Explainer: ACA’s impact more gradual for those whose jobs provide insurance

The Affordable Care Act has had its most visible impact on people who were able to buy health insurance through the federal marketplace or state-based exchanges and lower-income people who now receive Medicaid under the ACA’s expanded income-eligibility guidelines.

But what about the majority of people who are insured through their employer?

The effect of the law on employer health plans is expected to grow over time, as the number of plans exempted from the ACA’s requirements shrinks.

For now, the impact of the law on work-provided plans depends on whether the employer has a self-funded insurance plan or purchases a commercial insurance plan.

What it means: One of the goals of the ACA was to ensure that all health plans offer a minimum set of benefits, so everyone covered by insurance could rely on it paying for essential healthcare services. But that goal conflicted with another explicit promise from President Barack Obama, who said those who were happy with their employer-provided insurance wouldn’t be forced to change it.

The way this conflict was resolved is that employer plans won’t have to comply with many provisions of the ACA as long as they don’t substantially cut benefits or increase costs for consumers.

But healthcare experts note that insurance plans have historically changed with the times and say it’s unlikely that any health plans will remain “grandfathered” as time passes.

Provisions already being met: Even “grandfathered” plans have to meet some provisions of the ACA.

A primary one is that they must be open to adult children of insured members until their 26th birthday, starting this year. In addition, all employer-based plans are barred from applying lifetime dollar limits to member benefits; plans that are being renewed, beginning this year, aren’t allowed to have annual dollar limits. In addition, insurers can’t cancel plans based on honest mistakes made by either the insured member or their employer.

Provisions that employer-based plans don’t have to meet: These plans don’t have to provide free preventive services and don’t have the new protections for appealing health-plan decisions.

Differences that depend on plan size: In general, there are two broad types of employer plans: small-group plans, for companies with fewer than 50 workers, and plans for companies with 50 or more workers. Each must meet somewhat different requirements under the ACA.

Small employers don’t have to provide insurance under the ACA, unlike larger companies. They are also able to buy subsidized insurance through the Small Business Health Options Program, or SHOP, and can receive subsidies for this coverage if they have fewer than 25 workers with salaries above $50,000.

The impact on larger employers is being phased in. In 2015, businesses with 100 or more workers will be affected, while in 2016 those with 50 to 99 workers will also be affected.

Companies will have to pay a penalty for not providing insurance if they have at least one worker who receives a federal subsidy for insurance purchased through the federal health insurance marketplace.

The penalty will be $2,000 for each employees, minus an allowance of 30 workers. For example, if an employer with 75 full-time workers doesn’t offer health insurance in 2016 and has at least one employee receiving a subsidy for marketplace coverage, then it will have to pay the $2,000 penalty for 45 workers, for a total penalty of $90,000.

If an employer does offer insurance but it either has unaffordably high premiums for employees or offers coverage deemed inadequate according to the ACA, then the penalty will be $3,000 for each full-time employee receiving a subsidy. For example, if a business offers unaffordable or inadequate insurance and has 100 workers, including 25 who receive a subsidy, then it will have to pay a penalty of $75,000.

What’s different about self-funded plans and MEWAs: Larger employers usually provide insurance through a combination of paying directly for workers’ claims and buying “stop-loss” insurance, in which insurance pays for claims above a certain amount.

These types of plans traditionally had a wide range of areas where they didn’t have to follow federal or state insurance mandates.

The ACA significantly narrowed the areas where self-funded plans can “opt out” of coverage. But there will remain four areas in which self-funded plans and Multiple Employer Welfare Arrangements (MEWAs) – a kind of self-funded plan that includes multiple smaller companies – can opt out of of benefits otherwise mandated under the ACA: standards related to newborns and mothers; providing equal coverage for mental-health coverage; requiring coverage of reconstructive surgery after mastectomies; and covering dependent students on medically necessary leaves of absence.

While some businesses are advocating a bill that would expand MEWAs, consumer advocates have warned that the measure would weaken those protections.

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NJ Spotlight, an independent online news service on issues critical to New Jersey, makes its in-depth reporting available to NewsWorks.