SmallGroup HealthCare Reform

Confused by Healthcare Reform?

There are so many rules that have changed so quickly. It’s our goal to help keep you informed. Read below to learn more about how healthcare reform legislation impacts you and your small business.


Federal law imposes numerous requirements on the group health coverage that employers provide to their employees. Many federal compliance laws apply to all group health plans, regardless of the size of the sponsoring employer. However, there are some compliance exceptions for group health coverage provided by small employers. For this purpose, a small employer is one with fewer than 50 employees.


Small employers, for example, are not required to comply with the Affordable Care Act’s (ACA) employer shared responsibility rules for applicable large employers (ALEs), the ACA’s Form W-2 reporting rules or the Family and Medical Leave Act’s (FMLA) requirements.


Who is a Small Employer?

Most states define a Small Employers as a business with 50 or fewer employees. Effective for plan years beginning on or after January 1, 2016, the ACA was set to expand the small group market to include employers up to 100 employees. However, on October 7, 2015, President Obama signed into law the Protecting Affordable Coverage for Employers (PACE) Act. Which repealed the ACA’s small group market expansion requirement. As a result, states now have the option, but are not required, to expand their small group markets to include businesses with up to 100 employees.  A handful of states have elected to increase the small employer definition up to 100 lives.


Your CBC Marketplace representative can help you determine if you are considered a small employer or large employer, based on your resident state and the number of employees you have.


Health Coverage Changes

The ACA’s market reforms apply to health plans and health insurance issuers, with narrow exceptions for certain types of plans (for example, retiree medical plans). There is not an overall exception for small employers. Below is a high-level overview of key ACA market reforms:

  • Must provide comprehensive health coverage consisting of the essential health benefits (EHB) package—Applies to all non-grandfathered insured health plans in the small group market. Most states define the small group market as including employers with 50 or fewer employees.
  • No annual or lifetime dollar limits on EHB—Applies to all health plans.
  • Out-of-pocket maximums on EHB cannot exceed certain limits—Applies to all non-grandfathered health plans.

  • Cannot impose a waiting period that exceeds 90 days—Applies to all health plans.
  • No pre-existing condition exclusions on any covered individuals—Applies to all health plans.
  • Cannot discriminate against plan participants who participate in clinical trials—Applies to all non-grandfathered health plans.
  • Must cover specific preventive care services without imposing cost-sharing requirements—Applies to all non-grandfathered health plans.
  • Health plans that provide dependent coverage for children must make coverage available for adult children up to age 26—Applies to all health plans.
  • Cannot rescind coverage for covered individuals, except in cases of fraud or intentional misrepresentation of material fact—Applies to all health plans.

ACA Notices & Disclosures

  • Statement of Grandfathered Status—Plan administrator or issuer of a grandfathered plan must provide this statement on a periodic basis with participant materials describing plan benefits, such as the summary plan description (SPD) and open enrollment materials.
  • Notice of Rescission—Plan administrator or issuer must provide a notice of rescission to affected participants at least 30 days before the rescission occurs.
  • Notice of Patient Protections and Selection of Providers—Plan administrator or issuer of a non-grandfathered plan must provide a notice of patient protections/selection of providers whenever the SPD or similar description of benefits is provided to a participant. These provisions relate to the choice of a health care professional and benefits for emergency services.
  • Uniform Summary of Benefits and Coverage (SBC)—Plan administrator or issuer must provide the uniform SBC to participants and beneficiaries at certain times (including upon application for coverage and at renewal), as well as provide a 60-day advance notice of material changes to the summary that take place mid-plan year.
  • Exchange Notice—Employers must provide new hires a written notice about the ACA Exchanges.

W-2 Reporting

The Form W-2 reporting obligation applies to employers sponsoring group health plans. Small employers (those that file fewer than 250 W-2 Forms) are exempt until further guidance is provided. Other employers were required to comply with this reporting beginning with the 2012 tax year.


Employers must disclose the aggregate cost of employer-sponsored coverage provided to employees on the employees’ W-2 Forms. This reporting is intended to provide information to employees on how much their health coverage costs. It does not mean that the cost of coverage is taxable to employees.


Employer Penalty Rules

Under the ACA’s employer penalty rules, applicable large employers (ALEs) that do not offer affordable, minimum value health coverage to their full-time employees (and dependent children) will be subject to penalties if any full-time employee receives a subsidy for health coverage through an Exchange.


These employer penalties are also known as the “employer shared responsibility” or “pay or play” rules.
To qualify as an ALE, an employer must employ, on average, at least 50 full-time employees, including full-time equivalent employees (FTEs), on business days during the preceding calendar year. All employers that employ at least 50 full-time and FTE employees are subject to these rules, including for-profit, nonprofit and government employers.


MLR Rebates

The Affordable Care Act (ACA) established medical loss ratio (MLR) rules to help control health care coverage costs and ensure that enrollees receive value for their premium dollars. The MLR rules require health insurance issuers in the small employer markets to spend 80 percent of their premiums on health care and health care quality improvement activities. Issuers that do not meet these requirements must pay rebates to consumers.


Employers that expect to receive rebates, or have received a rebate, should follow the MLR rebate rules to decide how to administer the rebate. Your CBC Marketplace representative can assist you with this.

Links & Resources

  • On Dec. 1, 2010, the Department of Health and Human Services (HHS) issued interim final regulations on the MLR requirements.

  • The Department of Labor (DOL) issued Technical Release 2011-4 (TR 2011-4) to provide general guidelines on how ERISA plan sponsors should handle MLR rebates. TR 2011-4 explains how ERISA’s fiduciary duty and plan asset rules apply to MLR rebates.




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