The Affordable Care Act (ACA), passed in March 2010, is a transformative piece of healthcare legislation that has significantly impacted the United States since its passage in March 2010. The ACA remains a cornerstone of American healthcare reform, designed to expand access to health insurance, improve care quality, and reduce healthcare costs.

This blog will provide an overview of the ACA, its key provisions, penalties, and important terms that both employers and individuals need to understand. 

Overview of the ACA 

What is the ACA? 

The ACA aims to make health insurance more accessible and affordable for individuals and businesses alike. It established health insurance marketplaces (exchanges), expanded Medicaid, and implemented consumer protections such as guaranteed coverage for preexisting conditions. The ACA also introduced requirements for employers, particularly those classified as Applicable Large Employers (ALEs), to ensure compliance with health insurance standards.

History of the ACA 

• Signed into Law in March 2010: The ACA was signed by President Barack Obama, marking a landmark moment in U.S. healthcare policy. 

• Upheld by the Supreme Court: 

• 2012: The Supreme Court upheld most of the law in a 5-4 decision, which kept key provisions such as the individual mandate. 

• 2015: The Court reaffirmed its earlier decision, rejecting challenges to the law’s subsidies. 

• 2021: In another significant ruling, the Supreme Court upheld the ACA again, ensuring the survival of the law despite various legal challenges. 

• Gradual Implementation: While the law passed in 2010, its provisions were implemented gradually over several years. Some changes took effect immediately, such as the banning of lifetime coverage limits, while others, such as the creation of health insurance marketplaces, took more time. 

Key Provisions of the ACA 

• Guaranteed Coverage for Preexisting Conditions: Before the ACA, insurance companies could deny coverage to individuals with preexisting conditions. The ACA made it illegal for insurers to discriminate based on health status. 

• Coverage for Children Up to Age 26: The ACA allows young adults to remain on their parents’ insurance plan until they turn 26, even if they are married, not living with their parents, or financially independent. 

• Lactation Breaks for Nursing Mothers: The ACA mandates that employers provide reasonable break time and a private space (other than a bathroom) for nursing mothers to express breast milk. 

• No Lifetime Coverage Limits: The law prohibits insurance companies from placing lifetime dollar limits on essential health benefits, ensuring that people who need ongoing medical care won’t run out of coverage. 

• Free Preventive Care Screenings: The ACA requires most health plans to cover preventive services like screenings, vaccinations, and counseling at no cost to the insured. 

• Waiting Period Cannot Exceed 90 Days: Under the ACA, employers cannot impose waiting periods longer than 90 days before an employee can begin receiving benefits from a health plan. 

• 2018 Repeal of the Individual Mandate: The ACA originally required all Americans to have health insurance or pay a penalty. However, in 2018, the individual mandate was repealed, eliminating the penalty for not having insurance, though certain states have reinstated their own individual mandates. 

ACA Penalties and Compliance 

The ACA imposes several penalties on employers, individuals, and entities that do not comply with its requirements. Below are some of the key penalties you should be aware of: 

• Non-Offer Penalty: Employers with 50 or more full-time equivalent (FTE) employees who do not offer affordable health insurance to their employees may be subject to a penalty. If at least one employee receives a premium tax credit to purchase insurance through the marketplace, the employer could face a penalty. 

• Affordability Penalty: This penalty applies to employers who offer health insurance but the coverage is not considered “affordable” or does not meet the minimum value standard. The insurance is deemed affordable if the employee’s share of the premium does not exceed a set percentage of their household income. 

• Late Filing Penalty: Employers are required to file annual reports with the IRS about the health coverage offered to their employees. Failing to file these reports on time can result in a penalty. 

• Intentional Failure to File Penalty: This is a more severe penalty for employers who intentionally fail to file the necessary ACA paperwork with the IRS. This penalty can be significant, with fines of up to $500 per form. 

Key Terms of the ACA 

To navigate the ACA effectively, it’s important to understand some key terms. Here’s a breakdown of the most important ones: 

• ALE (Applicable Large Employer): An employer who has 50 or more full-time equivalent employees (FTEs) and is subject to the ACA’s employer mandate. ALEs must offer affordable health coverage to full-time employees and their dependents, or they may face penalties. 

• FTE (Full-Time Equivalent): This term is used to calculate the total number of full-time employees. An FTE is a way of combining the hours worked by part-time employees to determine the number of full-time employees. For example, if two part-time employees each work 15 hours a week, they together equal one FTE (30 hours). 

• Variable Hour Employee: These are employees whose work hours vary from week to week, making it difficult for the employer to determine if they meet the 30-hour-per-week threshold to be considered full-time. The ACA provides specific rules for handling variable hour employees. 

• Measurement/Look-Back Period: This is a defined period (usually 3 to 12 months) used to determine whether a variable hour employee is considered full-time under the ACA. If the employee averages 30 or more hours per week during this period, they must be offered coverage. 

• Stability Period: This is the period of time following the measurement period during which an employee who is determined to be full-time is guaranteed health coverage, regardless of how many hours they work during the stability period. 

• Administrative Period: The time period between the measurement period and the stability period. This time is used to determine which employees are eligible for coverage and to make the necessary changes to benefits. 

• Exchange (Marketplace): The ACA established online marketplaces where individuals can shop for health insurance. These exchanges help people compare different health plans, and in some cases, individuals can qualify for subsidies to make insurance more affordable. 

• MEC (Minimum Essential Coverage): MEC refers to the basic level of health insurance coverage that satisfies the ACA’s individual mandate. This can include employer-sponsored plans, government programs like Medicaid, and plans purchased through the marketplace. 

• MV (Minimum Value): The ACA requires that employer-sponsored plans meet a minimum value threshold. This means that the plan must cover at least 60% of the total cost of medical services for a standard population. 

• Affordability: For employer-sponsored health insurance to be deemed affordable, the employee’s share of the premium for self-only coverage cannot exceed a certain percentage of their household income. 

Conclusion 

The Affordable Care Act (ACA) has changed the way health insurance works in the United States, expanding access to care and introducing new protections for consumers. Whether you’re an employer navigating the requirements of the employer mandate or an individual seeking affordable health insurance options, understanding the ACA’s provisions, penalties, and key terms is crucial. Though the law has undergone several changes since its passage in 2010, it remains a critical element of U.S. healthcare reform and continues to shape the landscape of insurance coverage today. 

For a full walkthrough of the ACA and its impact on your business, watch MP’s webinar here. Our team is here to help you navigate and ensure ACA compliance with each modification that may come.  

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