Affordable Care Act: Understanding Employer Notices From the Marketplaces

The Affordable Care Act (ACA) established Health Insurance Marketplaces (also called Exchanges) where individuals can shop and enroll in health coverage. Individuals who meet certain criteria are eligible for premium subsidies and cost-sharing reductions for coverage on the Marketplace.

For the first time, in 2016 some employers will receive a notice from a Marketplace indicating that one of their employees signed up for health coverage through the Marketplace and received advanced premium subsidies. Many employers are asking what these notices mean and what actions they should take if they receive one.

Background

 

Premium subsidies and cost-sharing reductions are designed to expand healthcare coverage by making insurance, and its utilization, more affordable. Premium subsidies, more accurately referred to as a premium tax credit, are claimed on an individual’s income tax return at the end of the year. What is unique about this tax credit is that an individual can choose to have the expected premium tax credit advanced throughout the year, in which case the government makes payments directly to the health insurer on the individual’s behalf. Importantly, individuals who have access to health coverage through an employer that is affordable and meets minimum value are not eligible to receive the premium tax credit or advances of the premium tax credit for their coverage.

The ACA generally requires that applicable large employers – generally employers with 50 or more full-time employees, including full-time equivalents – offer health coverage that is affordable and of minimum value to their full-time employees (and their dependents) or face an Internal Revenue Service (IRS) tax. This is often referred to as the employer “pay or play” or employer mandate provision. Tax liability under this employer provision is triggered if one of the employer’s full-time employees receives a premium tax credit and the amount of the tax liability is determined by the number of full-time employees who received the premium tax credit.

Marketplace Notices

During the Marketplace application process, individuals are asked a host of questions, including questions about access to health coverage through an employer. If the Marketplace determines that the individual does not have access through an employer to coverage that is affordable and meets the required minimum value, and assuming the individual meets other eligibility criteria, advance payments of the premium tax credit can begin.

In such an instance, the Marketplace is required to send the employer a Marketplace notice. This will be the first year the Federally Facilitated Marketplace (FFM) is sending out these notices. It is worth noting that there is not a commitment to send a notice to all employers, and the FFM has said it can send a notice only if the individual provides a complete employer address. Consequently, some employers expecting Marketplace notices may not receive them and notices may not be mailed to the preferred employer address.

Potential Tax Liabilities

The Marketplace notices will give employers advance warning that they may have potential tax liability under the employer mandate of the ACA. However, there are reasons that receiving a notice does not necessarily mean the IRS will be in hot pursuit, including:

• The Marketplace cannot distinguish whether the employer is large enough to be subject to the employer mandate. That is, the Marketplace will be sending out notices to smaller employers that are not subject to the tax. An employer receiving a Marketplace notice may want to confirm whether it is an applicable large employer subject to the employer mandate.
  

 

• Even if the employer is an applicable large employer, the individual identified in the notice may not be a full-time employee. Determining whether a particular employee is a full-time employee, as defined by the law and related regulations, is not always easy. An employer receiving a Marketplace notice may want to confirm whether the individual identified in the notice is an employee and whether, in fact, the employee was, or is, a full-time employee.
  

• In addition to considering its potential tax liability under the employer mandate, an employer should also be mindful of its employees’ potential tax liability. As noted above, an individual with access through an employer to health coverage that is affordable and meets minimum value is not eligible for a premium tax credit. Consequently, any advance payments of the premium tax credit made on that individual’s behalf throughout the year will be subject to repayment when the individual files their income tax return. This will be an unwanted and unexpected surprise to many individuals.
  

Sample Notice Clarifications

The FFM recently posted a sample of its 2016 notice which can be found here.

Please note that the notice suggests that employers should call the IRS for more information if they have questions, however, IRS telephone assistors will be unable to provide information on the Marketplace process, including the appeals process, and will be unable to tell an employer whether they owe a tax under the employer mandate.

Considerations for Employers

An employer who receives a Marketplace notice may want to appeal the decision that the individual was not offered employer coverage that was affordable and of minimum value. An employer has 90 days from the date of the notice to file an appeal, which is made directly to the Marketplace. Importantly, the IRS will independently determine whether an employer has a tax liability, and the employer will have the opportunity to dispute any proposed liability with the IRS. Similarly, an individual will have the opportunity to challenge an IRS denial of premium tax credit eligibility. Any contact by the IRS, however, will occur late in the game after the year’s tax liabilities have already been incurred. Therefore, although an appeal is not required, it may be advisable.

Regardless of whether an employer pursues an appeal, an employer, particularly one that offers affordable, minimum value health coverage, should communicate to its employees about its offering. Although an applicable large employer is required to furnish IRS Form 1095-C to full-time employees detailing the employer’s offer, a better option is providing employees with information before they enroll in Marketplace coverage.

In summary, the Marketplace notice serves as an advance warning that either the employer or the employee may have a tax liability. Given this exposure, employers should review Marketplace notices and their internal records and consider taking action.

HHS Announces New Health Plan Out of Pocket Limits for 2017

On March 1, 2016, the Department of Health and Human Services (HHS) announced the finalized 2017 health plan out-of-pocket (OOP) maximums.   Applicable to non-grandfathered health plans, the OOP limits for plan years beginning on or after January 1, 2017 are $7,150 for single coverage and $14,300  for family coverage, up from $6,850 single/$13,700 family in 2016. The OOP maximum includes the annual deductible and any in-network cost-sharing  obligations members have after the deductible is met.  Premiums,  pre-authorization penalties, and OOP expenses associated with out-of-network benefits are not required to be included in the OOP maximums.

In addition to the new OOP maximum limits, employers offering high deductible health plans need to be particularly mindful of the embedded OOP maximum requirement. Beginning in 2016, all  non-grandfathered health plans, whether self-funded or fully insured, must apply  an embedded OOP maximum to each individual enrolled in family coverage if the plan’s family OOP maximum exceeds the ACA’s OOP limit for self-only coverage  ($7,150 for 2017).  The ACA-required embedded OOP maximum is a new and  often confusing concept for employers offering a high deductible health plan  (HDHP). Prior to ACA, HDHPs commonly imposed one overall family OOP limit  on family coverage (called an aggregate OOP) without an underlying individual  OOP maximum for each covered family member.  Now, HDHPs must comply with  the IRS deductible and OOP parameters for self-only and family coverage in  addition to ACA’s OOP embedded single limit requirement.     

The IRS is expected to announce the 2017 HDHP  deductible and OOP limits in May 2016.

Limiting Employee Hours To Avoid ACA Could Violate ERISA

In a first-of-its-kind decision, a federal court recently upheld the right of employees to sue their employer for allegedly cutting employee hours to less than 30 hours per week to avoid offering health insurance under the Affordable Care Act (ACA). Specifically, the District Court for the Southern District of New York denied a defense Motion to Dismiss in a case where a group of workers allege that Dave & Buster’s (a national restaurant and entertainment chain) “right-sized” its workforce for the purpose of avoiding healthcare costs.

Although this case is in the very early stages of litigation and is far from being decided, you should monitor this for developments to determine whether you need to take action to deter potential copycat lawsuits. 

Reducing Workforce Hours In Response To ACA

The ACA requires employers who employ 50 or more “full-time equivalents” to offer affordable minimum-value coverage to full-time employees and their dependents or pay a penalty if any of their full-time employees receive federal premium assistance to purchase individual coverage in the Health Insurance Marketplace. This requirement is also known as the “Employer Mandate”.  

One of the initial concerns by ACA critics is that many employers would respond to the Employer Mandate by reducing full-time employee hours to avoid the coverage obligation and associated penalties, increasing the number of part-time workers in the national economy. This is because the ACA does not require an employer to offer affordable, minimum-value coverage to employees generally working less than 30 hours per week.  

Although the initial economic data analyzing the national workforce suggests that the predictions of wide-scale reduction in employee hours have not materialized, some employers have increased their reliance on part-time employees as an ACA strategy to manage the costs of the Employer Mandate.

Could That Reduction Violate ERISA?

Although an employer who reduces employee hours would not violate any specific provision of the ACA, there is an open question as to whether such an action would violate another federal law. As alleged by employees of Dave & Buster’s, such a reduction creates a cause of action under the Employee Retirement Income Security Act of 1974 (ERISA). A group of employees filed a class action lawsuit against the restaurant chain last year making such an argument.

Section 510 of ERISA prohibits discrimination and retaliation against plan participants and beneficiaries with respect to their rights to benefits. More specifically, ERISA Section 510 prohibits employers from interfering “with the attainment of any right to which such participant may become entitled under the plan.” Because many employment decisions affect the right to present or future benefits, courts generally require that plaintiffs show specific employer intent to interfere with benefits if they want to successfully assert a cause of action under ERISA Section 510.  

Round One Goes To Employees

Dave & Buster’s moved to dismiss the class action lawsuit, arguing that the complaint failed to demonstrate that it reduced work hours with the specific intent to deny employees the right to group health insurance. However, the district court disagreed and recently denied the employer’s motion, clearing the case for further litigation.

The court found that the class of plaintiffs showed sufficient evidence in support of their claim that their participation in the health insurance plan was discontinued because the employer acted with “unlawful purpose” in realigning its workforce to avoid ACA-related costs. In this regard, the employees claimed that the company held meetings during which managers explained that the ACA would cost millions of dollars, and that employee hours were being reduced to avoid that cost.

What Should Employers Do Now?

The lawsuit against Dave & Buster’s is the first case to address whether a transition to a substantially part-time workforce in response to the Employer Mandate constitutes a violation of ERISA Section 510. The case is far from over and we do not know when it will be resolved. 

However, if you are considering reducing your employee hours, you should carefully consider how such reductions are communicated to your workforce. Employers often have varied reasons for reducing employee hours, and many of those reasons have legitimate business purposes. It is vital that any communications made to your employees about such reductions describe the underlying rationale with clarity. 

Be Prepared To Respond To Employer Notices Of ACA-Subsidized Employees

Beginning in Spring 2016, the Affordable Care Act (ACA) Exchanges/Marketplaces will begin to send notices to employers whose employees have received government-subsidized health insurance through the Exchanges. The ACA created the “Employer Notice Program” to give employers the opportunity to contest a potential penalty for employees receiving subsidized health insurance via an Exchange.

What are the Potential Penalties?

The notices will identify any employees who received an advance premium tax credit (APTC). If a full-time employee of an applicable large employer (ALE) receives a premium tax credit for coverage through the Exchanges in 2016, the ALE will be liable for the employer shared responsibility payment. The penalty if an employer doesn’t offer full-time equivalent employees (FTEs) affordable minimum value essential coverage is $2,160 per FTE (minus the first 30) in 2016. If an employer offers coverage, but it is not considered affordable, the penalty is the lesser of $3,240 per subsidized FTE in 2016 or the above penalty. Penalties for future years will be indexed for inflation and posted on the IRS website. The Employer Notice Program does provide an opportunity for an ALE to file an appeal if employees claimed subsidies they were not entitled to.

Who Will Receive Notices?

The first batch of notices will be sent in Spring 2016 and additional notices will be sent throughout the year.  For 2016, the notices are expected to be sent to employers if the employee received an APTC for at least one month in 2016 and the employee provided the Exchange with the complete employer address.

Last September, the Centers for Medicare and Medicaid Services (CMS) issued FAQs regarding the Employer Notice Program. The FAQs respond to several questions regarding how employers should respond if they receive a notice that an employee received premium tax credits and cost sharing reductions through the ACA’s Exchanges.

Appeal Process

Employers will have an opportunity to appeal the employer notice by proving they offered the employee access to affordable minimum value employer-sponsored coverage, therefore making the employee ineligible for APTC. An employer has 90 days from the date of the notice to appeal.  If the employer’s appeal is successful, the Exchange will send a notice to the employee suggesting the employee update their Exchange application to reflect that he or she has access or is enrolled in other coverage.  The notice to the employee will further explain that failure to provide an update to their application may result in a tax liability.

An employer appeal request form is available on the Healthcare.gov website. For more details about the Employer Notice Program or the employer appeal request form visit www.healthcare.gov.

Advice

Although CMS has provided these guidelines to apply only to the Federal Exchange, it is likely that the state-based Exchanges will have similar notification programs.

Employers should prepare in advance by developing a process for handling the Exchange notices, including appealing any incorrect information that an employee may have provided to the Exchange.  Advance preparation will enable you to respond to the notice promptly and help to avoid potential employer penalties.

Seven Questions Employees Will Ask About the ACA 1095s

You did it! Your 1095 forms are ready and going out to employees. Now what?

You guessed it: Employee confusion. You’re going to get some questions. If you’re the one in charge of providing the answers, remember a great offense is the best defense. You’ll want to answer the most common questions before they’re even asked.

We’ve put together a list of some basic things employees will want to know, along with sample answers. Tailor these Q&As as needed for your organization. and then send them out to employees using every channel you can (mail, e-mail, employee meetings, company website, social media, posters). Tell employees how to get more detailed information if they need it.

Employee questions about the 1095s:

1.    What is this form I’m receiving?
A 1095 form is a little bit like a W-2 form. Your employer (and/or insurer) sends one copy to the Internal Revenue Service (IRS) and one copy to you. A W-2 form reports your annual earnings. A 1095 form reports your health care coverage throughout the year.

2.    Who is sending it to me, when, and how?
Your employer and/or health insurance company should send one to you either by mail or in person. They may send the form to you electronically if you gave them permission to do so. You should receive it by March 31, 2016. (Starting in 2017, you should receive it each year by January 31, just like your W-2.)

3.    Why are you sending it to me?
The 1095 forms will show that you and your family members either did or did not have health coverage with our organization during each month of the past year. Because of the Affordable Care Act, every person must obtain health insurance or pay a penalty to the IRS.

4.    What am I supposed to do with this form?
Keep it for your tax records. You don’t actually need this form in order to file your taxes, but when you do file, you’ll have to tell the IRS whether or not you had health insurance for each month of 2015. The Form 1095-B or 1095-C shows if you had health insurance through your employer. Since you don’t actually need this form to file your taxes, you don’t have to wait to receive it if you already know what months you did or didn’t have health insurance in 2015. When you do get the form, keep it with your other 2015 tax information in case you should need it in the future to help prove you had health insurance.

5.    What if I get more than one 1095 form?
Someone who had health insurance through more than one employer during the year may receive a 1095-B or 1095-C from each employer. Some employees may receive a Form 1095-A and/or 1095-B reporting specific health coverage details. Just keep these—you do not need to send them in with your 2015 taxes.

6.    What if I did not get a Form 1095-B or a 1095-C?
If you believe you should have received one but did not, contact the Benefits Department by phone or e-mail at this number or address.

7.    I have more questions—who do I contact?
Please contact _____ at ____. You can also go to our (company) website and find more detailed questions and answers. An IRS website called Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C) covers most of what you need to know.

Late Breaking Benefits News for 2016

Congress and the IRS were busy changing laws governing employee benefit plans and issuing new guidance under the ACA in late 2015. Some of the results of that year-end governmental activity include the following:

Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

The PATH Act, enacted by Congress and signed into law on December 18, 2015, made some the following changes to federal statutory laws governing employee benefit plans:

• The ACA’s 40% excise tax (aka “Cadillac Tax”) on excess benefits under applicable employer sponsored coverage — so called “Cadillac Plans,” due to the perceived richness of such coverage — is  delayed from 2018 to 2020.

• Formerly a nondeductible excise tax, any Cadillac Tax  paid by employers will now be deductible as a business expense.

• Beginning with plan years after November 2, 2015,  employers with 200+ employees will not be required to automatically enroll new or current     employees in group health plan coverage, as originally required under the ACA.

• After December 31, 2015, individual taxpayers who purchase private health insurance via the Healthcare Exchange will not be eligible to claim a Health Care Tax Credit on their tax returns.

IRS Notice 2015-87

On December 16, 2015, the IRS issued Notice 2015-87, providing guidance on employee accident and health plans and employer shared-responsibility obligations under the ACA. Guidance provided under Notice 2015-87 applies to plan years that begin after the Notice’s publication date (December 16^th), but employers may rely upon the guidance provided by the Notice for periods prior to that date.

Notice 2015-87 covers a wide-range of topics from employer reporting obligations under the ACA to the application of Health Savings Account rules to rules for identifying individuals who are eligible for benefits under plans administered by the Department of Veterans Affairs. Following are some of the highlights from Notice 2015-87, with a focus on provisions that are most likely to impact non-governmental employers.

• Under the ACA, an HRA may only reimburse medical expenses of those individuals (employee, spouse, and/or dependents) who are also covered by the employer’s group health plan providing minimum      essential coverage (“MEC”) that is integrated with the HRA.

• Employer opt-out payments (i.e., wages paid to an employee solely for waiving employer-provided coverage) may, in the view of Treasury and the IRS, effectively raise the contribution cost for employees who desire to participate in a MEC plan. Treasury and the IRS intend to issue      regulations on these arrangements and the impact of the opt-out payment on the employee’s cost of coverage. Employers are put on notice that if an opt-out payment plan is adopted after December 16, 2015, the amount of the offered opt-out payment will likely be included in the employee’s cost of coverage for purposes of determining ACA affordability.

• Treasury and the IRS will begin to adjust the affordability safe harbors to conform with the annual adjustments for inflation applicable to the “9.5% of household income” analysis under the ACA. For plan years beginning in 2015, employers may rely upon 9.56% for one or more of the affordability safe harbors identified in regulations under the ACA, and 9.66% for plan years beginning in 2016. For example, in a plan year beginning in 2016, an employer’s MEC plan will meet affordability standards if the employee’s contribution for lowest cost, self-only coverage does not exceed 9.66% of the employee’s W-2 wages (Box      1).
• To determine which employees are “full-time” under the ACA, “hours of service” are intended to include those hours an employee works and is entitled to be paid, and those hours for which the employee is entitled to be paid but has not worked, such as sick leave, paid vacation, or periods of legally protected leaves of absence, such as FMLA  or USERRA leave.

• The Treasury and IRS remind applicable large employers that they will provide relief from penalties for failing to properly complete and submit Forms 1094-C and 1095-C if the employers are able to show that they made good faith efforts to comply with their reporting obligations.

The IRS Gives A Holiday Gift to Applicable Large Employers – 2015 ACA Reporting is Delayed

In the recently released Notice 2016-4, the IRS has extended the due dates for certain 2015 Affordable Care Act information reporting requirements.

Specifically, the Notice extends:

• the due date for furnishing to individuals the 2015 Form 1095-B and Form 1095-C from February 1, 2016, to March 31, 2016, and

• the due date for filing with the IRS the 2015 Form 1094-B, Form 1094-C and Form 1095-C from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

In the Notice, the IRS also grants special relief to certain employees and related individuals who receive their Form 1095-C or Form 1095-B, as applicable, after they have filed their returns:

• For 2015 only, individuals who rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit when filing their income tax returns will NOT be required to amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C.

• For 2015 only, individuals who rely upon other information received from their coverage providers about their coverage for purposes of filing their returns will NOT be required to amend their returns once they receive the Form 1095-B or Form 1095-C or any corrections.

Thus, generally, employers should not be concerned that furnishing these Forms on a delayed basis in accordance with the Notice will force employees to file amended 2015 income tax returns.

Finally, the extensions do not require the submission of any request or other documentation to the IRS and have no effect on information reporting provisions for other years.

Do You Have Covered Employees Collecting an ACA Subsidy?

Many employers offer affordable health coverage that meets or exceeds the minimum value requirements of the Affordable Care Act (ACA). However, if one or more of their full-time employees claims the coverage offered was not affordable, minimum value health coverage, the employee could (erroneously) get subsidized coverage on the public health exchange. This would cause problems for applicable large employers (ALEs), who potentially face employer shared responsibility penalties, and for employees, which may have to repay erroneous subsidies.

If an employee does receive subsidized coverage on the public exchange, most employers would want to know about it as soon as possible and appeal the subsidy decision if they believed they were offering affordable, minimum value coverage. There are two ways employers might be notified: (1) by the federally facilitated or state-based exchange or (2) by the Internal Revenue Service (IRS).

Employer notices from exchanges

The notices from the exchanges are intended to be an early-warning system to employers. Ideally, the exchange would notify employers when an employee receives an advance premium tax credit (APTC) subsidizing coverage. The notice would occur shortly after the employee started receiving subsidized coverage, and employers would have a chance to rectify the situation before the tax year ends.

In a set of Frequently Asked Questions issued September 18, 2015, the Center for Consumer Information and Insurance Oversight (CCIIO) stated the federal exchanges will not notify employers about 2015 APTCs and will instead begin notifying some employers in 2016 about employees’ 2016 APTCs. The federal exchange employer notification program will not be fully implemented until sometime after 2016.

In 2016, the federal exchanges will only send APTC notices to some employers and will use the employer address given to the exchange by the employee at the time of application for insurance on the exchange. CCIIO realizes some employer notices will probably not reach their intended recipients. Going forward, the public exchanges will consider alternative ways of contacting employers.

Employers that do receive the notice have 90 days after receipt to send an appeal to the health insurance exchange.

Employers that do not receive early notice from the exchanges will not be able to address potential errors until after the tax year is over, when the IRS gets involved.

Employer notices from IRS

The IRS, which is responsible for assessing and collecting shared responsibility payments from employers, will start notifying employers in 2016 if they are potentially subject to shared responsibility penalties for 2015. Likewise, the IRS will notify employers in 2017 of potential penalties for 2016, after their employees’ individual tax returns have been processed. Employers will have an opportunity to respond to the IRS before the IRS actually assesses any ACA shared responsibility penalties.

Regarding assessment and collection of the employer shared responsibility payment, the IRS states on its website:

An employer will not be contacted by the IRS regarding an employer shared responsibility payment until after their employees’ individual income tax returns are due for that year—which would show any claims for the premium tax credit.

If, after the employer has had an opportunity to respond to the initial IRS contact, the IRS determines that an employer is liable for a payment, the IRS will send a notice and demand for payment to the employer. That notice will instruct the employer how to make the payment.

Bottom line

For 2015, and quite possibly for 2016 and future years, the soonest an employer will hear it has an employee who received a subsidy on the federal exchange will be when the IRS notifies the employer that the employer is potentially liable for a shared responsibility payment for the prior year. The employer will have an opportunity to respond to the IRS before any assessment or notice and demand for payment is made. The “early-warning system” of public exchanges notifying employers of employees’ APTCs in the year in which they receive them is not yet fully operational.

IRS Adjusted ACA Fee Amounts Released for the 2015-2016 Plan Year

The Patient-Centered Outcomes Research Institute (PCORI) fee was established under the Affordable Care Act (ACA) to advance comparative clinical effectiveness research. The PCORI fee is assessed on issuers of health insurance policies and sponsors of self-insured health plans. The fees are calculated using the average number of lives covered under the policy or plan, and the applicable dollar amount for that policy or plan year. The past PCORI fees were—

• $2 per life, for policy and plan years ending on or after October 1, 2013, and before October 1, 2014
• $2.08 per life, for policy and plan years ending on or after October 1, 2014, and before October 1, 2015

The new adjusted PCORI fee is—

• $2.17 per life, for policy and plan years ending on or after October 1, 2015, and before October 1, 2016

Employers and insurers will need to file Internal Revenue Service (IRS) Form 720  and pay the updated PCORI fee by July 31, 2016

Transitional Reinsurance Fee

Like the PCORI fee, the transitional reinsurance fee was established under the ACA. It was designed to reinsure the marketplace exchanges. Contributing entities are required to make contributions towards these reinsurance payments. A “contributing entity” is defined as an insurer or third-party administrator on behalf of a self-insured group health plan. The past transitional reinsurance fees were

• $63 per covered life for 2014
• $44 per covered life for 2015

The new adjusted transition reinsurance fee is—

• $27 per covered life for 2016

President Signs PACE ACT Changing Small Group Market Definition

On October 7, 2015 President Obama signed the Protecting Affordable Coverage for Employees (PACE) Act that amends the Affordable Care Act (ACA) definition of a “small employer” for the purpose of purchasing health insurance coverage.

Prior to the signing of this amendment and beginning January 1, 2016, every state was required to expand the definition of the small group market to include employers with up to 100 employees. Prior to January 1, 2016 states had the flexibility to maintain the definition of a small employer to those with up to 50 employees and most states continued to do so.

The PACE Act repeals the mandatory expansion of the small group market to employers with up to 100 employees and reverts to the prior definition of up to 50 employees, although the states maintain flexibility to define the small market as up to 100 employees if they wish.

Under the ACA, health insurance offered in the small group market must meet strict underwriting requirements and cover all essential health benefits- conditions that do not apply in the large group market. Concerns about steep price increases and loss of benefit design flexibility from many businesses with 51 – 100 employees who would be re-classified as a “small employer” prompted this bi-partisan amendment to the law.

What Happens Now?

Numerous questions surround the passage of this amendment to the ACA given the fact that the change has happened so late in 2015. Insurance carriers have already filed their small group 2016 plan rates assuming the expansion of this market space and many employers impacted by their re-classification have already secured coverage or are finalizing plans for 2016 coverage. Here are some questions that hopefully will be addressed in the near future:

• When and how will each state determine the size of the small group market (50 or 100 employees)? Will this require state legislation or some other form of action to address this issue? Currently under Florida legislation, a small group is defined as 1-50 but it has not been determined yet if Florida will continue to use this definition or if they will transition to a 1-100 definition.
• Will insurance carriers be able to modify small group rates as this market space may no longer expand?
• Will employers with 51 -100 employees be able to shop for other coverage in the large group market? Will they be able to do this for January 1, 2016 or will it be possible to modify coverage at some time during 2016?
• Will the state allow some form of transition?
• Will each state have the flexibility to determine the methodology for calculating employer size?
• Will the state be able to revert back to the prior method such as considering only “eligible” employees or will they need to use an ACA counting method to determine employer size?

Employers who are impacted by this ACA amendment should monitor the situation and determine what may be the best course of action for your employees.