Marketplace FAQs

The purpose of the Exchanges is to permit individuals and small employers (with 100 or fewer employees) to purchase “qualified health insurance coverage.” (Beginning in 2017, a State may permit large employers (with more than 100 employees) to purchase health insurance through an Exchange)

If a State creates an Exchange within one year of enactment, the State may receive federal grant funding to assist it to establish the Exchange. The federal grant funding is available until January 1, 2015, after which the Exchanges must be self-sustaining.

The Exchanges must meet the following requirements:

a. Only “qualified health plans,” as defined in the PPACA, may participate in the Exchanges;

b. The plan must offer five benefit categories: bronze, silver, gold, platinum and a separate catastrophic plan option. Each benefit category must, at a minimum, provide the “essential health benefits package,” defined in the PPACA, with packages in the silver, gold and platinum levels offering additional levels of benefits. The catastrophic plan is intended to cover individuals up to age 30 or individuals who are otherwise exempt from the individual mandates and provides coverage only for catastrophic conditions. The catastrophic coverage is not available to employers.

c. Only “qualified individuals,” as defined in the PPACA, and small groups may purchase insurance through an Exchange. In addition, certain “qualified individuals” may be eligible to receive premium tax credits and cost-sharing subsidies. Employees who are offered coverage by an employer are not eligible for premium tax credits unless the employer plan does not provide the coverage equivalent to the “essential benefits package.”

• Lifetime limits are prohibited and annual limits are restricted
• Enhanced appeal procedures are available to consumers
• Children under 19 years of age cannot be denied coverage
• Children up to age 26 may remain on a parent’s policy
• Preventive services must be coverage and cannot have cost-sharing
• New rate review transparency requirements are in place
• Medical loss ratio standards limit insurers’ overhead
• A standardized summary of benefits must be used by all insurers

Every plan sold or renewed in the individual and small group market after January 1, 2014, must include all the benefits in a “benchmark” plan – a plan chosen for the state based on coverage currently available in the state – and will cover services in the following categories:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance abuse disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including oral and vision care

a. Coverage for Adult Dependents – A group health plan or health insurance issuer that offers group or individual insurance coverage and that provides dependent coverage must continue to make such coverage available for an adult child until the child turns 26 years of age. This change is generally effective beginning six months after enactment except that, prior to 2014, this requirement is applicable only for adult children who have no other employer coverage available to them. Employees may qualify for an income tax exclusion for the coverage of adult children under the employer’s group health plan.

b. Comprehensive Health Insurance Coverage – Effective for plan years beginning on or after January 1, 2014, unless considered a grandfathered plan, a health insurance issuer that offers health insurance coverage in the individual or small group market must ensure that such coverage includes the “essential health benefits package.” A group health plan must ensure that any annual cost-sharing (e.g. copayment, deductible, etc.) imposed under the plan does not exceed the limitations provided for in the “essential health benefits package.”

c. Preventive Health Services – Effective for plan years beginning six months after enactment of the PPACA, a group health plan and health insurance issuer in the individual and group markets must provide coverage for certain preventive health services (as defined in the PPACA) with no cost sharing to the participant.

a. Lifetime Maximums – Effective for plans years on or after the date that is six months after enactment of the PPACA, health insurance policies in the individual and group markets may not include lifetime maximums.

b. Annual Limits – Beginning January 1, 2014, group health plans may not impose annual limits on the dollar value of coverage (Group health plans and health insurance policies may impose an annual or lifetime per beneficiary limitation on specific covered benefits if such limits are permitted by federal and state law).

c. Rescission and Cancellation – Effective for plan years beginning on or after the date that is six months after enactment of the PPACA, a group health plan and a health insurance issuer that offers group or individual health insurance coverage may not rescind coverage for an enrollee (once covered), except in cases of fraud. In addition, a group health plan and health insurance issuer may not cancel health insurance coverage without prior notice to the enrollee and then only for those reasons specifically permitted by the Public Health Service Act (e.g., for nonpayment of premiums, termination of the plan, movement outside the area, etc.).

d. Guaranteed Access and Renewability – Effective for plan years on or after January 1, 2014, all health insurance issuers that offer health insurance coverage in the individual or group markets are subject to the “guarantee access and renewability” rules (originally established under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)) and must accept every employer and individual in the State that applies for coverage.

e. Pre-Existing Condition Limitation – Beginning six months after enactment, all health insurance policies in the individual and group markets and group health plans are prohibited from imposing pre-existing condition limitations for children. The prohibition is expanded to adults beginning in 2014.

f. High-Risk Pool – Beginning ninety days after enactment of the PPACA, the Secretary of HHS will establish a temporary national high-risk pool to provide health coverage to individuals with pre-existing medical conditions. U.S. citizens and legal immigrants who have a pre-existing medical condition and who have been uninsured for at least six months will be eligible to enroll in the high-risk pool and receive subsidized premiums. If an employer or health insurance issuer offers an incentive to an individual to dis-enroll from his or her current coverage and the individual dis-enrolls and enrolls in the temporary high-risk pool, the employer or health insurance issuer will be required to reimburse any expense incurred under the high-risk pool.

g. Waiting Periods – Effective for plan years beginning on and after January 1, 2014, group health plans and health insurance issuers in individual or group markets may not impose waiting periods in excess of ninety days.

h. Automatic Enrollment – An employer that is subject to the Fair Labors Standard Act, that has more than 200 FTEs, and that offers its employees one or more health benefit plans is required to automatically enroll all new FTEs in one of the plans offered and continue the enrollment of current employees in an employer offered health benefit plan. The employer must provide adequate notice to employees of the automatic enrollment and give employees the opportunity to opt-out of any coverage in which the employee was automatically enrolled.

Effective January 1, 2014, an employer with an average of at least 50 full time employees during the preceding calendar year (“FTEs”), which does not offer health insurance coverage, will be required to pay a fee of $2,000 per FTE if at least one of its FTEs receives a premium tax credit through an Exchange (as described below). The first 30 FTEs are excluded from the calculation of the assessed fee (for example, an employer with 51 FTEs would pay a fee of 21 x $2,000).

Effective January 1, 2014, an employer with an average of 50 FTEs during the preceding calendar year that does offer health insurance coverage but the coverage is considered unaffordable, would be assessed a fee of $3,000 for each FTE who receives a premium tax credit through an Exchange. The employer’s fee would be capped at an amount equal to $2,000 for each FTE.

The Health Reform Legislation specifically defines FTE, how the number of FTEs should be calculated, how the 30 FTE exclusion is applied and how related employers are impacted.

An employer is prohibited from discriminating or retaliating against any employee for receiving premium tax credit assistance or providing information to the Secretary of the Department of Health and Human Services (“HHS”) relating to employer violations under the Health Reform Legislation.

The Health Reform Legislation does not require an individual to terminate the insurance coverage he or she has under a group health plan or through an insurance policy on the date of enactment. This existing coverage is grandfathered for existing employees, new employees and for individuals who renew their existing coverage and, with certain exceptions, is not subject to the new requirements of the Health Reform Legislation.

The exceptions to grandfathering include:
a. For plan years beginning six months on or after enactment, all plans and insurance policies must comply with the prohibition on lifetime coverage limits, the prohibition on rescission of coverage, the restriction permitting only reasonable annual coverage limits (as determined by the Secretary of HHS), the requirement to provide coverage for dependent adult children up to age 26 years of age (as described below), the prohibition on pre-existing condition limitations for children, and the uniform summary of benefits disclosure and insurer reporting requirements (Prior to 2014, the requirement for group health plans to cover dependent adult children until age 26 is limited to those adult children without an employer offer of coverage).

b. Beginning in 2014, a group health plan may not exclude any pre-existing conditions for adults, may not impose excessive waiting periods, and is prohibited from imposing any annual coverage limits.

a. Notice to Employees – Beginning March 1, 2013 (and thereafter, for new hires), employers are required to notify their employees about the Exchange, the potential for premium tax credits for eligible employees, the cost-sharing subsidies that may be available to purchase coverage through the Exchange, and the potential loss of coverage and employer contribution if the employee decides to purchase insurance through an Exchange.

b. Uniform Summary of Benefits – The Secretary of HHS will develop, for use by group health plans and health insurers that offer group or individual health insurance coverage, standards for benefit summaries and coverage explanations utilizing a uniform format with standardized definitions. Beginning not later than twenty-four months after enactment of the PPACA, a health insurance issuer or the plan sponsor, in the case of a self-funded group health plan, must furnish the summary of benefits and coverage explanation to enrollees to an applicant, at the time of application; to an enrollee, prior to the time of enrollment or reenrollment; and to a policyholder, at the time of issuance of the policy. If material modifications are made in any of the terms of the plan or coverage that are not reflected in the most recently issued summary of benefits, the plan or issuer must also provide notice of such modifications no later than 60 days prior to the date on which such modification is to become effective. Failure to provide information can result in a penalty of not more than $1,000 for each failure.

c. Reporting Requirements – Group health plans and health insurance issuers that offer group or individual health insurance coverage also will need to comply with certain quality reporting requirements established by the Secretary of HHS. For calendar years beginning after 2013, each person that provides minimum essential coverage to an individual must report to the Secretary of HHS information about a covered individual and coverage levels and provide a copy of such information to the covered individual.

d. Prohibition of Discrimination in Favor of Highly Compensated Individuals. Effective for plan years beginning on or after the date that is six months after enactment of the PPACA, the plan sponsor of a group health plan (other than a self-insured plan) must satisfy the requirements of IRC Section 105(h)(2), which prohibits a plan from discriminating in favor of highly compensated individuals as to eligibility to participate as well as to benefits offered under the plan. This provision will prohibit the common practice among employers of purchasing fully-insured supplemental plans for key or highly paid employees only.

e. Appeal Process – Effective for plan years beginning on or after the date that is six months after enactment of the PPACA, a group health plan or health insurance issuer that offers group or individual health insurance coverage must comply with enhanced appeal process requirements, including making available internal and external claims processes and notifying enrollees of such rights. The plan and issuer must also inform enrollees of the availability of the to be created office of health insurance consumer assistance to assist them with appeals.

f. Fair Premium Rating – Effective for plan years beginning on or after January 1, 2014, a health insurance issuer for health insurance coverage offered in the individual or small group market may vary the premium rate with respect to a particular plan or coverage involved only based on single/family coverage tiers, premium rating areas, certain age bands, and certain tobacco use. These rating restrictions also will apply to any insurance offered in the Exchange in the large group market.

g. Reporting of Cost of Employer-Sponsored Health Coverage – Effective for tax years beginning after January 1, 2011, employers are required to disclose the value of an employee’s medical, dental, vision, prescription drug, and health savings accounts benefits (but excluding pre-tax salary contributions to a flexible spending account) on IRS Form W-2.

a. Excise Tax on High Cost Employer-Sponsored Health Coverage – Effective January 1, 2018, an excise tax will be imposed on any employer-sponsored health coverage that has an aggregate value (The aggregate value of the plan includes reimbursements under a FSA, a HRA, employer contributions to a HSA, and coverage for supplementary health insurance coverage, including vision and dental.) that exceeds $10,200 for individual coverage and $27,500 for family coverage, or $11,850 for single and $30,950 for family in the case of retirees age 55 and older who are not eligible for Medicare or for employees engaged in high-risk professions. These threshold values will be indexed to the consumer price index for urban consumers (CPI-U) for years beginning in 2020. The threshold amounts may be adjusted upwards if health care costs rise more than expected prior to implementation of the tax in 2018. The threshold amounts also will be increased for employers that may have higher health care costs because of the age or gender of their workers.

The excise tax is equal to 40% of the value of the plan that exceeds the threshold amounts and is imposed on the issuer of the health insurance policy, or, in the case of a self-insured plan, the plan administrator (which in some cases, will be the employer).

An employer must calculate the excess value of health insurance coverage and report it to the insurer and the IRS and is subject to a penalty for underreporting.

b. Increase in Medicare Part A (hospital insurance) Tax Rate – Effective January 1, 2013, the Medicare Part A tax rate is increased from 1.35% to 2.35% on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly. An additional 3.8% tax is imposed on certain net investment income or modified adjusted gross income over a threshold amount on unearned income for higher-income taxpayers.

c. Medicare Part D – If an employer offers a retiree health plan that includes prescription drug coverage that is actuarially equivalent to Medicare Part D, the employer may receive a Retiree Drug Subsidy (“RDS”) from the Centers for Medicare & Medicaid Services. Effective on January 1, 2013, the amount of deduction that the employer may claim for the health care expenses of employees/retirees must be offset by the amount of any RDS received by the employer.

For tax years 2010 through 2013, an employer that employs no more than 25 FTEs for the tax year, that has average annual wages that do not exceed $50,000 (as adjusted for cost of living in 2014 and subsequent years), and that provides health insurance coverage for its employees, may be eligible to receive a tax credit. The tax credit will be equal to a percentage of the employer’s contribution toward each employee’s health insurance premium if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium. The amount of the tax credit is capped at 35% of the employer’s contribution and the full amount of the tax credit is available only to employers with ten or fewer FTEs and average annual wages of $25,000 or less. Tax-exempt small employers meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium.

For tax years 2014 and later, an eligible small employer that purchases coverage through the Exchange will be entitled to a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost. The tax credit will be available for two years. The full credit will be available to employers with ten or fewer full-time employees and average annual wages of less than $25,000. Tax-exempt small employers meeting these requirements are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium.

The tax credit may be claimed by an eligible small employer as a general business tax credit on its tax return; no deduction will be allowed for that portion of premium paid by an employer which is equal to the amount of the tax credit claimed by such small employer.

Effective January 1, 2014, any employer that offers group health coverage to its employees must provide a free choice voucher to employees with incomes less than 400% of the federal poverty level if the employee’s share of the premium exceeds 8% (but is less than 9.8%) of their income and if the employee chooses to purchase a health insurance plan in the Exchange. The voucher amount is equal to what the employer would have paid to provide coverage to the employee under the employer’s plan. An employer that provides free choice vouchers will not be required to pay the fees described in question 1 above.

Beginning ninety days after enactment of the PPACA, the Health Reform Legislation creates a temporary reinsurance program for participating employment-based plans. A participating employment-based plan is a group health plan that is:

a. maintained by one or more current or former employers (including States and local governments and political subdivisions thereof), an employee organization, a VEBA, a committee or board of individuals appointed to administer such plan or a multi-employer plan

b. provides health benefits including: self-funded or fully insured medical, surgical, hospital, prescription drug benefits (May include other benefits defined by the Secretary of HHS) to early retirees (An early retiree is an individual who is age 55 or older, is not eligible for Medicare and who is not an active employee of the employer sponsoring the employment-based plan).

c. implements programs and procedures to generate cost-savings with respect to participants with chronic and high-cost conditions and provides documentation of the actual cost of medical claims to HHS

d. is certified by the HHS.

The participating employment-based plan will be reimbursed for 80% of the retiree claims between $15,000 and $90,000. Payments to a participating employer-based plan must be used to lower the premium costs of the employer or reduce premium contributions, co-payments, deductibles, co-insurance or other out-of-pocket costs for plan participants. Payments received under the reinsurance programs by employers will not be treated as income to the employer.

Congress has appropriated $5 billion to finance this reinsurance program for early retirees. The Secretary of HHS has the authority to stop taking applications in the program based on the availability of funds.

a. Wellness Grants – Beginning in 2011, small employers may receive grants to establish wellness programs for up to five years.

b. HIPAA Non-Discrimination – Effective January 1, 2014, the Health Reform Legislation expands the HIPAA non-discrimination rules to apply to all group health plans and health insurance issuers in individual or group markets and in the Federal Employee Health Plan. The Health Reform Legislation also codifies the wellness regulations under the HIPAA non-discrimination rules and increases the amount that a plan may give to a participant for achieving certain wellness targets.

The Secretaries of HHS and Treasury are directed to establish ten state pilot programs by July, 2014 to develop wellness programs in the individual market and expand wellness initiatives in 2017 if proven effective. The Secretaries are required to submit a report to Congress on the effectiveness of wellness programs within three years following enactment.

a. Qualified Health Plans in the Exchange – An employer’s IRC Section 125 – cafeteria plan may not allow employees to pay for “qualified health plan coverage” that is purchased through an Exchange on a pre-tax basis under the cafeteria plan. The only exception to this prohibition is for a small employer that is a “qualified employer” and that offers the employee the opportunity to enroll through the Exchange in a “qualified health plan” in a group market.

b. Annual Salary Reduction Limitation on Contributions to Health Care Flexible Spending Accounts – Effective January 1, 2013, a health care flexible spending account (“FSA”) provided under an employer’s IRC Section 125 – cafeteria plan must limit the employee’s pre-tax salary reduction contributions to no more than $2,500 in a plan year (as adjusted annually for cost of living).

c. Simple Cafeteria Plans – Effective January 1, 2011, the IRS will develop a simple cafeteria plan for small employers. The plan automatically will be deemed to satisfy nondiscrimination requirements if the plan satisfies minimum eligibility, participation and uniform contribution requirements specified in the Health Reform Legislation.

d. Eligible Medical Expenses – Effective January 1, 2011, the costs for over-the-counter drugs that are not prescribed by a physician may not be reimbursed through a Health Reimbursement Account (“HRA”) or a FSA and will not be reimbursed on a tax-free basis through a Health Savings Account (“HSA”) or Archer Medical Savings Account (“Archer MSA”).

e. Increase Excise Tax for Non-qualified Distributions from HSA or Archer MSA – Effective January 1, 2011, if a HSA or an Archer MSA makes a distribution for expenses other than qualified medical expenses, then the account holder will be subject to an excise tax of 20% of the disbursed amount.

All plans sold or renewed in 2014, must limit the out-of-pocket exposure of consumers to approximately $6,000 for individual and $12,000 for families. These limits will be indexed to average premium growth in future years. In addition, the deductible for plans in the small group market will be limited to $2,000 for individuals and $4,000 for families in 2014, also indexed to average premium growth in future years.

Also, all plans must design their cost-sharing (deductibles, copays, coinsurance) to fit into specific levels of coverage. The levels of coverage are defined as follows:

Bronze Level – The plan must cover 60% of expected costs for the average individual
Silver Level – The plan must cover 70% of expected costs for the average individual
Gold Level – The plan must cover 80% of expected costs for the average individual
Platinum Level – The plan must cover 90% of expected costs for the average individual
The exchange will group coverage by these “metal” levels, allowing consumers to easily compare comparable options.

Yes, though they may not charge older individuals a premium that is more than 300% of the premium charged a younger individual. Currently, rates can vary based on age as much as 700% in some cases. In addition, insurers may not vary rates based on health, claims, genetic information, or any other health-related factors. Insurers may only vary rates in a state by age (within limits), tobacco use, geography, and the number of family members covered.

The health reform law requires that insurers and employers that provide dependent coverage to children make that coverage available to adult children of enrollees up to their 26th birthday. This requirement became effective for “plan years” beginning September 23, 2010, so parents will be able to enroll a child in group coverage during the next open enrollment period. Children can be added to an individual policy when it is renewed.

Of course, adding an adult child to the plan will likely increase your premiums. If the child is 19 or older, the insurer may exclude coverage of pre-existing conditions for a period of time, as allowed by existing state and federal law, until the prohibition on preexisting condition exclusions takes effect in 2014.

The law and subsequent regulations prohibit insurers from denying coverage for children based on health status or excluding coverage of their pre-existing conditions if otherwise covered under the policy. This protection became effective after September 23, 2010. A child can be added to an existing policy under the enrollment rules of the policy. If you are seeking a child-only policy, you will need to inquire whether child-only coverage is available in your state. If you are covered under a group plan, you may add your child to your policy at the next open enrollment period.

Subsidized coverage is now available in every state to individuals with pre-existing conditions who have been uninsured for at least six months through the Preexisting Condition Insurance Program. This program, either run by the federal government or the state, provides coverage that immediately covers preexisting conditions at premiums that are capped at the average cost of private coverage in your state’s individual market.

Beginning Janauary 1, 2014, insurers will be prohibited from discriminating against individuals with pre-existing conditions in offering or pricing health insurance policies. In addition, for those with qualifying incomes, subsidies will be available to reduce premiums and cost-sharing for plans purchased through the Exchange.

Low- and moderate-income individuals and families whose employers do not subsidize health insurance coverage will be eligible for subsidies that enable them to purchase coverage through the Exchange in their state. The amount of these subsidies, which will reduce premiums and out-of-pocket costs for deductibles, copayments and coinsurance, will depend upon the size of your family and your household income.

Exchanges are the central mechanisms created by the health reform bill to help individuals and small businesses purchase health insurance coverage. On October 1, 2013, an Exchange in every state will begin enrolling individuals and small businesses into qualified health plans. The Exchange, operated by the federal government or by the state, will provide information to consumers about their coverage options and what assistance is available to them. The Exchanges will also administer the new health insurance subsidies and facilitate enrollment in private health insurance, Medicaid, and the Children’s Health Insurance Program (CHIP). The federal law does not require anyone to purchase health insurance through the Exchange, though subsidies will only be available for plans sold through the Exchange. You will be able to purchase this coverage right on the Exchange’s website or through your agent if he or she is approved to sell Exchange plans. If you would rather buy other health insurance through an insurance agent or broker, you will be free to do so.

If your insurance company “rescinds,” or retroactively cancels, your health insurance coverage, it is now required to provide advance notice of its intention to do so, and may only do so if you committed fraud or made an intentional misrepresentation of an important fact. If your insurer notifies you that it wants to rescind your policy, and you have not done either of these things, request more information from the company. If you are not satisfied with their explanation, immediately contact your state Department of Insurance to file a complaint.

Yes, nothing in the legislation would infringe upon the ability of an individual to contribute to a Health Savings Account (HSA), or discourage an individual from doing so. The minimum level of coverage required to meet the individual mandate was specifically designed to allow for the purchase of a qualified high deductible health plan that would complement the HSA.

Unfortunately, the grim fact is that health care spending is likely to continue rising faster than general inflation well into the future, resulting in higher premiums. While some individuals and families with health problems may see their premiums decrease significantly under the new rating rules, for most Americans premiums will continue to increase from year to year. However, the new regulations are designed to prevent unreasonable and unexpected spikes in premiums and, over time, to slow the growth in health care spending.

The Small Business Tax Credit has been available since the 2010 Tax Year. Businesses with fewer than 25 full-time equivalent employees (FTE) and average annual wages less than $50,000 per employee may qualify. To receive the tax credit, an employer must have a group health plan and must pay at least 50% of the premium.

The tax credit is equal to a percentage of what the employer pays and is based on the average premium in the small group market in the State. For Tax Years 2010 through 2013, the maximum credit in each year is 35% of the employer’s contributions (25% for nonprofit employers). Beginning Tax Year 2014, the maximum credit is 50% of the employer’s contribution (35% for nonprofit employers). The full 35% tax credit (50% in future years) is available for a business with 10 or fewer full time equivalent workers and average annual wages of $25,000 or less. The tax credit phases out completely for employers with 25 workers (FTEs) or average wages of $50,000.

No. The employer responsibilities under the health reform bill do not apply to employers with fewer than 50 employees. However, you will be able to enroll your employees in coverage through the Exchanges beginning in 2014, if you choose to do so.

Yes. An employer that fails to offer “minimum essential coverage” to its employees will be subject to a penalty of $2,000 for each of their employees beyond the first 30. In your case, this penalty would be $2,000 x (75-30) = $90,000. Employers that do offer minimum essential coverage will be assessed a penalty of $3,000 per employee that is eligible for, and receives, a subsidy through the Exchange because their share of the premium for the employer’s group health plan exceeds 9.5% of their household income. This penalty may not exceed $2,000 times the number of employees, disregarding the first 30 employees.

Through the small business (SHOP) exchange, small employers will have the option of choosing a level of coverage and then allowing each employee to select their own insurer and plan. The exchange can also collect the employer and employee contributions and direct those payments to the chosen insurers.

Yes, nothing in the PPACA would eliminate these options, nor discourage them.