Part I of ACA Compliance for Employers covered off on a brief overview of the Affordable Care Act (Obamacare) and the Tier 1 and Tier 2 penalties that employers may face if they lack compliance. Today’s nextSource Blog is Part II of a retrospective, looking-back-at-the-basics of Obamacare as we’ve covered them in the past and reiterates what we’ve shared in numerous posts across 2016 with respect to promoting and enforcing compliance with this important legislation. Part II looks at the different types of plans an organization can elect to offer under the ACA and the effects of each.
Insurance carriers responded to the new law with a number of product/service levels to accommodate employers’ needs to provide coverage to their workforce. It is up to each organization to determine which type of plan they wish to provide – keeping in mind compliance with the affordability and adequacy guidelines (covered in Part I) weighed against the costs. Here are basic definitions (excerpted from posts published by insurance solution providers the Leavitt Group and Zane Group) of the types of plans an organization can elect to engage and be compliant with the law:
Minimum Essential Coverage (MEC)
Minimum essential coverage (MEC) is defined by the ACA as most group health plans offered by a large or small employer, or health coverage provided by the government. However, a plan consisting solely of “excepted benefits” is not MEC. (Excepted benefits are certain limited-scope health benefits that are exempt from many requirements under the ACA and HIPAA).
Minimum Value Plan (MVP)
Minimum Value plans pay on average at least 60% of the actuarial value of the total allowed cost of benefits under the plan. This means that enrollees pay—via deductibles, coinsurance, copayments and other out-of-pocket amounts—on average no more than 40% of the total allowed cost of benefits. Minimum Value does not take into account the amount paid for premium.
Traditional Fully Insured plans
As the name implies, these are the plans many workers received through their employers before the ACA, wherein the company pays a premium to the insurance carrier, and premium rates are fixed for a year, based on the number of employees enrolled in the plan each month. Monthly premiums only change during the year should the number of enrolled employees in the plan change. The insurance carrier collects the premiums and pays the health care claims based on the coverage benefits outlined in the policy purchased; whereas, the covered persons are responsible to pay any deductible amounts or co-payments required for covered services under the policy.
Self-Insurance Exchange Platform
Self-insured health plans (sometimes referred to as self-funded) are plans typically operated by larger employers who find it more cost-effective to operate their own health plan as opposed to purchasing a fully-insured plan from an insurance carrier. Employers choose to self-insure because it allows them to save the profit margin that an insurance company adds to its premium for a fully-insured plan. However, self-insuring exposes the company to much larger risk in the event that more claims than expected must be paid.
Quality and Delivery Effects
Due to the latitude in ACA allowable healthcare offerings, there are concerns that the type of healthcare offerings a supplier adopts could impact customer service delivery and candidate quality. Simply put, contractors talk amongst themselves – especially those in manufacturing environments. As contractors have discussions about what types of plans they are being offered, they may seek to work with suppliers with better healthcare offerings. Suppliers offering “skinnier” plans may also begin to face challenges of attracting the best quality candidates to support your programs. Candidates may “shop” around and be more selective about accepting a contract position. This is to say that reliable healthcare offerings by the employer are just as important to sourcing quality talent as other parts of a compensation package.
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