What You Should Know About Patient Protections and Affordable Care Act Compliance

Learn more about ACA compliance — like determining ALE status and offering patient protections — in this guide.

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Affordable Care Act Requirements for 2022-2023

The Affordable Care Act (ACA) is a comprehensive healthcare reform law that was enacted in March 2010. It has 3 primary goals:

  • Make affordable health insurance available to more people.
  • Expand the Medicaid program to cover all adults with incomes below 138% of the federal poverty level (FPL).
  • Support innovative medical care delivery methods designed to generally lower healthcare costs.

The ACA also mandates that Applicable Large Employers (those with 50 or more full-time employees during the previous calendar year) offer healthcare coverage to eligible employees. Learn more about ACA compliance in this guide.

Determining Applicable Large Employer status

The Affordable Care Act of 2010 (ACA) classifies some businesses that had 50 or more employees in the previous calendar year as Applicable Large Employers (ALEs). Here is how to determine if whether your company is considered an ALE.

  1. Count the number of full-time employees. For each month of the last calendar year, determine which employees worked at least 130 hours of service in that month. These are full-time employees.
  2. Calculate the number of Full-Time Equivalents (FTEs):
    1. For each month of the last calendar year, add up the hours of service for all non full-time employees, up to a maximum of 120 hours for each employee. Don’t include any hours over 120.
    2. Divide the total by 120. These are the FTEs for each month.
  3. Add Full-Time Employees and FTEs: Add together all twelve months of full-time employees and full-time equivalents, and round to the nearest hundredth (two digits to the right of the decimal point).
  4. Determine Your Monthly Average: Divide the total from step 3 by 12 to get your monthly average. Round down to the nearest whole number.

Companies with a monthly average of 50 or more in the previous calendar year are considered Applicable Large Employers (ALEs), and are subject to the requirements of the employer mandate. The mandate requires ALEs to offer insurance coverage to employees and their dependents (up to age 26) as they are eligible.

Rate of Pay Safe Harbor

An ACA affordability safe harbor is a technique an employer can use to prove their coverage is affordable.

This safe harbor may be most useful for employers with hourly employees and the need for a fast, “failsafe” calculation method to prove affordability. If the Rate of Pay safe harbor is met for a company’s lowest-paid worker, then it will also be met for the rest of their workforce.

W-2 Wages Safe Harbor

This safe harbor may be most useful to an employer with full-time employees who regularly work 40 hours per week and whose compensation is unlikely to decrease during the year.

Patient protections for choosing a health professional under ACA

The Affordable Care Act requires group heath plans to permit an enrollee to select any available participating primary care provider.

What is the difference between In-Network and Out-of-Network Providers?

Insurance carriers will designate a provider as either in-network or out-of-network:

  • An in-network provider is a doctor, specialist, etc. that has contracted with the insurance carrier to participate in a specific network, typically at a lower cost.
  • An out-of-network provider is any provider who does not belong to the carrier’s network

Primary Care Physicians

When enrolling in an HMO or POS plan, the enrollee and all enrolling dependents are required to designate a Primary Care Physician (PCP). This doctor will be the gatekeeper for all of the enrollee’s services and referrals (see the articles on HMO plans and POS plans for more information on how these plans operate).

Patient protections for emergency coverage under ACA

Under the Affordable Care Act (ACA), health plans must offer regulated coverage for emergency services.

Definition of Emergency Services

“Emergency Services” are defined as acute symptoms that a prudent layperson with average knowledge of health and medicine would expect that in the absence of medical attention would place the individual’s health in serious jeopardy, or seriously impair body functions, organs, or parts. These services would also be performed in the hospital’s emergency department.

Under the ACA, health plans cannot require:

  • Higher copayments or co-insurance for out-of-network emergency room services.
  • Approval before seeking emergency room services from a provider or hospital outside a plan’s network.

Patient protections for clinical trials under ACA

Under the Affordable Care Act, health plans or insurers cannot deny patients’ participation in a clinical trial, limit or deny coverage of routine costs to patients who choose to participate in an approved clinical trial, or increase costs because a patient chooses to participate in a clinical trial. This means that an insurer cannot limit benefits if the individual chooses to enroll in a clinical trial.

Health insurance companies are not required to cover the cost of the treatment or procedure being researched; however, the clinical trial’s sponsor may cover these costs.

Protection against rescission under ACA

The Affordable Care Act (ACA) protects enrollees from rescission. Rescission is a cancelation or discontinuation of coverage that has a retroactive effect. Plans and issuers generally must not rescind coverage unless there is fraud, or if an individual makes an intentional misrepresentation of a material fact.

Protections against rescission

  1. The plan sponsor may not terminate coverage retroactively if the member was covered through plan error and the member paid premiums or contributed to the cost of the plan.
  2. If the member paid premiums or contributed to the cost of the plan, the plan sponsor may only terminate the member’s coverage with a future or prospective date of termination. This limits the liability of the employer to correct administrative errors.

Timing details

Group health plans or issuers offering health insurance coverage are required to provide at least 30 days advance written notice to each participant impacted by the rescinded coverage.

State exchanges

Marketplaces are now known as the “exchanges” under the Affordable Care Act and are required as part of the Act. Each state is required to establish an exchange. Should a state decide not to set up an exchange, the federal government set up a federally-facilitated or federally-operated exchange in those states. In many states, while there is an exchange, it is a federal exchange as opposed to a state-based exchange.

Purpose of the exchange

Marketplaces are now known as the “exchanges” under the Affordable Care Act and are required as part of the Act. Each state is required to establish an exchange. Should a state decide not to set up an exchange, the federal government set up a federally-facilitated or federally-operated exchange in those states. In many states, while there is an exchange, it is a federal exchange as opposed to a state-based exchange.

Purpose of the exchange

Exchanges were created for individuals or small employers to purchase or gain access to health care financing options through a program administered by state and/or federal government. In the individual exchange, the financing options include subsidy, advance premium tax credits, or premium tax credits, along with cost-sharing subsidies to qualified individuals.

The small group exchange, also known as the SHOP exchange, is where a small employer who is eligible for the small business tax credit would be able to receive the credit. The credit is a subsidy available to qualifying small employers.

Network requirements for Exchange plan providers

Under the Affordable Care Act, the provider networks for Exchange plans must meet specific requirements in order to be compliant.

The provider networks must meet the following criteria:

  1. Have adequate coverage including coverage in areas that will serve low income communities.
  2. Provide general contracting specifications designed to create a level playing field for rural and small communities.
  3. Ensure quality standards for improvement within the networks.
  4. Comply with all HIPAA and privacy standards under the statute.

Exchange plan requirements

Plans offered through the Exchange must meet the following requirements as set by the Affordable Care Act.

  1. Be certified by each Exchange through which it is offered.
  2. Offer qualified health plan coverage.
  3. Offer at least one Silver and one Gold plan.
  4. Agree to charge the same price for coverage premiums for the same policies if offered in and out of the Exchange.

Employer responsibilities under the Health Insurance Marketplace

All employers subject to the Fair Labor Standards Act are responsible for providing notice to their employees about Health Insurance Marketplace Coverage Options.

What should be included in the notice?

The notice must inform employees of:

  • The existence of the Marketplace,
  • The ability to receive a premium tax credit for purchasing a qualified health plan through the Marketplace,
  • The potential to lose the employer contribution to any health benefit plan offered by the employer if the employee purchases a qualified health plan through the Marketplace, and
  • The manner in which the employee may contact the Marketplace to request assistance.

The Department of Labor provides 2 model notices. One for employers who do not offer a health plan and another for employers who offer a health plan to some or all employees. To access the notices, please visit this Department of Labor page.

When must employers provide the notice?

Employers must provide the Health Insurance Marketplace Coverage Options notice to all employees at the time of hiring.

For more information regarding the Health Insurance Marketplace Coverage Options notice, please visit this Department of Labor page.

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