Preparing for Annual Enrollment

Part 1: Health Reform 10+ Years Later

Health Reform - The Path Ahead

Most provisions of the Patient Protection and Affordable Care Act of 2010 (Health Reform)[i] have either been implemented or eliminated (discussed in more detail later).

As coverage costs continued their increase, and as Health Reform added new costs to insured plans, more and more plan sponsors, especially smaller plans, changed from an insured to a self-insured basis. There was a marked increase, which may have since leveled off.

Changing from an insured to a self-insured basis introduces new compliance requirements - self-insured health plans cannot discriminate in favor of highly compensated employees in terms of eligibility, contributions or benefit design, or in operation. These rules may create a challenge where the plan design includes: (1) Different eligibility requirements, (2) Benefits that vary based on classification or years of service, or (3) Separate plans.

One remaining, significant Health Reform change is the delayed implementation of similar non-discrimination rules for insured, non-grandfathered health plans.[ii] Those changes were to be effective for plan years starting on or after October 23, 2010. The rules are similar to those for self-insured plans. However, the penalty is much different – civil action to compel provision of nondiscriminatory benefits and an excise tax of $100 per day per individual discriminated against. All benefit professionals believe these penalties, if implemented, will all but end insured health coverage that discriminates in favor of highly compensated employees.

Health Reform – Annual Enrollment

Here’s a checklist of items to consider in your continuing efforts to comply with Health Reform – this list is not exhaustive – compliance with:

  • The employer mandate for “applicable large employers” to offer “affordable”, “minimum essential coverage” of “minimum value” to “substantially all” full time employees and their dependents,
  • Reporting coverage on Forms 1095-B or Form 1095-C,
  • Determination of grandfathered status,
  • Limits on cost sharing and out-of-pocket maximums,
  • Compliance with pre-existing condition exclusions, child coverage to age 26, waiting period limits, essential health benefits, clinical trials,
  • Disclosures (Summary of Benefits and Coverage, Marketplace Notice, Grandfathered Plan Notice, Patient Protection Notice, W-2 Reporting of Health Coverage Costs),
  • PCORI fees,
  • Medical loss ratio rebates for insured plans,
  • Wellness program (HIPAA, ADA, GINA compliance), incentives, alternative standards, and
  • Health Flexible Spending Account dollar limit.

Health Reform – Looking Back

Then-Speaker of the House Nancy Pelosi had a(n) (in)famous quote regarding Health Reform way back on March 9, 2010 – two weeks prior to Health Reform enactment. In her speech at the 2010 Legislative Conference for the National Association of Counties, she noted that:

“… but we have to pass the bill so that you can find out what is in it,

away from the fog of the controversy. …”

Well, here we are, ten years later and most of the fog has cleared; even if the controversy is still being decided in the courts.[iii]

The Journey to Date

Here’s a high-level summary of Health Reform changes that impacted employer-sponsored coverage:


  • Rebates for retired and disabled Americans covered under Medicare Part D to partially fill the coverage gap or “donut hole”, including a $250 rebate
  • “Grandfathered Plan” transition rules for plans that maintained coverage as in effect 3/23/10
  • A $5 Billion Early Retiree Reinsurance Program for employer-sponsored retiree medical coverage
  • A Pre-Existing Condition Insurance Plan for uninsured individuals with pre-existing medical conditions[iv]
  • Curtailment of most annual dollar limits and elimination of all lifetime dollar limits (or “caps”)
  • Elimination of pre-existing condition limits for children
  • Coverage for certain preventive services without point of purchase cost sharing
  • Child coverage extended to age 26 (regardless of dependency or access to other coverage) without additional premium/contributions
  • Prohibitions on rescission of coverage (a cancellation or discontinuance of coverage with retroactive effect)
  • New appeals process for disputed claims and addition of external review processes.


  • Implemented medical loss ratio targets of 80% or 85% of insurance premiums
  • Added certain preventive services for Medicare recipients without point of purchase cost sharing
  • 50% discount on Part D brand name Rx for Medicare beneficiaries in the “donut hole”
  • Patient protections – allowing choice of any participating primary care provider, prohibiting insurers from requiring prior authorization for ob/gyn visits, lactation counselling, provisions for access to emergency care
  • Income Related Monthly Adjustment Amount (IRMAA) Medicare premiums for Medicare Part B and Part D
  • Community First Choice Options created to provide disabled home- and community-based services
  • Independent Payment Advisory Board created.


  • Addition of the ACA’s “contraceptive mandate” for women’s preventive services without cost-sharing as well as HIV screening, contraception counseling, and domestic violence support services
  • Creation of incentives to form Accountable Care Organizations (ACOs) for Medicare patients
  • Implementation of Summary of Benefits and Coverage requirement, including the requirement that the plan or issuer must provide notice of any modification in coverage to enrollees not later than 60 days prior to the date on which such modification will become effective
  • Addition of Patient-Centered Outcomes Research Institute (PCORI) fee.


  • Annual deferrals to health flexible spending accounts capped at $2,500
  • With no advance notice, nor any legislative or regulatory justification, announced a one-year delay for the employer-mandate to offer affordable, minimum essential coverage, of minimum value
  • Increased the exclusion for tax deductible medical expenses from 7.5% of adjusted gross income (AGI) to 10% of AGI, except for taxpayers age 65+[v]
  • Notice of public exchange coverage availability.


  • Public health exchanges open for business, incorporating taxpayer-financed subsidies for coverage, individual subsidies as well as small business tax credits of up to 50% of premiums
  • Medicaid expansion takes effect - total enrollment in Medicaid and the Children’s Health Insurance Plan (CHIP) grew to 73.5 million as of May 2020
  • Individual mandate (and penalties) take effect, with extensive, significant exceptions and waivers
  • Pre-Existing Condition Insurance Plan ends
  • Annual limits on essential health benefits eliminated
  • No denying coverage due to pre-existing conditions or gender
  • Federally mandated insurance fees implemented, including the Market Share Fee, Transitional Reinsurance Program Fee, Risk Adjustment User Fee and Federally Facilitated Exchange User Fee
  • Increase in permissible incentives for health-contingent wellness programs from 20% to 30%, 50% for tobacco cessation
  • Limitations on Health Reimbursement Accounts unless integrated within a group health plan that meets the requirements of the Public Health Service Act
  • Limitations on maximum deductibles and out of pocket expenses for non-grandfathered plans; specific reasonableness requirement applied to reference based pricing
  • Non-discrimination in contracting with health care providers acting within the scope of that provider’s license or certification under applicable state law
  • No denying a covered person’s participation in an approved clinical trial, no discriminating in terms and conditions of employment due to participation in a trial, and no cost sharing on “routine patient costs for items and services furnished in connection with participation in the trial
  • Limitations on eligibility periods in excess of 90 days (delayed effective date of January 1, 2015).


  • The threshold for itemizing medical expenses increased from 7.5% to 10% for individuals age 65+.

What Was Discarded/Changed

Many Health Reform provisions were discarded or changed, including but not limited to:

  • Repealed Form 1099 income reporting requirement[vi]
  • Repealed the free-choice voucher program[vii]
  • Repealed the CLASS Act[viii]
  • Repealed the cap on deductibles for small plans[ix]
  • Amended definition of “large” employer[x]
  • Repealed automatic enrollment provisions for large employers[xi]
  • Adjusted the threshold for itemizing medical expenses[xii]
  • Expanded access to short-term “skinny” health plans[xiii]
  • Eliminated the individual mandate penalty tax[xiv]
  • Repealed the Independent Payment Advisory Board (IPAB)[xv]
  • Created then extended the moratorium on the medical device excise tax[xvi]
  • Delayed twice, then repealed the High Cost Health Plan (“Cadillac”) tax.[xvii]

Contact us to review compliance If you’ve made the change from insured to self-insured, or if you are considering such a change at this time. Most plan sponsors adjust their coverage and other provisions to remove discriminatory features. Failure to comply requires imputing taxable income to highly compensated employees.

[i] Patient Protection and Affordable Care Act of 2010, Pub. L. 111-148, Signed by President Obama on 3/23/10. See also: Health Care and Education Reconciliation Act of 2010, Pub.L. 111–152, 3/30/10.

[ii] Request for Comments on Requirements Prohibiting Discrimination in Favor of Highly Compensated Individuals in Insured Group Health Plans, IRS Notice 2010-63, 9/20/10, Accessed 10/5/20 at: See also: Affordable Care Act Nondiscrimination Provisions Applicable to Insured Group Health Plans, Notice 2011-1, 12/22/10. “… compliance should not be required (and thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued… the Departments anticipate that the guidance will not apply until plan years beginning a specified period after issuance. …” Accessed 10/5/20 at:

[iii] California v. Texas, Docket No. 19-840, Cert granted from the 5th Circuit Court of Appeals, 3/2/20. “In 2012, the U.S. Supreme Court upheld the individual mandate of the Affordable Care Act (ACA) against a constitutional challenge by characterizing the penalty for not buying health insurance as a tax, which Congress has the power to impose. In 2017, the Republican-controlled Congress enacted an amendment to the ACA that set the penalty for not buying health insurance to zero, but it left the rest of the ACA in place. Texas and several other states and individuals filed a lawsuit in federal court challenging the individual mandate again, arguing that because the penalty was zero, it can no longer be characterized as a tax and is therefore unconstitutional. California and several other states joined the lawsuit to defend the individual mandate. The federal district court held that the individual mandate is now unconstitutional and that as a result, the entire ACA is invalidated because the individual mandate cannot be “severed” from the rest of the Act. The U.S. Court of Appeals for the Fifth Circuit upheld the district court’s conclusion but remanded the case for reconsideration of whether any part of the ACA survives in the absence of the individual mandate. The Supreme Court granted California’s petition for review, as well as Texas’s cross-petition for review.” Oral arguments are scheduled for the week after the November 2020 election.

[iv] Originally represented as essential coverage for millions of Americans, at no time did more than 115,000 Americans enroll in this coverage prior to its termination (during the period October 2011 – January 2014.) – confirming that the challenge was as much one of cost as it was of access.

[v] The threshold for itemization of medical expenses was at 7.5% until 2013 when Congress increased it to 10% - leaving 7.5% in place for those age 65+. The Tax Cuts & Jobs Act of 2017, Pub. L. 115–978, 11/2/17, retroactively reset the threshold to 7.5% for the tax years 2017 through 2018 for everyone, regardless of age. The National Defense Authorization Act for Fiscal Year 2020, Pub. L. 116-92), 12/20/19, maintained the 7.5% threshold for 2019 and 2020.

[vi] Pub. L. 112-9, Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, 4/14/11. Repealed the requirement that businesses file an information report (IRS Form 1099) whenever they pay a vendor more than $600 for goods in a single year.

[vii] Pub. L. 112-10, Department of Defense and Full-Year Continuing Appropriations Act, 2011, 4/15/11. Repealed the free-choice voucher program, which would have required certain employers to provide vouchers to qualified employees for purchasing coverage through a health insurance exchange.

[viii] Pub. L. 112-240, American Taxpayer Relief Act of 2012, 1/2/13. Repealed Title VIII of the ACA, the Community Living Assistance Services and Supports (CLASS) Act.

[ix]Pub. L. 113-93, Protecting Access to Medicare Act of 2014, 4/1/14. Repealed the cap on deductibles for small-group health plans, which was to be $2,000 for self-only plans and $4,000 for family plans in plan year 2014 (and indexed to average per capita premium costs in subsequent years).

[x] Pub. L. 114-60, Protecting Affordable Coverage for Employees (PACE) Act, 10/7/15. Amended the definition of small employer to mean employers with up to 50 employees, while giving states the option to expand the definition to include employers with up to 100 employees.

[xi] Pub. L. 114-74, Bipartisan Budget Act of 2015, 11/2/15. Repealed the requirement that employers with more than 200 employees automatically enroll new full-time employees in health insurance and continue coverage

for current employees.

[xii] Pub. L. 115-97, 12/22/17. Reduced the adjusted gross income (AGI) threshold from 10% to 7.5% for individual taxpayers claiming an itemized deduction for unreimbursed medical and dental expenses in 2017 and 2018.

[xiii] Pub. L. 115-97, Note xii, Ibid.

[xiv] Pub. L. 115-97, Note xii, Ibid.

[xv] Bipartisan Budget Act of 2018, Pub. L. 115–123, 2/9/18.

[xvi] Pub. L. 115-120, Extended the moratorium on the medical device excise tax for an additional two years—through Dec. 31, 2019. The moratorium was first established under P.L. 114-113, for the period 1/1/16 – 12/31/17

[xvii] Pub. L. 116-94, Further Consolidated Appropriations Act, 2020, 12/20/19, Pub. L. 115-120, Division D, SUSPENSION OF CERTAIN HEALTH-RELATED TAXES, DELAY IN IMPLEMENTATION OF EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED HEALTH COVERAGE, 1/22/18, delayed effective date of excise tax on high cost employer-sponsored health coverage from 1/1/20 to 1/1/22. Pub. L. 114-13 previously delayed effective date of excise tax on high cost employer-sponsored health coverage from 1/1/18 to 1/1/20.

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