unmarried young adults can qualify for the dependent coverage extension, although that coverage does not extend to a young adult’s spouse or children. Student, military or marital status does not affect dependent eligibility.
The ACA requires that adult dependents be treated the same as all other dependents. For example, employers can’t charge more for adult dependents.
*Some states require that insurance policies provide dependent coverage beyond age 26; these rules and any associated restrictions apply after age 26.
Can people use their flexible spending account, health reimbursement account and health savings account funds for dependents up to age 26?
Yes, people can use money from their health reimbursement account and flexible spending accounts on dependent children (up to age 26, or when their health plan coverage ends, after their birthday).
Giving flexible spending account coverage to dependents may be an employer’s option under the ACA. We advise clients to check with their legal counsel.
Because health savings accounts (HSAs) must follow additional Internal Revenue Service (IRS) rules, individuals may not use HSA funds for a covered dependent unless they are claimed as a dependent on the individual’s federal income tax returns. If the adult dependent child is not listed as a tax dependent, any HSA distributions for that child would be taxable and subject to an IRS penalty. In this situation, the adult child may open their own health savings account and contribute up to the health plan’s allowable family maximum contribution.
What is the employer mandate?
The employer mandate requires that employers with 50 or more full-time employees must offer medical coverage that is "affordable" and provides "minimum value" (covers at least 60 percent of total costs) to 95 percent of their full-time employees and their children up to age 26 or face penalties. The employer mandate provision does not apply to an employer’s part-time employees.
For more details about these requirements, visit the Employer Mandate page
What are the penalties if employers do not offer coverage in 2018?
The 2019 penalties have not yet been published. Penalties for 2018 are as follows:
If no health coverage is offered to full-time employees AND any full-time employee receives premium assistance from the federal government, the employer penalty is:
- $2,320 annually for each full-time employee minus 30
If coverage is offered to full-time employees BUT any full-time employee receives premium assistance from the federal government, the employer penalty is the lesser of:
- $3,480 for each employee receiving premium assistance OR
- $2,320 per employee for each full-time employee minus 30
Read more about the Employer mandate
What reporting must employers complete to confirm their compliance with the employer mandate?
Employers with 50 or more full-time employees or full-time equivalents must provide the Internal Revenue Service (IRS) and their employees with information about the coverage offered during the previous calendar year. Individuals will need this information when they file their income tax returns. They should keep their forms, once received, with their tax records.
Read more about this the Reporting Requirements
Enrollment Waiting Periods
Essential Health Benefits
What are Essential Health Benefits?
Essential Health Benefits (EHBs) are a core package of health care services that most fully insured small group and individual health plans are required to cover. These services fall under a set of ten categories that can be further expanded under state-specific regulations:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance abuse disorder services (including behavioral health treatment)
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
When any of these services are receive within a health plan’s in-network providers, customers’ out-of-pocket expenses are limited year over year – a limit set by the federal government to make health care more affordable. And, any health plan that covers EHBs must cover these benefits with no annual limits or lifetime maximums. This includes self-insured and large group plans (having 51 or more employees).
For more information on these rules, visit the EHB page
What are "Excepted Benefits"?
- Dental and vision insurance benefits offered under a separate insurance policy from other medical coverage are "excepted benefits" and not subject to ACA provisions such as the essential health benefits (EHB) mandate.
- Dental and vision benefits that are incorporated into the insured medical plan are not "excepted benefits" and therefore are subject to the ACA EHB requirement.
- Dental and vision insurance benefits are treated as "excepted benefits" only if individuals can separately elect or reject the dental or vision benefits.
- Dental and vision benefits are not "excepted benefits" if employees enrolling in medical insurance automatically get the vision or dental benefits.
What is an Exchange or Marketplace?
The ACA requires a Health Insurance Exchange, also known as a Health Insurance Marketplace, to be established in every state. The Exchnage/Marketplace allows individuals and small businesses to purchase health insurance through their state and/or federal governments. While each state may have a different name for their state-based Marketplace, the federally run exchange is called the Health Insurance Marketplace.
Exchanges offer individuals standard health plans at five levels of coverage ranging from 60 percent to 100 percent of covered costs. This program is intended to help make health insurance more affordable for those eligible for a Federal Premium Subsidy (financial assistance).
For more details, visit the Exchanges page
What is the Employee Notice of Coverage Options, also known as the Employee Notice of the Exchange?
Employers subject to the Fair Labor Standards Act (FLSA) are required to provide a one-time notice to all employees stating whether or not medical coverage is offered to their employees. The notice must give information about the Marketplace and explain how an employee may be eligible for a premium subsidy available through the Marketplace if they are not eligible for coverage or the employer plan does not meet certain requirements.
These requirements took effect in October 2013, and established employers provide this notice of coverage options during the new hire process. The Department of Labor has model notices, available in English and Spanish.
Click here for more information.
Federal Premium Assistance Tax Credit
What is the Federal Premium Assistance Tax Credit?
A Federal Premium Assistance Tax Credit is available to eligible individuals to subsidize the cost of insurance coverage purchased through a government exchange or marketplace. In order to be eligible, the individual’s household income must be between 100 percent and 400 percent of the federal poverty level, and the individual must either:
- Not be offered minimum essential coverage by an employer, or
- Be offered minimum essential coverage, but the coverage is (i) unaffordable (i.e., the cost of coverage exceeds the annual threshold of the employees household income), or (ii) does not provide the required minimum actuarial value (the plan’s share of the total allowed costs of benefits is less than 60 percent).
Fees and Taxes
What fees and taxes do employers need to watch and manage under the ACA?
The ACA established many fees and taxes to help fund expanded programs and services. Employers are responsible for some of these, whether they will directly pay new fees and taxes or administer payments through employee tax with-holdings.
Comparative Effectiveness Research Fee (CERF)
This annual fee applies to insured and self-insured health plans with plan years beginning on or after October 2, 2011. The annual fee will partially fund research and evaluations performed by the Patient-Centered Outcomes Research Institute (PCORI), which is intended to determine the effectiveness of various forms of medical services that treat, manage, diagnose or prevent illness or injury.
Insurers will pay the fee on insured plans and will build the fee into their rates. Employers will be responsible for paying the fee on self-insured plans. The fee continues through September 30, 2019, with final payments due in 2020.
Read the Fees & Taxes page
Health Insurance Industry Fee
The Health Insurance Industry Fee is a fee on health insurers (including HMOs) that started at $8 billion in 2014 and continues to increase annually until it reaches an estimated $14.3 billion in 2018. After 2018, it will increase with premium growth. The fee applies only to insured business, and will be based on each insurer’s share of the taxable health insurance premium base (among all health insurers of U.S. health risks).
In December 2015, the fee was suspended for 2017. It was reinstated for 2018, but suspended again for 2019.
Read the Fees & Taxes page
The Reinsurance Fee sunset in 2016, with final payments paid in 2017. It totaled $25 billion, which was collected over a three-year period from 2014 through 2016. The majority of the money was used to lessen the effect of adverse selection in the individual market. The fee applied to both insured and self-funded commercial major medical plans. Health insurers were responsible for the fee on insured plans. For self-funded plans, employers paid the fee.
How is full-time employee status calculated under the ACA?
The employer mandate requires that "large employers" (i.e., employers with 50 or more full-time employees or full-time equivalents) offer affordable health care coverage that provides minimum value to all full-time employees and their dependents (through the end of the month in which the dependent turns age 26).
A full-time employee is one who works on average 30 hours a week. For many employees, it is easy to determine whether they are full-time, but for employees with variable hours, employers can use one of the safe harbor methods described in Treasury Notice 2012-58. Employers should consult their legal counsel to handle the nuances of their unique employee populations.
What are grandfathered plans?
A grandfathered plan is a group health plan that was in place when the ACA was signed into law on March 23, 2010.
Grandfathered plans do not have to follow many ACA provisions for as long as they remain grandfathered, such as the requirement to cover preventive care services at no cost to the employee.
Plans remain grandfathered indefinitely unless companies:
- Significantly reduce benefits
- Increase costs to their employees, or
- Reduce how much the employer pays toward benefits
Employers can maintain grandfathered status even if they:
- Change plan funding from self-insured to fully-insured
- Change insurance companies if they offer the same coverage
Insured collectively bargained health insurance plans are subject to a special grandfathering rule. They do not have to follow any ACA health insurance reforms until the last of the collective bargaining agreements under the health plan in effect on March 23, 2010 ends. At this point, the ACA's other grandfathered rules would apply.
What is considered a significant increase for out-of-pocket costs?
If a plan changes a copay, deductible, or out-of-pocket maximum by an amount that exceeds medical inflation plus 15% since March 23, 2010, it will lose grandfathered status. Employers may select the medical inflation factor from any month in the 12-month period preceding the change effective date.
The medical inflation factor as of December 2018 is 25.43%. The calculation is based on the Consumer Price Index (CPI) for medical care and is updated monthly. Employers can access monthly CPI data by visiting the Bureau of Labor Statistics website and selecting “U.S. Medical Care, 1982-84=100-CUUR0000SAM”. To determine medical inflation, simply divide any amount listed in the 12-month period preceding the change effective date by 387.142 (the March 2010 amount).
For example, if an employer wanted to increase its $500 plan deductible, based on the December 2018 medical inflation rate plus 15% (40.43%), the maximum allowed deductible to maintain grandfathered status would be $702.15. If the new deductible were to be set higher, it would be considered a significant increase and grandfathered status would be lost.
What is guaranteed availability?
Health insurers must accept every individual and employer that applies for health care coverage. This provision applies to non-grandfathered fully insured individual, small group and large group health insurance coverage. Issuers must offer all products that are approved for sale.
Guaranteed availability does not apply to insured health plans issued in the U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands).
What is guaranteed renewability?
Health insurers must renew all insurance coverage in the individual and group market if the individual or group chooses to renew. This provision under the ACA applies to non-grandfathered fully insured individual, small group and large group coverage; however, it already applied to all group plans (including self-insured and grandfathered plans) under Health Insurance Portability and Accountability Act (HIPAA).
The only exceptions to this ACA rule are situations such as non-payment of premium or fraud.
Guaranteed availability does not apply to insured plans issued in the U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands).
Health Savings Accounts
Does the ACA allow health savings accounts to cover dependent expenses?
Under the ACA, if a dependent is not listed on the health savings account (HSA) owner’s federal income tax return, reimbursements are not allowed to be made for that dependent’s expenses and would incur tax penalties if they occurred. Adult dependent children who are not tax dependents may open their own health savings accounts and contribute up to the medical plan’s allowable family maximum.
Individual Mandate and Reporting Requirements
What is the individual mandate? Is it still in effect?
Effective January 1, 2014 through December 31, 2018, almost everyone was required to obtain and maintain "minimum essential coverage" or pay a penalty. As of January 1, 2019, the mandate has been effectively repealed due to the Tax Cuts and Jobs Act which zeroed out the penalty.
What reporting is required for individuals?
Insurers, as well as employers who self-insure their group health plans, must provide the Internal Revenue Service (IRS) and each covered individual with information about whether they had minimum essential coverage during each month of the year.
While the mandate penalty has been reduced to $0, individual reporting requirements remain in effect under the ACA. This means that individuals must continue to report health insurance coverage on federal income tax returns.
Read more about this topic on our Reporting Requirements page
International and Expatriate Plans
How does the ACA affect international and expatriate plans?
Based on December 2014 legislation:
- U.S.-issued expatriate plans are exempt from most ACA market reforms such as the requirement to provide a Summary of Benefits and Coverage; the requirement to provide dependent health coverage to age 26 is a significant exception to those exemptions
- U.S.-issued expatriate plans are considered minimum essential coverage that meets the individual mandate and are considered eligible plans for purposes of the employer mandate
- U.S.-issued expatriate plans are exempt from the health insurance fee after 2015, the reinsurance fee, the CERF fee and the Cadillac tax
How does the ACA affect Medicaid eligibility?
Under the ACA, Medicaid eligibility is extended to 133 percent of the Federal Poverty Level for those states electing to expand the eligibility level. Subsidies will be made available to families and individuals with household income up to 400 percent of the poverty level, declining incrementally as income levels raise.
Medical Expense Income Tax Deduction
How does the ACA affect the federal income tax deduction for medical expenses?
The amount of medical expenses required to claim a tax deduction for medical expenses on a federal income tax return increased from 7.5 percent to 10 percent of annual income.
- Under age 65 – Effective January 1, 2013
- Individual or spouse age 65 or older – Effective January 1, 2019
Medical Loss Ratio
What are the minimum medical loss ratio (MLR) requirements?
Under the health care reform law, health insurers have to spend at least 80 percent (for individual and small group) or 85 percent (for large group) of their policy premiums in a given state on claims. If their medical loss ratio (claims over premiums) is less than the required percentage, the difference has to be paid to individual and group policyholders as a rebate.
Rebates will be based on the MLR for a group of policies known as a "block" or "cell." A block is defined by:
- Segment: Individual, small group or large group
- Company: The legal entity issuing the coverage (e.g., Cigna Health and Life Insurance Company), and
- State: The state where the policy was issued
Limited medical plans have a different formula for calculating the medical loss ratio due to the unique features of these plans.
For more information, visit our Frequently Asked Questions about MLR Rebates
Medicare Part D Coverage Gap
How have federal regulations impacted the Medicare Part D Coverage Gap, known as the "Donut Hole," for seniors?
The ACA gradually closes the gap between 2010 and 2020 by establishing progressively lower coinsurance for generic drugs and providing coverage for brand-name drugs (with discounts from pharmaceutical manufacturers) in the gap. The Bipartisan Budget Act of 2018 accelerated the closure of the donut hole and decreases contributions to 25 percent by 2019 instead of 2020. It also increases the drug-manufacturer discount of prescriptions in this final phase, starting in 2019, from 50 percent to 70 percent, with the plan responsible for 5 percent. The 70 percent manufacturer discount will count toward beneficiary out-of-pocket costs.
The federal Medicare Part D 28 percent drug subsidy has been maintained, but can no longer be deducted by an employer as a business expense, effective January 1, 2013.
Minimum Essential Coverage
What qualifies as minimum essential coverage?
Minimum essential coverage was required under the individual mandate; however, the penalty for the mandate has been zeroed out beginning in 2019. For prior years, the following coverage qualified as minimum essential coverage:
- Eligible employer-sponsored health insurance coverage
- Individual health plan
- Grandfathered health plan
- Medicare part A and Medicare Advantage plans
- Children's Health Insurance Program (or a qualified CHIP look-alike program)
- TRICARE (military health system)
- Veterans Affairs
- Other coverage as may be designated by the Department of Health and Human Services
- Coverage purchased through a state insurance exchange or the federal exchange
- U.S.-issued expatriate coverage
What is the Minimum Value Calculator and how is it used?
The Minimum Value (MV) Calculator helps to determine whether an employer-sponsored group health plan meets the minimum value standard of having at least 60 percent coverage on in-network health benefits. The U.S. Department of Health and Human Services (HHS) created the MV Calculator to help ensure applicable large employers comply with this minimum standard of coverage under the Employer Mandate regulations. The calculator and methodologies can both be found on the CMS website.
Employers with 50 or more full-time employees – regardless of grandfathered status or funding arrangement – must offer "affordable" health care coverage that provides "minimum value" to full-time employees and their dependent children through the end of the month in which the dependent child turs age 26, or employers could face possible penalties.
To learn more, visit the Employer Mandate page
What are the Section 1557 nondiscrimination requirements?
Under Section 1557 of the ACA, individuals may not be denied, cancelled, limited or refused health coverage on the basis of race, color, national origin, sex, age or disability. The final rule is broad in scope and became effective July 18, 2016. Affected group health plans that required changes in benefits design were required to comply on the first day of the plan or policy year beginning on or after January 1, 2017.
Generally, the key requirements affecting health plans and services include:
- Expanded protection for transgender individuals
- Publicized “taglines” offering language assistance for people with limited English proficiency
- Prevalent “notices” offering communication assistance for individuals with disabilities
- Grievance procedures for individuals who believe they have been subjected to discrimination in their health care or health care coverage
The rule affects federal and state Marketplaces, all health care providers and health insurance issuers and any health program or activity that receives financial assistance from HHS, including employer sponsored health plans. Visit our Nondiscrimination Requirements page for more details.
How are group health plans impacted by Section 1557 nondiscrimination requirements?
Insured health plans: All insured health plans provided by insurance issuers that receive federal assistance must comply with Section 1557.
Self-insured health plans: Section 1557 does not apply to self-insured plans except when the plan sponsor’s purpose is to provide health care, health insurance, or other health services (including hospitals, clinics, hospices, nursing facilities, health insurance carriers and health insurance exchange subsidies), as well as companies who receive federal financial assistance via HHS, regardless of their type of business.
In addition, the Equal Employment Opportunity Commission (EEOC) requires all self-insured plans (regardless of whether they are covered by Section 1557) to comply with similar nondiscrimination requirements under Title VII of the Civil Rights Act of 1964.
What is the embedded individual out-of-pocket maximum?
Effective January 1, 2016, plans that have a family out-of-pocket (OOP) limit that is higher than the ACA individual OOP maximum must apply an "embedded" individual OOP limit for each person enrolled in family coverage. This means:
- Once a person reaches the embedded individual OOP limit, all covered expenses for that person must be reimbursed at 100%, even if the family OOP limit has not been met;
- Once the family OOP limit is reached, the plan must pay 100% of all covered expenses for every covered person regardless of what each person has accumulated in OOP expenses.
For current limits, visit the Cost-Sharing page.
What does the ACA say about pre-existing conditions?
Beginning with the first health insurance plan year on or after September 23, 2010, all individual and group health insurance plans are prohibited from denying coverage to anyone under the age of 19 based on a pre-existing condition. The ban includes benefit limitations and coverage denials.
As of January 1, 2014, no person, regardless of age, can be denied coverage based on pre-existing conditions.
Grandfathered individual health plans are exempt from this requirement.
How does the ACA address preventive care?
All non-grandfathered plans must cover preventive care services and immunizations with no cost-sharing. Cost-sharing includes deductibles, coinsurance, copayments or any other payment required when care is received. Annual dollar limits are also prohibited for both non-grandfathered and grandfathered health plans.
What preventive care services are covered for women?
Effective August 1, 2012, non-grandfathered health insurance plans were required to cover the following additional preventive care services for women, with no cost sharing:
- Annual well-woman visits
- Food and Drug Administration (FDA)-approved contraception methods and contraceptive counseling*
- Screening for gestational diabetes
- HPV DNA testing for women 30 years and older
- Sexually-transmitted infection counseling
- HIV screening and counseling
- Breastfeeding support, supplies and counseling
- Screening and counseling for interpersonal and domestic violence
Health insurance plans may impose cost sharing on brand name preventive drugs if a generic version is available and is just as effective and safe for the patient to use. Cost sharing is not permitted on the generic drug.
Please visit hrsa.gov to read the Guidelines for Women’s Preventive Services.
* On Jan. 14, 2019, a Pennsylvania federal court temporarily blocked final rules issued Nov. 7, 2018 to expand the exemption for employers to not cover contraceptive services under their sponsored group health plans for both religious and moral objections. The injunction means that the new rules cannot be enforced in any state unless or until the injunction is removed. The injunction maintains the status quo and rules in place under the ACA.
An eligible employer is defined as a religious organization that meets all of the following criteria:
- The promotion of religious values is the purpose of the organization
- The organization primarily employs individuals who share the religious beliefs of the organization
- The organization serves primarily people who share the religious beliefs of the organization
- The organization is a nonprofit organization as described in the Internal Revenue Code Sections 6033(a)(1) and 6033(a)(3)(A)(i) and (iii).
Qualified Health Plans
What is a Qualified Health Plan?
A qualified health plan is coverage offered through a health insurance exchange.
Under the ACA, qualified health plans may not have pre-existing condition limitations or lifetime maximums or annual limits on the dollar amount of essential health benefits.
Each state exchange's qualified health plans must cover essential health benefits at five levels: bronze (60 percent), silver (70 percent), gold (80 percent), platinum (90 percent) and catastrophic. Only an insurer or health maintenance organization with a license and in good standing in the state may offer exchange plans.
Read more about qualified health plans in these pages:
Section 1332 – State Relief and Empowerment Waivers
What are Section 1332 State Relief and Empowerment Waivers?
Under Section 1332 of the ACA, states can waive key provisions of the law in order to implement innovative, alternate health coverage rules or programs while retaining basic consumer protections. Beginning in 2017, states can apply for the 5-year State Relief and Empowerment Waivers (previously called State Innovation Waivers) through the Department of Health and Human Services (HHS). In the application, states can request to waive or modify any or all of the following ACA provisions:
- Essential Health Benefits (EHBs) and cost sharing requirements
- "Plan categories" (or metal levels) on Marketplaces
- Premium tax credits and cost-sharing reductions
- Individual and/or employer mandates
To receive consideration and approval for a waiver, a state must demonstrate that its innovation plan will not increase the federal deficit over ten years and will provide:
- Coverage that is at least as comprehensive;
- Coverage that is at least as affordable; and
- Coverage to at least a comparable number of residents
In addition to the basic guardrails, the Oct. 2018 guidance identified five new principles that future waiver requests should aim to achieve:
- Provide increased access to affordable private health plan coverage (including Association Health Plans and Short-Term Limited Duration Insurance Plans)
- Limit cost increases for consumers and the federal government
- Foster state innovation
- Support and empower those in need
- Promote consumer-driven health care
Since 2017, multiple states have been approved for waivers, primarily to implement reinsurance programs. Learn more about these approved waivers on The Center for Consumer Information & Insurance Oversight’s Section 1332 Waivers page.
Section 1557 – Nondiscrimination Requirements
Self-Insured Client and ERISA
Does the Employee Retirement Income and Security Act (ERISA) shelter self-insured plans from provisions of the ACA?
No. Health insurance reform provisions of the ACA are incorporated into ERISA, so they apply to all self-insured plans governed by ERISA.
Short-Term Limited Duration Insurance
What is Short-term Limited Duration Insurance?
Short-term Limited Duration Insurance (STLDI) is designed to provide people experiencing a gap in health coverage with temporary coverage until they are able to enroll in a typical one-year policy. Compared with health plans that cover a person for full calendar year, STLDI does not usually include as many benefits, resulting in lower monthly premium costs.
How have Federal regulations impacted Short-term Limited Duration Insurance?
The ACA does not require STLDI to include many of the patient protections required of most major medical health insurance policies sold to individuals. Because they do not cover as many health benefits, STLDI typically costs less than ACA-compliant health plans. To help ensure consumers were only purchasing STLDI to fill gaps in coverage, rules took effect in January 2016 limiting STLDI policies to provide benefits for not longer than three months.
Final rules were released in August 2018 to extend the maximum period a person could be covered under a STLDI policy. While the initial coverage period is required to be less than 12 months from the original effective date, the policy could be renewed or extended for no longer than 36 months in total.
Read the final rules, posted by multiple Federal agencies, for more details.
Small Business Health Care Tax Credit
Who qualifies for the Small Business Health Care Tax Credit?
The Small Business Health Care Tax Credit is available for businesses that employ the equivalent of 25 or fewer full-time employees (excluding the owner) with average annual compensation below $50,000 per employee if they offer coverage through the Small Business Health Options Program (SHOP) marketplace.
The maximum credit for a for-profit business is 50 percent of the employer's cost of health insurance, if the employer pays at least 50 percent of employee premium expenses. The maximum credit for a tax exempt not-for-profit business is 35 percent. The credit is claimed on the employer's annual income tax return.
State Innovation Waivers
Summary of Benefits and Coverage
When must employers provide a Summary of Benefits and Coverage to their employees?
The Summary of Benefits and Coverage (SBC) provision applies to employees and dependents of domestic group and individual health plans. It applies to all fully insured and self-insured plans, regardless of grandfathered status. It does not apply to Medicare plans or U.S.-issued expatriate plans.
Effective September 23, 2012, health insurers and self-insured group health plans are required to provide a standard SBC document to all individuals enrolling in medical coverage annually. This includes mid-year enrollment for new employees and those experiencing a special enrollment event, and/or 'upon request' by an enrollee.
Generally, the date by which the SBC needs to be provided is driven by the enrollment method:
- The SBC must be provided as part of any written application materials that are distributed by the health plan or issuer for enrollment.
- If the health plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll in health insurance coverage for the participant and any beneficiaries.
In the case of renewal or reissuance, if the issuer requires written application materials for renewal (in either paper or electronic form), it must provide the SBC no later than the date the materials are distributed. If renewal or reissuance is automatic, the SBC must be provided no later than 30 days prior to the first day of the new policy year.
If an enrollee requests the SBC, it must be provided within seven business days.
What is a "material modification" and how do employers communicate this to their employees?
A material modification is any change that an average participant would consider an important enhancement or reduction in benefits.
If a material change is made to a health plan during the plan year that is not reflected in the most recent Summary of Benefits and Coverage, a notice must be provided at least 60 days before the effective date of the change.
Note: This timing applies only to changes that become effective during the health plan year
How does the ACA apply to U.S. territories, such as the U.S. Virgin Islands and Puerto Rico?
Certain ACA requirements have been modified for the territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands). For example, the legislation provided funding to establish Marketplaces in the territories, but if a territory declined to create a Marketplace, the Medicaid funding cap was increased for that territory.
Under the ACA, any resident of the territories is treated as having minimum essential coverage, regardless of whether they have health coverage or not. This means they may not be eligible for federal premium assistance to purchase coverage through the Marketplace, if one is established in their territory.
Effective July 16, 2014, the following ACA provisions no longer apply to insured plans issued in the U.S. territories:
- Required coverage of essential health benefits (EHB)*
- Medical Loss Ratio (MLR) rebates
- Employer mandate (a territory may enact a comparable provision under its own law)
- Guaranteed issue
- Rate review*
- Community rating*
- Single risk pool*
- Risk corridors and risk adjustment*
* Applies only to individual and small group insured plans
Read more about this topic
What is the W-2 reporting requirement for the value of employer-sponsored health coverage?
The ACA requires employers who distribute 250* or more Form W-2s for the tax year to include the value of applicable employer-sponsored coverage on each employee's W-2 Form. This is not considered taxable income and is for informational purposes only.
Employers that choose not to report this information may be subject to tax penalties.
* It is important to note that this requirement applies to employers who distribute 250 or more W-2s, not simply to employers with 250 or more employees. A high-turnover employer, averaging 200 employees in a calendar year, may send out more than 250 W-2s, and would consequently need to include this information.
What gets reported on the W-2, total premium or just what the employee pays for coverage?
Total premium reflecting both employer and employee contributions is required to be reported.
What is the ACA rule on enrollment waiting periods?
The ACA prohibits employers from imposing enrollment waiting periods that exceed 90 days. This provision applies to both grandfathered and non-grandfathered health plans.
Wellness Programs and Incentives
What rules and regulations apply to employer-sponsored wellness programs?
Many employers offer wellness programs to support employees and their family members in improving their health. In addition to encouraging a culture of health, these programs are designed to reduce health care costs for both employees and the company. There are three federal regulations that impact wellness programs: ACA, Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA).
ACA regulations apply to all wellness programs that are, or are part of, group health plans; ADA regulations apply to wellness programs that include medical examinations or inquiries; and GINA regulations apply to wellness programs that solicit genetic information from employees, spouses or their dependents.
The incentive limits in EEOC's ADA and GINA rules were challenged by the American Association of Retired Persons (AARP) as being too high and potentially coercive. The D.C. District Court found the limits to be insufficiently justified, and issued an order to vacate the rules on January 1, 2019 if clarification or new rules were not issued. The EEOC has formally removed incentive limits from ADA and GINA, but has not provided insight on an anticipated date for new rules. ADA and GINA incentive limits are no longer effective as of January 1, 2019. It is important to note that the remaining sections of the ADA and GINA rules (e.g., ADA's reasonable accommodations and GINA's limited use of collecting genetic information) remain in effect.
Complying with one set of rules and regulations does not necessarily ensure compliance with all the others. For details on the requirements under the ACA, ADA and GINA and how they work together and where they differ, read our Wellness and Incentive page.
What are maximum incentive limits for wellness programs?
Incentives were limited in accordance with multiple sets of rules after the ADA and GINA rules went into effect; however, as referenced above, ADA and GINA incentive limits are no longer effective as of January 1, 2019. ACA rules on incentive limits remain in place.
Rule applies to:
Incentive* limit for programs that do not include tobacco cessation
Incentive* limit for programs that include tobacco cessation
Based on what total cost (Employer and employee share)
Based on enrollment, self-only coverage
30% of family coverage if spouse and dependents participate
Included in max limit
Health-contingent program incentives
Frequency of incentive
Health-contingent program: Must provide chance to qualify at least once per year
Participatory program: No requirement