Reform Timelines

2014

·         A temporary small business tax credit is available for two consecutive years for certain small businesses that provide qualified health coverage. The rules include:

‒         Only firms with 10 or fewer employees are eligible for the full credit. For firms with 11 to 24 employees, the credit is reduced. Firms with 25 employees or more are ineligible for the credit.

‒         Only firms that pay their workers an average wage of $25,000 or less are eligible for the full credit. The credit is reduced as the average wage goes up, phasing out at $50,000.

‒         Only firms offering a uniform contribution of at least 50 percent of employee insurance costs may be eligible.

‒         Health insurance coverage must be purchased in a Small Business Health Options Program (SHOP) exchange.

·         Employers must distribute the Notice of Coverage Options to new employees within 14 days of the employees’ start date. The Notice of Coverage Options document is a written notice describing an employer’s health insurance offerings and/or exchange availability:

‒         Informing the employee of the existence of an exchange, description of exchange services, and exchange contact information; and

‒         Notifying the employee if the employer’s plan is below the minimum value threshold (60 percent actuarial value).

·         Employers must determine business size, whether they will be considered “small,” “midsize,” or “large,” for the requirements of the employer mandate. Penalties will not begin until tax year 2015, but a midsize employer is defined as a business that employed an average of at least 50 full-time equivalent (FTE) employees on business days during the preceding calendar year, and a large employer is defined as a business that employed an average of at least 100 full-time equivalent (FTE) employees on business days during the preceding calendar year. For 2015, the preceding calendar year is 2014. Employers may use six consecutive calendar months during 2014 in order to determine business size for 2015. Business size is determined monthly by adding the number of full-time employees to the number of FTE employees.

·         Full-time employees are individuals who work an average of 130 or more monthly hours (30 hours or more per week).

·         New counting requirements for part-time and seasonal employees: Part-time and seasonal employees’ hours will be converted into FTE employees for determination of business size. Total monthly part-time and seasonal hours must be added together and divided by 120. For example, if 6 employees each work 20 hours per month, they will count as if the firm had 1 additional FTE employee.

·         Large employers must determine whether employees are full-time employees: Once an employer has determined their business is “large,” they may either track actual monthly hours or utilize a look-back period of 3–12 months to determine whether employees’ average hours exceeded 130 hours per month (30 hours per week).

·         Filing occurs for a new 3.8 percent tax on investment income for higher-income taxpayers for tax year 2013.

·         An $8 billion small business health insurance tax will begin on the fully insured market, where the majority of individuals and small businesses purchase insurance.

·         Every insured American will pay a $63 reinsurance fee.

·         Individual health insurance exchanges begin offering coverage to qualified individuals. Open enrollment for individuals in 2014 ends on March 31, 2014 (or April 15, 2014 for individuals who began, but were unable to complete enrollment). Open enrollment for 2015 will begin on November 15, 2014.

·         Small business exchange begins offering coverage to qualified small businesses with fewer than 50 employees. Employers may only select one health insurance plan and must enroll directly through an insurance agent/broker or an insurer.

·         Premium tax credits and subsidies begin. The federal government will subsidize health insurance premiums for individuals with incomes below 400 percent of the federal poverty level. Individuals with incomes below 250 percent of the federal poverty level are eligible for subsidies to assist with cost-sharing.

·         Individual mandate penalty tax begins. Most individuals without minimum essential coverage by March 31, 2014 are subject to a penalty tax. Individual mandate penalty tax begins at $95 or 1 percent of household income above the filing threshold, whichever is greater.

·         All qualified individual and small group health insurance policies must provide an Essential Health Benefits package, a comprehensive list of ten broad benefit mandates and service categories.

·         Remaining insurance requirements take effect, and insurers cannot impose coverage restrictions based on pre‐existing conditions. Modified community rating standards go into effect for individual or small business coverage based on geography, age, and smoking status. The law also limits out-of-pocket spending for in-network services. [1]

 

2015

·         Employer mandate coverage requirement phases in for “large” businesses. Businesses with 100 or more full-time or full-time equivalent employees are mandated to offer health insurance to at least 70 percent of full-time employees or pay penalties. The penalties are based on the number of full-time employees during the preceding calendar year; whether the firm offers coverage to a significant percentage of full-time employees; whether coverage is “affordable” and meets “minimum value;” and whether one or more full-time employees qualify for a premium subsidy. A full-time employee qualifies for a subsidy if his or her taxable income is between 100 and 400 percent of the federal poverty level and the employee’s share of the self-only portion of the premium exceeds 9.5 percent of their taxable income. Taxable income can be found in Box 1 of an employee’s W-2 form. Here are some scenarios:

‒         More than 100 FTE employees and the business does not offer insurance to the full-time employees, with one or more full-time employees receiving premium subsidies because their taxable income falls between 100 percent and 400 percent of the federal poverty level. The penalty is $2,000 per full-time employee (minus 80 full-time employees).

‒         More than 100 FTE employees and the business offers insurance, with one or more full-time employees receiving premium subsidies because their share of the self-only portion of the premium exceeds 9.5 percent of their taxable income. The penalty is the lesser of $3,000 per subsidized full-time employee or $2,000 per full-time employee (minus 80 full-time employees).

‒         More than 100 FTE employees and the business offers insurance, with no full-time employees receiving premium subsidies. There is no penalty on the employer.

‒         Fewer than 50 FTE employees: No penalty or requirement to offer insurance.

·         Small business health insurance tax rises to $11.3 billion.

·         Every insured American will pay a $44 reinsurance fee. (Self-insured and self-administered health plans are exempt from the reinsurance fee in 2015.)

·         Individual mandate tax penalty increases to $325 or 2 percent of income above the filing threshold, whichever is greater.

·         Open enrollment for coverage in individual health insurance exchanges for 2015 ends on February 15, 2015.

·         Small business (SHOP) health insurance exchanges must offer online enrollment and provide more employer health insurance offering opportunities including:

‒         Employer choice – allowing employers to choose one of multiple health insurance plans from which employees may select.

‒         Employee choice – allowing employers to choose a metallic coverage level from which employees may choose any plan from any insurer within the coverage level.

 

2016

·         Employer mandate coverage requirement is fully implemented for “mid-size” and “large” businesses. Businesses with 50 or more full-time or full-time equivalent employees are mandated to offer health insurance to at least 95 percent of full-time employees (and dependents) or pay penalties. The penalties are based on the number of full-time employees during the preceding calendar year; whether the firm offers coverage to nearly all full-time employees; whether coverage is “affordable” and meets “minimum value;” and whether one or more full-time employees qualify for a federal premium subsidy. A full-time employee qualifies for a subsidy if his or her taxable income is between 100 and 400 percent of the federal poverty level and the employee’s share of the self-only portion of the premium exceeds 9.5 percent of their taxable income. Taxable income can be found in Box 1 of an employee’s W-2 form. Here are some scenarios:

‒         More than 50 FTE employees and the business does not offer insurance to the full-time employees, with one or more full-time employees receiving premium subsidies because their taxable income falls between 100 percent and 400 percent of the federal poverty level. The penalty is $2,000 per full-time employee (minus 30 full-time employees).

‒         More than 50 FTE employees and the business offers insurance, with one or more full-time employees receiving premium subsidies because their share of the self-only portion of the premium exceeds 9.5 percent of their taxable income. The penalty is the lesser of $3,000 per subsidized full-time employee or $2,000 per full-time employee (minus 30 full-time employees).

‒         More than 50 FTE employees and the business offers insurance, with no full-time employees receiving premium subsidies. There is no penalty on the employer.

‒         Fewer than 50 FTE employees: No penalty or requirement to offer insurance.

·         Midsize and large employers must report and verify the offer of affordable and adequate coverage to employees by January 31, 2016 and to the IRS by February 28, 2016 (March 31, 2016 if submitted electronically). Midsize employers must certify with the IRS they did not reduce employment, reduce employees’ hours, or eliminate or materially reduce coverage in order to qualify for transition relief for tax year 2015 from the employer mandate.

·         Small business health insurance tax remains at $11.3 billion.

·         Every insured American must pay a to-be-determined reinsurance fee.

·         Individual mandate tax penalty increases again, to $695 or 2.5 percent of income above the filing threshold, whichever is greater.

·         Small business (SHOP) health insurance exchanges must open up to qualified businesses with up to 100 employees.

·         Small group market definition increases to businesses with up to 100 employees, making more businesses subject to the Essential Health Benefits package and other insurance market requirements.

 

2017

·         Brand-name drug tax rises to $3.5 billion.

·         Small business health insurance tax increases to $13.9 billion.

·         Individual mandate tax penalty is based on 2016 levels and will rise according to a cost-of-living adjustment.

·         States and the federal government may allow large employers with 100 or more employees to enter the SHOP exchanges. All SHOP health insurance plans must cover Essential Health Benefits and other health insurance market requirements.

 

2018

·         Cadillac tax begins on high-cost health insurance plans with an aggregate value that exceeds threshold amounts of $10,200 for individual coverage and $27,500 for family coverage.

·         Brand-name drug tax rises to $4.2 billion.

·         Small business health insurance tax rises to $14.3 billion.

·         Individual mandate tax penalty is based on 2016 levels and will rise according to a cost-of-living adjustment.