Actuarial Value
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 allows a plus or minus two percent range for each plan category. For example, a Silver plan must have an actuarial value between 68 percent and 72 percent.

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.

Administrative Simplification
What are the Administrative Simplification regulations under PPACA, 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.

Effective October 31, 2014, HHS announced that, until further notice, it will delay enforcement of regulations related to obtaining the HPID and using the HPID in Health Insurance Portability & Accountability Act (HIPAA) transactions.


Annual limits
What are restricted annual limits and lifetime maximums under the PPACA?

Health care reform ends the lifetime limit on the cost of essential health benefits, known as the lifetime maximum limit. The law requires health plan's starting on or after September 23, 2010 to follow the rule. The lifetime maximum rule does not apply to grandfathered individual plans.
The law also ends annual cost limits on the value of essential health benefits, known as annual dollar limits. Health care reform raises the annual dollar limit each year for all employer and new individual health insurance plans:

  • Plans beginning September 23, 2010 have a limit of $750,000
  • Plans starting September 23, 2011 have a limit of $1.25 million
  • Plans effective on September 23, 2012 have a limit of $2 million

On January 1, 2014, the limits end for most health plans.

The PPACA does allow some limits. There can be a limit on the cost per visit per hour and on 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.

Some people may no longer be on their employer’s group health insurance plans because they are at the health plan’s lifetime maximum limit. This may also be true of dependents. The PPACA allows these people to rejoin health plans during the open enrollment period on or after Sept. 23, 2010.

Health care reform allows these limits for non-essential health benefits.

Read more about annual limits

More questions about annual limits

What does the PPACA say about appeals?

Health care reform says that the 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.

Read more about appeals

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, 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.

Automatic enrollment
What is the status of the ACA automatic enrollment provision?

Automatic enrollment was repealed on November 2, 2015. This provision would have required automatic enrollment and re-enrollment activities for employers with more than 200 employees.

Behavioral health
How will the PPACA affect Cigna's behavioral health products and services?

The PPACA requires behavioral health services be included as essential health benefits, which are defined by the Department of Health and Human Services. The law applies the federal mental health and substance abuse parity law to qualified health insurance plans offered through the state insurance exchanges and Marketplaces as well as those in the individual and small group market beginning in 2014.

Parity in the state insurance exchanges and Marketplaces will not apply to individual policies or small groups (50 employees or less).

Health insurance reform legislation amended the 2008 Public Health Service Act, effective as of October 3, 2009, and extended mental health parity to individual insurance policies. There is no effective date for this change, so it is unclear when the extension on individual policies becomes effective.

Cadillac tax
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
  • premiums
  • 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

Clinical trials
Does the PPACA require coverage of clinical trials?

Yes. The legislation requires coverage of routine patient care costs related to clinical trials beginning January 1, 2014. Although the requirement does not apply to grandfathered plans, Cigna is adopting it as standard policy for all insured and self-insured plans.

We expect the financial effect to be relatively small as many of the expenses associated with clinical trials are already covered.

Read the Clinical Trials Fact Sheet

Collective bargaining agreements
If employees are covered by a collective bargaining agreement, do employers have to follow health care reform rules, or is the plan grandfathered until the next collective bargaining agreement? Also, how does the law affect multiple unions in one benefit option?

Collectively bargained agreements must follow reform rules. If these plans were in place when the law passed on March 23, 2010, they are a grandfathered plan. If a grandfathered plan gets rid of some health benefits, increases costs or reduces what employers pay than it would lose its status and have to follow health care reform rules.

All of the PPACA rules that apply to grandfathered plans also apply to grandfathered collectively bargained plans for all plans beginning on or after September 23, 2010. The law also allows self-insured plans with collective bargaining agreements to remain grandfathered under the same rules.

The PPACA says insured collectively bargained plan may maintain grandfathered status until the last of their agreements in place before March 23, 2010 ends. PPACA rules then apply after the final termination date, and then all plans must comply with health care reform.

If there are three collective bargaining agreements under one health insurance plan, then the PPACA will not apply until the last of the three agreements ratified prior to March 23, 2010 ends.

Read more about collective bargaining agreements

Cost Sharing
What are cost-sharing limits?

Cost sharing limits were implemented in 2014. These limits apply to all non-grandfathered plans, regardless of size or funding type.

For 2019, in-network out-of-pocket (OOP) maximums cannot exceed $7,900 for self-only coverage and $15,800 for family coverage. In 2020, those amounts increase to $8,150 for self-only coverage and $16,300 for family coverage.

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.

Read our Cost-Sharing Fact Sheet

More questions about this topic
Out-of-Pocket Maximums

Dental benefit maximums
Will dental annual dollar maximums and orthodontic lifetime dollar maximums be removed from dental policies in 2014?

If a dental-only policy is separate from a medical health insurance plan, PPACA rules do not apply. If the dental plan is part of an employee medical plan and defined as an essential health benefit, but is not an excepted benefit under Health Insurance Portability and Accountability Act, known as the health insurance rule, PPACA rules may apply to dental insurance coverage.

Health insurance rules consider dental benefits as excepted benefits. When health plans have dental or vision benefits on a separate policy, certificate or contract the health insurance rule treats dental or vision benefits as excepted benefits. They would also treat dental benefits as excepted benefits if the coverage is not a key part of a group health plan. If employees can decline dental benefits when they enroll for medical coverage, or if they have to pay an additional monthly premium or contribution for those dental benefits, then the dental benefits are not considered a key part of those medical plans.

If dental benefits are not part of a medical plan, annual limits and lifetime maximum limits could apply.

Read more about dental benefit maximums

Dependent coverage
What are the rules for extending dependent coverage to age 26?

Beginning September 23, 2010, the PPACA has required all health plans to provide coverage without limits to dependents until their 26th birthday.*

The PPACA Extended Dependent Coverage 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.

Health care reform also requires employee health plans 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.

In addition, young adults qualify for this coverage even if they no longer live with a parent, are not a dependent on a parent’s tax return, 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.

According to a changed tax code rule, we interpret a dependent for purposes of this requirement to mean a son, daughter, stepson, stepdaughter or eligible foster child of the taxpayer.

Until 2014, grandfathered plans are not required to cover dependents that have access to their own employer-sponsored coverage. Beginning January 1, 2014, all health insurance plans must cover dependents to age 26, even if they have access to coverage through their own employer.

Health care insurance reform 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?

Health care reform does allow people to 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 health care reform law. We advise clients to check with their legal counsel.

People may not use money from their health savings accounts for their covered dependents, unless their federal income tax returns also list the dependents. If the adult dependent child can’t be listed as a tax dependent, any HSA distributions for the dependent would be taxable and subject to an Internal Revenue Service 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.

Doctor choice
What does the PPACA say about choosing a primary care physician?

The PPACA requires that health insurance plan customers be allowed to designate any available participating primary care physician (PCP) or pediatrician as their health care professional. Health plans cannot require a referral for OB-GYN care and women can designate their specialist as their PCP.

Early Retiree Reinsurance Program
What is the PPACA Early Retiree Insurance Program?

The PPACA created the Early Retiree Insurance Program, a temporary program, for employers providing health insurance coverage to retirees over age 55 who can’t get Medicare. The government offers employers a tax break for a portion of health benefits costs they give to retired employees ages 55 and over and their spouses, surviving spouses and dependents that can’t be on Medicare.

The program began in June 2010 and was set to end on January 1, 2014, or when the $5 billion in federal funds set aside were gone, whichever came first. The funds were exhausted on December 31, 2011.

Emergency care
What is the cost sharing difference for in-network vs. out-of-network emergency care?

For non-grandfathered health insurance plans, the PPACA requires cost sharing for emergency services obtained either in-network or out-of-network to be equivalent.

There is no higher out-of-network cost share for emergency services and health plans and insurers will not be able to charge higher copays or coinsurance or require prior authorization for emergency services obtained out of network. This policy applies to all individual market and group health plans, except grandfathered plans.

Employer mandate
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" (costs no more than 9.86 percent of an employee's wages in 2019 and 9.78 percent in 2020) and provides "minimum value" (covers 60 percent plus of total costs) to 95 percent of their full-time employees and their children up to age 26 or face penalties.*

* Before January 2016, employers with 50 to 99 were not required to offer coverage, and employers with 100 or more complied if they offered coverage to at least 70 percent of their full-time or full-time equivalent (FTE) employees.

Employer Mandate Fact Sheet

What are the penalties if employers do not offer coverage in 2018?

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

Excepted Benefits
What are "Excepted Benefits" under PPACA?

Insured plans

  • Dental and vision insurance benefits offered under an insurance policy that is separate from other medical coverage are "excepted benefits" and not subject to PPACA health insurance reform 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 PPACA EHB requirement.

Self-funded plans

  • 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.
Exchange / Marketplace
What is an exchange?

The law required a Health Insurance Marketplace, also known as a Health Insurance Exchange, to be established in every state effective January 1, 2014. They are a way for individuals and small businesses to purchase health insurance and are run by state, federal or combined governments.

Exchanges offer individuals standard health plans at five levels of coverage ranging from 60 percent to 100 percent of covered costs: bronze – at least 60 percent, silver – at least 70 percent , gold – at least 80 percent , platinum – at least 90 percent , and catastrophic – 100 percent. This program will help make health insurance more affordable for those eligible for a Federal Premium Subsidy (financial assistance).

What is a Marketplace?

The PPACA has a provision that requires the establishment of a Health Insurance Exchange in every state beginning January 1, 2014. In spring of 2013 the Department of Health and Human Services (HHS) started calling this program the Health Insurance Marketplace. While each state may have a different name for their state-based Marketplace, the federally run exchange is called the Health Insurance Marketplace.

In a general sense, Health Insurance Exchange and Health Insurance Marketplace are one in the same.

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 now only need to 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 state 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 9.66 percent 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).

Read more about this topic

More questions about this topic

Fees and Taxes
Are there additional fees and taxes employers need to watch and manage?

The Affordable Care Act (ACA) established many fees and taxes to help fund and create dollars for 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.


  • This applies for health plan years beginning on or after 10/2/11
  • First payments were due 7/31/2013
  • Fee continues through 9/30/2019 with the last payment due 7/31/2020

How Much?

  • Initial annual fee of $1 per covered life
  • For current fees, review the CERF Payment/Due Date Grid linked below

How to Pay?

  • Tax is self-reported on Excise Tax Form 720

CERF Fact Sheet

CERF Payment/Due Date Grid


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 as a result of changes made in the Jan 22, 2018 short-term federal spending bill.

Health Insurance Industry Fee Fact Sheet

Reinsurance Fee

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.

Medicare Taxes

Starting January 1, 2013, there will be additional Medicare taxes for high-income individuals. Currently, both employers and employees pay a Medicare tax of 1.45 percent each, totaling 2.9 percent on all income. Employers do not have to pay any more under the new Medicare tax - they continue to pay 1.45 percent. However, they will have to withhold the additional tax for employees earning more than $200,000, and should plan to communicate this to affected employees.

Employees earning up to $200,000 will continue to pay the same 1.45 percent Medicare tax. Employees earning more will be taxed an additional .9 percent on all earnings over the $200,000. Employers are liable for this added tax if they do not begin withholding the additional .9 percent once earnings reach $200,000.

For married couples, the additional Medicare tax is assessed on total household earnings above $250,000. Therefore, employees with income under $200,000 may actually have a joint income above this threshold. In such cases, the employee is liable for the additional Medicare tax, and will be expected to make estimated quarterly payments.

  • The Modified Adjusted Gross Income above the threshold of
    • $200,000 for an individual
    • $250,000 for married or joint income
  • Total investment earnings

Individuals who believe they may be assessed this new tax should consult their tax advisor or Certified Public Accountant (CPA) for guidance.

Flexible spending accounts
How are flexible spending accounts affected by PPACA?

Health care reform changes how most over-the-counter drugs are now paid for. The law now requires a prescription for health saving and spending account reimbursements. Flexible spending accounts and health reimbursement accounts, which cover 213d expenses, and health savings accounts rules all change with health care reform law.

The PPACA affects flexible spending accounts the most. FSA debit cards may no longer be used to purchase over-the-counter drugs or medicines.

Most retailers can identify items that could be reimbursed at the time of purchase, so the flexible spending account debit cards will pay for only the eligible items. Individuals must pay for over-the-counter drugs and medicines another way.

If you have a flexible spending account, submit a doctor’s prescription and store receipt with the required reimbursement request form. A person can still use remaining FSA funds from the prior year to pay for eligible items, up to two and a half months after the end of the preceding plan year. Insurance carriers require people to keep prescriptions and receipts as documentation required for reimbursement.

If a person has a prescription can he or she purchase over-the-counter drugs with a flexible spending account debit card?

If a prescription for an over-the-counter drug is filled by a licensed pharmacist and has an Rx number, then a pharmacy may process the transaction on the flexible spending account debit card as a prescription item. The pharmacy must hold a record of the Rx number, the name of the purchaser (or the person named on the prescription) and the date and amount of the purchase. These records must be available to the employer or the flexible spending account administrator when requested. Some pharmacies may not dispense an over-the-counter drug as a prescription item, so it won’t process on the flexible spending account debit card and a different form of payment will be needed.

Because the way pharmacies handle over-the-counter prescriptions varies, we recommend you submit receipts and prescriptions for prescribed over-the-counter and medicine reimbursement through Cigna’s direct submit process.

The PPACA may allow coverage of your dependent’s eligible expenses. Speak with legal counsel to determine if and when your flexible spending account plan may provide coverage of a dependent’s expenses.

Flexible spending accounts contribution cap
How does the PPACA affect flexible spending account annual contributions?

Health care reform currently limits an individual’s flexible spending account contributions to $2,500 per taxable year. The amount will be adjusted annually as the Department of Health and Human Services decides.

Does the contribution cap affect the dependent care flexible spending account?

No. Health care reform affects only the health flexible spending account annual contribution limit. Dependent care contributions remain capped at $5,000 per year maximum.

How will health care reform affect flexible spending account contribution caps for flexible spending accounts that don't run on a calendar year?

The PPACA currently caps flexible spending account contributions at $2,500 per taxable year. The contributions count on a calendar or taxable year and not by a health insurance plan year, even if the health insurance plan starts on a date other than January 1.

Free choice vouchers repealed
What is the free choice voucher?

The Free Choice Voucher provision was repealed on April 15, 2011. This provision would have required employers to provide financial subsidies for certain employees to purchase health coverage through exchanges if their employer-sponsored plan was defined as not affordable.

Read more about this topic

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Full-time employees
How will PPACA establish hours worked and full-time employee status?

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.

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 how is a large employer to treat employees who work variable hours?

Treasury Notice 2012-58 describes safe harbor methods that large employers may use to determine whether a particular employee is a "full-time employee" for purposes of the employer mandate,

It's complex, and the rules differ for new employees and ongoing employees, so we suggest that you refer to the Notice and work with your legal counsel to deal with the nuances of your unique employee population.

What might an example be of how the look back, administrative and stability periods work together?

The following simple example illustrates how the Treasury safe harbor method would apply in a hypothetical situation:

  • John is an employee and his hours vary.
  • His employer has selected the maximum 12-month initial measurement period to determine whether its employees are "full-time." [An employer can choose a measurement period of between three to 12 months.]
  • John's employer has also elected the maximum three month administrative period during which to gather the hours worked data, crunch the numbers, make the determination as to full-time status and to notify its employees about the eligibility for health care coverage.
  • John's employer would look back at the average monthly hours John worked during the 12-month initial measurement period of 10/1/14 through 9/30/15, and during the 90-day administrative period of 10/1/15 to 12/31/15, John's employer determines that he is a full-time employee and communicates to John his eligibility for health care coverage.
  • Beginning on January 1, 2016, John's employer must thereafter treat John as a full-time employee for a 12-month stability period even if John's average hours worked during this stability period are fewer than 30 hours per week. [The stability period can be no less than the measurement period used by the employer to determine the employee's status for the stability period.]
  • John's employer will thereafter reassess his status going through the same process for the next stability period that commences on 1/1/17.
Grandfathered plans
What are grandfathered plans?

A grandfathered plan is a group health plan that was in place when the Patient Protection and Affordable Care Act (PPACA) was signed into law, on March 23, 2010.

Health insurance plans established after PPACA cannot be grandfathered.

The advantage of being grandfathered is that these health plans do not have to follow some health insurance reform provisions, such as the requirement to cover all preventive care services with no cost-sharing, for as long as they remain grandfathered. See our timeline for more details.

The Departments of Health & Human Services, Labor, and Treasury developed rules for maintaining grandfathered status. Plans remain grandfathered indefinitely unless companies:

  • Significantly reduce benefits
  • Increase costs to their employees, or
  • Reduce how much the employer pays toward benefits

As of November 17, 2010, employers have additional flexibility to keep grandfathered status if they:

  • Change plan funding from self-insured to fully-insured
  • Change insurance companies if they offer the same coverage


For a group health insurance plan to decide to stay grandfathered, the group health plan must weigh the financial result of following health reform rules against being able to make cost-effective benefit plan changes.

Insured collectively bargained health insurance plans are subject to a special grandfathering rule. They do not have to follow any PPACA 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 PPACA's other grandfathered rules would apply.

Read more about grandfathered plans

Guaranteed issue
What is guaranteed availability?

Beginning with the first health insurance plan year on or after January 1, 2014, 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, including non-grandfathered closed blocks of business. This means insurers must offer insurance coverage under a health plan that was previously closed and not available to new membership.

Effective July 16, 2014, guaranteed availability no longer applies 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).

Read our market rules fact sheet

What is guaranteed renewability?

Beginning with the first health plan year on or after January 1, 2014, health insurers must renew all insurance coverage in the individual and group market if the individual or group chooses to renew.

This provision applies to non-grandfathered fully insured individual, small group and large group coverage. The only exceptions to this rule are situations such as non-payment of premium or fraud.

Guaranteed renewability already applies to all group plans (including self-insured and grandfathered plans) under the 2001 Health Insurance Portability and Accountability Act (HIPAA) requirements.

Effective July 16, 2014, guaranteed renewability no longer applies to insured plans issued in the U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands).

Read our market rules fact sheet

Health reimbursement accounts
How are health reimbursement accounts affected by PPACA?

Health care reform affects purchases of most over-the-counter drugs that now require a prescription for reimbursement. Flexible spending accounts and health reimbursement accounts, which cover 213d expenses, as well as health savings accounts, are affected.

If you have a health reimbursement account that includes over-the-counter drugs, you must submit your doctor’s prescription and the store receipt along with a reimbursement request form. With the PPACA’s extension of Dependent Coverage up to age 26 rule, your health reimbursement account can cover eligible dependent expenses for children up to age 26, or when their health coverage ends.

Health savings accounts
How are health savings accounts affected by PPACA?

Health care reform affects purchases of most over-the-counter drugs—they now require a prescription for reimbursement. Flexible spending accounts and health reimbursement accounts, which cover 213d expenses and health savings accounts are all affected.

Unlike flexible spending account debit cards, eligible expenses purchased with your health savings account debit card will not be verified at the register. To avoid incurring the Internal Revenue Service Health Savings Account Distribution Tax Penalty it’s important to understand which expenses are covered.

While the new law applies to health savings accounts, people are responsible to use health savings accounts debit cards properly. Unlike flexible spending account debit cards, eligible expenses purchased with a health savings account debit card will not be verified at the register. Therefore, it is important individuals understand the new rules to avoid building up tax penalties.

Does the PPACA allow health savings accounts to cover dependent expenses?

As part of health care reform, the PPACA does not allow you to cover eligible dependent expenses with health savings accounts when the dependent is not listed on your federal income tax return.

If your adult child dependent does not qualify as a tax dependent, any health savings accounts payments for that dependent’s expenses would be taxed under the Internal Revenue Service Health Savings Account Distribution Tax Penalty. However, your adult dependent child may open their own health savings accounts and contribute up to your medical plan’s allowable family maximum.

People with health savings accounts must keep their prescriptions and receipts and submit them for reimbursement. Individuals should always keep a copy of these documents. If the Internal Revenue Service audits a tax return, it requires copies of all the prescriptions and receipts related to health savings accounts.

Health savings penalty increase
Is the Internal Revenue Service increasing the penalty on health savings account distributions for non-eligible expenses?

Yes. Health care reform increased the tax penalty on health savings account payments that are not used for eligible expenses from 10 percent to 20 percent of the payment amounts beginning in 2011.

The PPACA does not allow you to cover eligible dependent expenses with health savings account when the dependent is not listed on your federal income tax return. If your adult child dependent does not qualify as a tax dependent, any health savings account payments for that dependent’s expenses would then be taxed under the Health Savings Account Distribution Tax Penalty.

Your adult dependent child could open their own health savings account and contribute up to your medical plan’s allowable family maximum.

Individual mandate
What is the PPACA rule called the individual mandate?

Effective January 1, 2014 through December 31, 2018, almost everyone must have "minimum essential coverage" or pay a penalty. The penalties for not having coverage will be removed starting in 2019. This modification to the ACA was included in the 2018 Tax Cuts and Jobs Act.

Qualifying minimum essential coverage includes:

  • An employer-sponsored health plan
  • A government health plan such as Medicare or Medicaid
  • Individual coverage
  • A U.S.-issued expatriate plan

Exceptions include:

  • Religious reasons
  • Not lawfully present in the United States
  • In prison
  • The cost of coverage exceeds eight percent of household income
  • Income below 100 percent of the poverty level
  • Hardship waiver obtained
  • Not covered for a period of less than three months during the year

Any resident of the U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands) will be treated as having minimum essential coverage, regardless of whether they have coverage or not.

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What penalty applies to individuals who do not maintain minimum essential coverage?

Individuals will pay penalties for each month they don't have coverage. The annual penalties are prorated if someone has coverage for part of the year. The penalty amounts increased year over year, 2014 through 2016, but remained the same for 2017 and 2018 -- the annual penalty is the greater of $2,085 ($695 per adult and $347.50 per child) or 2.5 percent of income over tax-filing threshold. The penalty is removed in 2019, effectively repealing the individual mandate. More details can be found on the Individual Mandate Penalty page.

What reporting is required to confirm compliance with the individual mandate?

Insurers and 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. Individuals will need this information when they file their income tax returns.

This reporting requirement applies to employers of all sizes, and has not been affected by the 2018 Tax Cuts and Jobs Act, which zeroes out the penalty for individuals starting in 2019.

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International and expatriate plans
How does the PPACA affect international and expatriate plans?

Based on December 2014 legislation:

  • U.S.-issued expatriate plans are exempt from most PPACA market reforms except the requirement to provide dependent health coverage to age 26
  • 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
  • U.S.-issued expatriate plans are not required to provide a Summary of Benefits and Coverage
  • Different Medical Loss Ratio reporting and calculation rules apply to expatriate plans because they are structured differently and have more administrative costs
How does the PPACA affect Medicaid eligibility?

Under the PPACA, 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 PPACA 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, 2017
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 and plans covering expatriates have a different formula for calculating the medical loss ratio due to the unique features of these plans.

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. Under the ACA, the donut hole was scheduled to reduce coinsurance for seniors from 100 percent to 25 percent by 2020. The Bipartisan Budget Act of 2018 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
How can the minimum essential coverage provisions be satisfied?

Individuals satisfy the minimum essential coverage requirement with:

  • Eligible employer-sponsored health insurance coverage
  • Individual health plan
  • Grandfathered health plan
  • Medicare part A
  • Medicaid
  • Children's Health Insurance Program (CHIP) or 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

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Minimum Value
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. 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.

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 up to age 26, or employers could face possible penalties.

Read the Employer Mandate fact sheet to learn more on how to determine if these standards are met and what the penalties are for not meeting the standards.

Employer Mandate Fact Sheet

The Minimum Value Calculator and Methodologies can both be found on the CMS website.

What are the Section 1557 nondiscrimination requirements?

Under Section 1557 of the Affordable Care Act (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 U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) enforces this rule on nondiscrimination in health programs and activities.

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 broad application of this final 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. Financial assistance from HHS includes Medicare Part A, student health plans, advanced premium tax credits and many other programs.

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.
How are employer-sponsored health plans generally affected by the Section 1557 nondiscrimination requirements?

For most employer plans, including COBRA plans, the primary impact will be eliminating categorical exclusions or limitations for health services related to gender reassignment surgery and ensuring that their plans do not limit access to services based on gender.

Employers are also affected in their interactions with their own employees and/or clients if they operate a health program or activity which, in any part, receives federal financial assistance or funding (e.g., Medicare Part A, student health plans, and advanced premium tax credits).

Visit our Nondiscrimination Requirements page for more details.

Do self-funded plans need to cover transgender services?

Self-funded plans should remove any limits or dollar maximums on transgender services and medications to comply with Section 1557 of the ACA as well as the Mental Health Parity and Addiction Equity Act (MHPAEA).

Under MHPAEA, the diagnosis of gender dysphoria is a behavioral condition for which limitations should not be applied. Limits on transgender benefits (e.g., transgender therapy) that are not also applied to similar medical conditions and benefits could potentially be in conflict with MHPAEA rules.

Read more:
Nondiscrimination Requirements page
Nondiscrimination Requirements fact sheet

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 PPACA 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.

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Over-the-counter drugs
What are over-the-counter drugs and medicines?

Drugs and medicines that people can buy without a doctor’s prescription and that do not require a pharmacist are called over-the-counter drugs and medicines. However, for health care reform, some of these over-the-counter drugs and medicines will require a prescription for reimbursement from health saving and spending accounts. Some examples are acid controllers, allergy and sinus medication, pain relievers and stomach remedies.

Some over-the-counter items like insulin, bandages, medical supplies and vision care supplies are still eligible for reimbursement without a prescription.

Is an official prescription required, or may a doctor provide another form of documentation, such as a note of medical necessity?

The Internal Revenue Service in Notice 2010-59 says that a prescription is a written or electronic order for a medicine or drug that meets the state’s legal requirements in which the medical expense is paid and issued by a person legally authorized to issue prescriptions.

What effect does health care reform have on what people can buy with their flexible spending accounts, health reimbursement accounts and health savings accounts?

Purchases of most over-the-counter drugs on or after January 1, 2011 require a prescription for reimbursement from flexible spending accounts, health reimbursement accounts and health savings accounts.

Unlike flexible spending accounts and health reimbursement accounts, Cigna does not validate health savings accounts purchases. People are responsible to use the account only for eligible expenses, and prescriptions and receipts are needed when they complete federal income taxes. In the event of an audit, the Internal Revenue Service will require the documents.

The PPACA affects only over-the-counter drugs. Individuals may continue to buy eligible over-the-counter items without a prescription, such as insulin, bandages and medical supplies.

Which types of accounts are affected by new rules for eligible over-the-counter drug expenses?

Purchases of most over-the-counter drugs require a prescription for reimbursement. Reform affects all flexible spending accounts and health reimbursement accounts which cover 213d expenses, and health savings accounts. The PPACA will affect flexible spending accounts the most. FSA debit cards can no longer buy over-the-counter drugs or medicines.

Part-time employees
Does the PPACA provision known as the employer mandate extend to part-time employees?

The employer mandate applies to large employers, defined as employing an average of 50 full-time employees (i.e., employees working at least 30 hours per week) or equivalent. For 2015, the employer mandate will apply only to employers with 100 or more full-time employees. Beginning in 2016, it will expand to include employers with 50 or more full-time employees.

To determine whether an employer meets PPACA's 50-full-time-employees threshold, take the aggregate number of hours worked by the part-time employees in a particular month and divide that total by 120 to determine the equivalent number of full-time employees. Add the full-time equivalent number to the total number of actual full-time employees to determine whether the employer meets the 50-full-time-employees threshold.

The calculation is used for determining whether an employer is subject to the employer mandate. The employer mandate provision does not apply to an employer’s part-time employees.

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Pre-existing conditions
What does the PPACA say about pre-existing conditions?

Beginning with the first health insurance plan year beginning 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.

Beginning January 1, 2014, nobody can be denied coverage based on pre-existing conditions.

Grandfathered individual health plans are exempt from this requirement.

Preventive care
How does the PPACA 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.

Read more about preventive care

More questions about preventive care

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
  • Screening for gestational diabetes
  • HPV DNA testing for women 30 years and older
  • Sexually-transmitted infection counseling
  • HIV screening and counseling
  • Food and Drug Administration (FDA)-approved contraception methods and contraceptive 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 would not be permitted on the generic drug.

Eligible employers may self-certify with the insurance carrier, a third-party administrator (TPA) or the Department of Health and Human Services (HHS) for a religious exemption. This process transfers the responsibility of covering contraceptive benefits to the carrier or TPA.

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).

Please visit to read the Guidelines for Women’s Preventive Services.

Qualified health plans
What is a Qualified Health Plan?

A qualified health plan is coverage offered through a state insurance exchange.

Under the PPACA, qualified health plans may not have pre-existing condition limitations or lifetime maximums or annual limits on the dollar amount of essential health benefits, which the Department of Health and Human Services will define.

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

More questions related to qualified health plans

Rescissions (cancellation) of plans
What does the PPACA provision prohibiting rescissions (cancellation) mean for individual policyholders and covered individuals?

The PPACA bans rescission (cancellation) of health care coverage of an individual except for fraud or material misrepresentation provided the policy/plan provides for rescission.

The ban applies to individual policies and insured and self-insured group health plans (including grandfathered plans). If coverage is rescinded, the law requires 30 days advance notice to the enrollee.

The PPACA requirements are consistent with Cigna's prior business practice.

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Risk adjustment is a stabilization program designed to spread the financial risk that health plans (insurers) assume for their enrolled population – in and out of the public health care Marketplaces. It is designed to encourage insurers to offer a variety of health plans with stable premiums.

Risk adjustment is just one of three components of the stabilization program:

Risk adjustment (long-term)

  • Budget-neutral redistribution program
    • Those with "less risky" populations pay into the program
    • Those with "riskier" populations get payments from the program
  • "Risk" is determined based on demographics and claims’ ICD-9/ICD-10 diagnosis codes
  • Applied at the state/market level
  • Permanent program

Reinsurance (short-term)

  • Applied at the individual customer level
  • Reimbursed carriers for a portion of a customer’s claims when those claims are high
  • Funded by industry fees
  • Applied from 2014-2016

Risk corridor (short-term)

  • Protected issuers as they set rates for the first time for non-underwritten, guaranteed issue plans
  • Looked at actual versus expected claims
  • Applied from 2014-2016
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
  • Marketplaces
  • 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

Under new Oct. 2018 guidance, CMS has stated they will interpret some of the guardrails differently to loosen restrictions. For example:

  • 2015 guidance: Focused on the number of individuals estimated to receive comprehensive and affordable coverage
  • 2018 guidance: Focused on the availability of comprehensive and affordable coverage

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

Through the waiver process, states can also request a subsidy “pass through” to assist with funding the plan. The “pass through” provides the state with funds equal to the total premium tax credit and cost-sharing subsidies that residents would otherwise have received from the ACA regulated Marketplace.

For more information, visit The Center for Consumer Information & Insurance Oversight’s Section 1332 Waivers page.

Read the Section 1332 Waivers Fact Sheet

Which states have been approved for a waiver?

Section 1332 was effective Jan. 1, 2017. Since that time, the following state waivers have been approved:

  • Alaska (effective 2018-2022): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Alaska Reinsurance Program.
  • Colorado (effective 2020-2021): Waives the requirement to maintain a single risk pool in the individual market so that it can implement a two-year reinsurance program.
  • Delaware (effective 2020-2024): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Delaware Health Insurance Individual Market Stabilization Reinsurance Program.
  • Hawaii (effective 2017- 2021): Waives the requirement to operate a SHOP program, as well as related provisions. Hawaii will maintain its long-standing law that requires "virtually all employers" to offer coverage and provides small employers premium assistance.
  • Maine (effective 2019-2023): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Maine Guaranteed Access Reinsurance Association program.
  • Maryland (effective 2019-2023): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Maryland State Reinsurance Program. 
  • Montana (effective 2020-2024): Waives the requirement to maintain a single risk pool in the individual market so that it can implement a state reinsurance program.
  • Minnesota (effective 2018-2022): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Minnesota Premium Security Plan Reinsurance Program.
  • New Jersey (effective 2019-2023): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the New Jersey Health Insurance Premium Security Plan.
  • North Dakota (effective 2020-2024): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Reinsurance Association of North Dakota (RAND).
  • Oregon (effective 2018-2022): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Oregon Reinsurance Program.
  • Rhode Island (effective 2020-2024): Waives the requirement to maintain a single risk pool in the individual market so that it can implement a state reinsurance program.
  • Wisconsin (effective 2019-2023): Waives the requirement to maintain a single risk pool in the individual market so that it can implement the Wisconsin Healthcare Stability Plan.
See Nondiscrimination Requirements above

See Nondiscrimination Requirements above

Self-insured client and ERISA
Does the Employee Retirement Income and Security Act (ERISA) shelter self-insured plans from provisions of the PPACA?

No. Health insurance reform provisions of PPACA are incorporated into ERISA, so they apply to all self-insured plans governed by ERISA.

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 to annual health plans, 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 Affordable Care Act (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.

Small employer
What is the definition of "small employer?"

The national small group definition was scheduled to expand in 2016 from one to 50 to one to 100 total employees (any person that receives a W-2). However, this rule was repealed early October 2015, leaving the definition of small group as one to 50 total employees, unless a state defines differently. Non-grandfathered, insured, small group health plans must comply with community rating standards and Essential Health Benefits (EHB) rules.

States currently expanding their small group definition to one to 100 total employees: CA, CO, NY and VT.

Expanding the small group definition beyond 50 total employees could present a significant change for insured groups with 51 or more full-time or full-time equivalent (FTE) employees, as these employers are considered "large employers” for most PPACA rules.

Non-grandfathered insured employer groups that fit a state-defined small group size greater than 50 total employees, and whose workforce is comprised of 51 or more full-time or FTE employees will need to comply with both the small group market rules and the employer mandate. Such insured group health plans must comply with minimum value and affordability rules to avoid employer penalties despite higher premiums resulting from the small group rules. Consequently, these affected employers may consider self-insuring their plans.

As an example, if a state expands its small group definition to one to 100 employees, an employer would be subject to both sets of rules if it had 95 total employees, comprised of 65 full-time employees.

U.S.-issued expatriate plans can continue to define a “small employer” as having one to 50 employees in 2016 and beyond.

Fully insured groups in states that expand the definition may have to comply with both requirements.

Requirements for small employer group insurance

* The small group size is set by every state and is determined by number of actual employees (any person that receives a W-2). The definition of an “applicable large employer” for purposes of the employer mandate is set by federal law and is any employer with 50 or more full-time and full-time equivalent employees.

See Section 1332 - State Relief and Empowerment Waivers above

see Section 1332 - State Relief and Empowerment Waivers above

Summary of Benefits and Coverage
When were employers required to begin delivering the Summary of Benefits and Coverage to their employees?

The Summary of Benefits and Coverage 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 were required to provide a standard Summary of Benefits and Coverage (SBC) document to all individuals enrolling in medical coverage. This includes mid-year enrollment for new employees and those experiencing a special enrollment event, and 'upon request' by other enrollees. 

Except for the 'upon request' requirement, the date by which the SBC needs to be provided is actually 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.

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.

For example, if a January 1 renewal wants to make a change on February 1, they will need to communicate it on February 1 and make the change effective in April, which thus gives the requisite 60-day advance notice.

Note: This timing applies only to changes that become effective during the health plan year.

Where can an individual customer go to view a sample of the Summary of Benefits and Coverage?

Templates for both the current SBC and new SBC are available at the Department of Labor website.

Taft Hartley funds
Does PPACA affect Taft-Hartley Funds or Groups the same as employers?

Yes. However, a special grandfathering rule for insured collectively bargained plans says they do not have to follow all health insurance rules at the beginning. When the last of the health plan’s collective bargaining agreements that started on or before March 23, 2010 ends, then all other grandfathered health plans rules apply.

Many Taft-Hartley plans had annual limits on the dollar amount of essential health benefits and, like all other health plans, could apply for a waiver from the ban on annual limits.

More questions about Taft Hartley funds

Tanning Tax
What is the tanning tax?

This 10 percent tax on indoor tanning services took effect in 2010.

U.S. territories
How does the PPACA apply to U.S. territories, such as the U.S. Virgin Islands and Puerto Rico?

Certain PPACA 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.

The Individual Mandate provision states that any resident of the territories will be treated as having minimum essential coverage, regardless of whether they have health coverage or not. If individuals are deemed to have minimum essential coverage, they may not be eligible for federal premium assistance to purchase coverage through the Marketplace (if a Marketplace is established in their territory).

Effective July 16, 2014, the following additional PPACA 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

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W-2 reporting
What are the PPACA rules relating to W-2 reporting of the value of employer-sponsored health coverage?

The PPACA 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. Employee premiums may still be made on a pre-tax basis.

Employers that choose not to report the aggregate cost of employer-sponsored coverage may be subject to tax penalties. While the Form W-2 has not changed, the IRS added a code "DD" that employers should put in box 12 to report the value.

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 with 200 employees may send out more than 250 W-2s.

See the IRS sample W-2 form.

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.

Waiting Periods
What is the PPACA rule on enrollment waiting periods?

The PPACA prohibits employers from imposing enrollment waiting periods that exceed 90 days. This provision applies to both grandfathered and non-grandfathered health plans.

Read more about the Final Rule on Waiting Periods

Waiver process/special consideration
Is there a waiver to delay following the PPACA annual limit rule?

If compliance with the PPACA’s annual limit  for essential health benefits  rule caused a big loss of coverage or increase in monthly premiums, the interim final rules allowed for one-year waivers from September 2010 through January 2014. These waivers were particularly useful for limited benefit plans, or mini med plans, that often had annual limits well below what the PPACA interim final regulations require. Plans were required to get waivers annually until 2014, when all plans were required to follow the annual limits rule.

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 main 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; whereas 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.

There are key differences with these rules. These include:

  • Voluntary participation requirements
  • Reasonable accommodations and alternatives
  • Notice and confidentiality requirements

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 Fact Sheet.

Read more
Wellness Programs and Incentives page
Final Rules on Employer Wellness Programs under the ADA and GINA news alert

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: All enrollees
Incentive* limit for programs that do not include tobacco cessation 30%
Incentive* limit for programs that include tobacco cessation 50%
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

* All incentives offered through a wellness program should be reviewed for tax purposes. Incentives are generally subject to tax unless (1) given as a premium credit, (2) deposited into an FSA/HSA/HRA, or (3) are prizes of nominal value (e.g., pens or t-shirts). Cash or gift card incentives are always taxable.

Read more
Wellness Fact Sheet
Wellness Programs and Incentives page

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