Employers now or soon to be negotiating new labor agreements should be aware that the Affordable Care Act (the “ACA”) contains significant new requirements and imposes certain costs for employers and their health plans. These will have an impact on the health insurance language contained in those agreements.
Employers may want to consider negotiating language which grants them discretion 1) to maintain group health insurance plans currently in effect; or 2) to change their plans to comply with the ACA’s requirements or to limit the employer’s costs to those in effect before enactment of the ACA. Alternatively, employers may consider using limited reopener clauses, but these obviously present risks that must be carefully considered before they are used.
In particular, employers should be mindful of the following costs and requirements imposed in coming years:
- Fully insured group health plans must satisfy non-discrimination rules similar to Internal Revenue Code Section 105(h) (eligibility to participate and benefits provided). Internal Revenue Service guidance from December 2010 delayed the effective date until at least 2012 and possibly longer. This does not apply to health plans that existed on the day the ACA was enacted, known as “grandfathered plans.”
- Effective January 1, 2014, employers with at least 50 full-time employees (or the equivalent thereof) that do not offer full-time employees “minimum essential coverage” could be assessed a fee of $2,000 per full-time employee. A slightly different $3,000 fee could apply in some situations.
- No later than September 30, 2014, there will be an annual fee on a “covered entity” that provides health insurance. This excludes a self-funded plan but does not specifically exclude a fully insured plan.
- No later than January 1, 2014 (with an apparent sunset of January 1, 2017), third-party administrators of group health plans and insurers must contribute to a reinsurance program.
- For tax years beginning January 1, 2018, there will be a 40 percent excise tax on the excess benefit of high-cost employer-sponsored health insurance (the so-called “Cadillac” tax). The tax is based on a $10,200 annual limit for individual coverage and a $27,500 annual limit for other than individual coverage. There are numerous exceptions and adjustments based on states and job classifications. These entities may try to “pass along” this cost to employers.