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Small Business Employee Benefits and HR Blog

What are the ACA Market Reforms?

 ACA Market ReformsThe Affordable Care Act (ACA) was signed into law March 23, 2010. Along with its enactment, the ACA introduced a set of group health plan and health insurance standards, known as the “Market Reforms.”

Generally to be implemented by January 1, 2014, these reforms addressed limits placed on certain benefits, the treatment of basic preventive healthcare, limited waiting periods, extended dependent coverage, and written employee communications, among others. 

This article provides an overview of when compliance with the Market Reforms is required, how the Market Reforms impact reimbursement plans, and penalties for non-compliance.

When is Compliance with the Market Reforms Required?

With very few exceptions, group health plans are required to comply with the Market Reforms.

A plan or arrangement is considered a group health plan when an employer’s funds are conditioned on an employee’s medical expenses. Even in the most informal circumstances, a group health plan is established when employer dollars are used specifically for medical expenses.

Once a group health plan is established, the plan is required to comply with the Market Reforms.

How Does this Impact Individual Health Insurance Reimbursement?

For decades (see this timeline), employers have offered a health benefit by reimbursing employees for their verified medical expenses, including health insurance premiums. Because the employer conditions their funds on medical expenses incurred by the employee, the reimbursement arrangement is a group health plan.

As a group health plan, reimbursement plans are required to comply with the following Market Reforms.

Prohibition of Lifetime Limits and Annual Limits on Essential Health Benefits

Prior to the ACA, plans were generally allowed to place lifetime and annual limits - dollar limits - on how much the plan would spend for covered health benefits either during the entire period an individual was enrolled in the plan (lifetime limits) or during a plan year (annual limits). Under the ACA, both lifetime and annual limits on essential health benefits (EHB) are prohibited.

No Cost-sharing for Preventive Health Services

Plans are required to provide coverage for certain preventive health services without imposing cost-sharing. 

90 Day Waiting Period

The ACA prohibits plans from establishing waiting periods greater than 90 days. A “waiting period” refers to the time period that must pass before an eligible individual is allowed to participate in the plan.

Extension of Dependent Coverage

The ACA requires plans that offer dependent coverage to make such coverage available to children under age 26. This includes coverage for both married and unmarried adult children under age 26.

Summary of Benefits and Coverage (SBC)

The ACA requires that each plan provide an SBC to individuals prior to their enrollment and upon each new plan period. The SBC is a short document intended to describe the benefits of health plans in simple language.

What is the Penalty for Non-compliance?

Compliance with the Market Reforms is enforced by potential excise taxes under Internal Revenue Code §4980D. If non-compliance with certain group health plan requirements (including the Market Reforms) is determined, an employer may be assessed a $100 per day, per employee excise tax.

These costly fines make it imperative that employers offer a compliant plan.

Conclusion - A Compliant Way to Reimburse Individual Health Insurance

To reimburse employees for individual health insurance and comply with the Market Reforms, employers may use a Healthcare Reimbursement Plan (HRP), such as ZaneHealth. An HRP is carefully designed to satisfy the discussed Market Reforms by only allowing reimbursement for health insurance premiums (not an essential health benefit), and certain preventive services (without cost-sharing). Additionally, an HRP allows waiting periods up to 90 days, dependent coverage up to age 26, and provides participants with a Summary of Benefits and Coverage.

What questions do you have about the Market Reforms or their impact on reimbursement plans? Leave a comment below.

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