Health Care Reform: Eye on Implementation

Regular updates from Aetna on the implementation of health care reform.

Seizing Opportunities to Help Shape ACA Regulations

Aetna’s work related to ACA implementation and compliance continues. Eye on Implementation features a number of examples of ACA implementation and Aetna's efforts to provide helpful feedback to government agencies overseeing the process.

Employer Mandate Delayed to 2015

The federal government announced on July 2, 2013 that it will delay implementation of the employer mandate penalties and reporting requirements until 2015. It also says it will simplify the reporting requirements.

This means:

  • Large employers (50 or more employees) will not pay any penalties in 2014 if they do not offer affordable coverage that meets minimum value as defined under the Affordable Care Act (ACA).
  • Large employers and insurers are not required to report coverage affordability and access details to the IRS in 2014, as previously expected under IRC 6055 and 6056. This reporting will be voluntary until 2015.

Of course, large employers who are already planning to offer coverage that is affordable and meets minimum value in 2014 may continue with their plans, without an obligation for federal reporting requirements.

Employers that had not yet finalized their plans for 2014 now have a choice. They may offer coverage that does not meet the minimum value and affordability requirements of the law, with no penalty. The government’s announcement does not change or delay other plan and benefit requirements that go into effect for 2014.

For small employers, nothing has changed since this requirement did not apply. Businesses with fewer than 50 full-time equivalent employees will still have access to the Small Business Health Options Program.

You can read a a U.S. Treasury Department blog post about the decision here.

Final Wellness Regulations Issued

On May 29, 2013, the U.S. Departments of the Treasury, Labor (DOL) and Health and Human Services (HHS) issued final regulations modifying the 2006 HIPAA nondiscrimination wellness regulations to implement the employer wellness program provisions of the ACA. These rules are effective for plan years beginning on or after January 1, 2014.

The final rules apply to both grandfathered and non-grandfathered group health plans and both insured and self-funded plans. These regulations do not apply to the individual market in all states. The final regulations do not differ much from the November 2012 proposed regulations, but there are a few key differences from the 2006 HIPAA regulations.

The HIPAA nondiscrimination rules prohibited a group health plan from discriminating against an individual based on a health factor, except in two circumstances: 1) if the discrimination is in favor of an individual with an adverse health status (called "benign" discrimination) or 2) if the discrimination is part of a wellness program that meets the requirements of the HIPAA wellness rules. ACA extended this prohibition against discrimination based on health status to individual health insurance policies but did not also extend the exception for wellness programs. The final regulation allows individual health insurance plans to use participatory wellness programs but not health contingent wellness programs.

Read our Employer Guide to learn more.

Market reforms-Rating bands

Under a final rule announced on February 22, 2013, in 2014 health plans will be allowed to vary premiums based only on age (within a 3:1 ratio for adults), tobacco use (within a 5:1 ratio), family size, and geography.  A number of interested parties, including Aetna, argued for phasing in the 3:1 ratio, but the Centers for Medicare and Medicaid Services (CMS) said it lacked “legal authority to provide for a phase-in.” Higher premiums to certain enrollees because of their current or past health problems, gender, occupation, and small employer size or industry would be prohibited.

For states that choose to allow large employers the option (allowed as of 2017) of buying coverage through exchanges, the rating rules would also apply to all large group health insurance coverage. States can choose to enact stronger requirements under the law.

The final rule establishes year-long open enrollment periods for the group market, except for those small employers that do not meet participation and contribution requirements. For these small employers, issuers may limit enrollment to enrollment periods beginning November 15 and extending to December 15 each year. In the individual market, enrollment periods outside the exchange must be aligned with individual market qualified health plans offered inside the exchange.

Concerning geographic rating areas, the final rule grandfathers any state’s uniform rating area for the entire state when effective by January 1, 2013. After that date uniform rating areas must be no greater than the number of MSAs in the state plus one. The final rule eliminates the cap at seven rating areas.

The final rule also provides that non-grandfathered student health insurance coverage is not subject to the ACA single-risk pool requirement. However, this coverage is subject to the federal premium rating requirements and the premium rate charged may be based on a school-specific group community rate, if coverage is offered without rating for age or tobacco use.

Aetna sent a comment letter following the release of the proposed regulation expressing concern that moving to the 3:1 rate band restriction suddenly in 2014 could cause significantly higher premiums and consumer rate shock.  Aetna recommended modified community rating standards over a three-year period, phasing in new plan design requirements, allowing multiple age tiers for children, providing broader funding for exchanges that does not solely burden consumers, omitting student health from the individual market rating pool, preserving the “Employer Choice” option in federal SHOP exchanges.

For more information, read an AHIP infographic on the impact of the rating rule.

IRS Issues Proposed Rule for ACA Health Insurance Tax

The Internal Revenue Service has released a proposed rule for the ACA health insurance tax. The proposed rule clarifies that major medical insurance, stand-alone dental and vision coverage, student health insurance, and insurers providing coverage through government programs (Medicare Advantage, Medicare Part D, and Medicaid) are generally subject to the tax. Self-funded employer coverage, HIPAA excepted benefits, government health services, and indemnity reinsurance are excluded.

Insurers will report net premiums written in the prior year for covered health insurance to the IRS by May 1. The IRS will make a preliminary determination of the insurer’s tax liability. Insurers may file an error correction report challenging the IRS’ determination. The IRS will send a final tax liability notice by August 31 each year and the tax is due no later than September 30.

The amount of the tax is based on the insurer’s share of total industry net premiums written in the prior year. A portion of the covered entity's net premiums written are disregarded for purposes of the fee (e.g., the first $25 million are excluded). In addition, nonprofit tax-exempt entities generally pay the tax based on 50 percent of net premiums written (after exclusions). The annual tax is set at $8 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017, and $14.3 billion in 2018. Thereafter, the tax amount will be inflation adjusted.

HHS Issues Proposed Rule Addressing Issues in SHOP Program

HHS has released a proposed rule addressing issues in the Small Business Health Options Program (SHOP). The proposed amendments would amend existing regulations regarding triggering events and special enrollment periods for qualified employees and their dependents. It also would implement a transitional policy regarding employees’ choice of qualified health plans (QHPs) in the SHOP. 

Some of the key issues addressed by include special enrollment periods for the SHOP, which would be 30 days (changed from 60 days) to be consistent with the enrollment periods for the group market established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Special enrollment periods for employees or dependents who become eligible for, or lose eligibility for, premium assistance under Medicaid or the Children’s Health Insurance Program (CHIP) would be 60 days to select a QHP under the exchange.

A transitional policy would make the requirement that employers allow employees to choose among QHPs at a single level optional until January 1, 2015. State-based SHOPs may choose to permit employee choice effective January 1, 2014. However, the federally facilitated SHOPs will instead assist employers in choosing a single QHP to offer their qualified employees for plan years beginning on or after January 1, 2014 and before January 1, 2015 – the employee choice option would be effective January 1, 2015.

HHS Issues Final Rule for Notice of Benefit and Payment Parameters for 2014

HHS has released a final rule and a related interim final rule for the Notice of Benefit and Payment Parameters for 2014. As part of the final notice, HHS has modified provisions linking coverage issuer participation in a federally facilitated exchange to participation in a federally facilitated SHOP exchange. The final notice only requires insurers that exceed a 20 percent market share in a state to be subject to the tying provision – linking individual federally facilitated exchange participation to SHOP participation.

The final rule provides technical details and policy parameters related to:

  • The risk-adjustment, reinsurance, and risk corridors (3Rs) programs;
  • Cost-sharing reductions (CSR) for low- and moderate-income families purchasing exchange-plan coverage;
  • User fees for the federally facilitated exchange;
  • Implementation of the federally facilitated small business (SHOP) exchange; and
  • Changes to the medical loss ratio (MLR) program.

The final notice largely adopts the risk-adjustment methodology and model, as well as the reinsurance contribution amount and reinsurance parameters, that were previously outlined in the proposed notice released in November.

With respect to implementation of the cost-sharing reductions, the interim final rule provides an optional simplified methodology for calculating cost-sharing reduction amounts during a transitional period. The alternative approach is aimed at balancing the need to “safeguard federal funds with the goal of lessening the administrative burden on qualified health plan (QHP) issuers.”

Coverage Responsibility Rules for Employers

Proposed rules were issued by the Internal Revenue Service (IRS) in late December on employers’ shared responsibility requirements for providing health care coverage to employees under the ACA. Starting in 2014, employers with 50 or more full-time employees (combined with full-time equivalents) are required by the ACA to offer at least 95 percent of their full-time employees health care coverage or pay a $2,000 penalty per employee (the first 30 employees are disregarded in determining the amount of the penalty) if any full-time employee receives a federal subsidy to purchase insurance through a health exchange.

Covered employers that fail to provide minimum value (at least 60 percent of the total allowed cost of benefits) or provide coverage deemed unaffordable will pay the penalty or $3,000 to each full-time employee who receives a premium tax credit to enable purchase of coverage through a health insurance exchange.

The proposed rules address a number of conditions under which employers are subject to the shared responsibility provisions and for determining full-time employees. For example, large employer status is based on actual number of hours of U.S. employee service in the prior year. Also, companies that have a common owner are combined together for purposes of determining whether they employ at 50 full-time employees.

A full-time employee is any worker employed an average of at least 30 hours per week. A total of 130 hours of service in a calendar month is treated as the equivalent of at least 30 hours of service per week, as long as the standard is applied on a reasonable and consistent basis.

The scope of the proposed rules is extensive, covering such conditions as new variable hour and seasonal employees, determining hours of service for employees, transitioning from new to ongoing employees, employees returning to work after a break in service, educational organizations, transition rules, cafeteria plans, coverage of dependents and measurement and stability periods.

State Exchanges Approved

The Department of Health and Human Services (HHS) has announced conditional federal approval for 18 state-run health insurance exchanges and the District of Columbia, while seven states have received conditional approval to operate joint state-federal partnership exchanges. The approved state-based exchanges will be in California, Colorado, Connecticut, the District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington.

While Utah received conditional federal approval in January, the state appears headed toward a federally facilitated exchange. Governor Gary Herbert tried but failed to negotiate acceptance of the state’s existing exchange as compliant with the ACA.

FAQs Address ACA Implementation Issues

HHS, the Department of Labor and the Department of Treasury issued a set of FAQs on January 24, 2013 that clarify several issues related to the implementation of the ACA. For example, a requirement that employers notify their employees of the existence of insurance exchange coverage by March 1, 2013 will be postponed until late summer or fall of 2013. Labor is considering model notice language and will coordinate the timing of the notices with exchange open enrollment periods in the fall.

Also, employer-sponsored HRAs offered on a stand-alone basis must comply with the ACA prohibition on annual or lifetime dollar limits. The FAQs clarify that a stand-alone HRA used to purchase individual market coverage does not meet the ACA requirement regarding no annual or lifetime limits.

The FAQs also include guidance on the circumstances under which fixed indemnity coverage constitutes an excepted benefit product.

Wellness regulations

A proposed rule sets out the requirements for acceptable health promotion and disease prevention programs, affecting all insured and self-funded group health plans. Under the proposed wellness program rule, a health plan is permitted to offer a reward or incentive, such as premium discounts or rebates and modifications to cost sharing, to members who adhere to health promotion and disease prevention programs.

Currently, wellness program rewards may not exceed 20 percent of the cost of coverage. However, as of January 1, 2014, the proposed rule increases the total reward limit to 30 percent of the cost of coverage. Further, the rewards connected to curbing the use of tobacco are increased to a maximum of 50 percent.

The proposed rule also would require that a “reasonable alternative” standard be provided for obtaining the reward when it is unreasonably difficult, due to a medical condition, or medically inadvisable for an individual to attempt to meet the applicable standard. Aetna is concerned that the proposed rule a different standard be used for anyone who fails to meet the original standard even if the individual is medically capable, effectively expanding the current reasonable alternative rule to everyone.

The wellness exception is available to group plans but not to individual insurers.  Members eligible to participate in wellness programs must be given the opportunity to qualify for the reward at least once per year. For more information regarding this rule, visit:

Impact of the 2012 Elections

Now that the election is over and President Obama has been re-elected, our nation must focus on the economic and health reforms needed to get the country back on track. We are focused on getting our health care system headed in the right direction with a two-pronged approach.
First, we remain focused on achieving full compliance with the Affordable Care Act (ACA) and helping our customers achieve the same. While we are ready to meet these requirements, we will continue to advocate for workable regulations and needed legislative changes to avoid the unintended consequences of higher costs and needlessly complicated requirements on our customers.

Second, we will work with public policy leaders and legislators to fix the serious issues that continue to plague our health care system:

  • As much as one-third of all health care services are wasted.
  • Health care costs continue to grow at three times the rate of inflation.
  • Medicare/Medicaid growth is a key driver of the deficit – increasing from 5 percent today to about 9 percent by 2031.
  • Medicaid spending could jump by more than 25 percent by 2014, making it some states’ largest expense and hurting their ability to invest in education and other critical needs.

We can effectively address these issues and achieve quality, affordable health care for all if we allow public and private solutions to lead the way together.

The private sector already is providing innovative solutions that improve quality and health outcomes, which ultimately makes care more affordable. We are working toward medical payment reform that rewards value over quantity, and we are connecting the system as never before and bringing greater value and quality to the system with a high-tech, high-touch approach.

Working with all stakeholders, we can build a better health care system that benefits everyone and is sustainable for years to come. We appreciate your ongoing support as we continue these efforts.

Supreme Court Upholds Affordable Care Act

On June 28, 2012, the Supreme Court upheld the Affordable Care Act (ACA). This means the changes we have made or are making in our plans and processes to comply with the law will continue uninterrupted.

While the debate about the ACA will certainly continue on the political front, our business strategy is not changing. Neither is our commitment to system reforms that make quality care more affordable and accessible.

The full decision can be read here.

HHS Issues Final Rules Implementing the ‘Three Rs’

In March, the Department of Health and Human Services (HHS) issued final rules implementing the ACA’s premium risk mitigation programs, which include risk adjustment, reinsurance and risk corridor programs (the three Rs). Effective in 2014, these programs are designed to shift funds from plans with the lowest risk individuals to plans that attract the highest risk individuals. The goal is to help mitigate the potential impact of adverse selection and promote premium stability in the individual and small group markets.

If a state does not establish its own risk adjustment program, HHS will establish the program and perform the risk adjustment functions for that state.

A federally-developed risk adjustment methodology will be proposed in the fall of 2012 and published in the Federal Register with a comment period.  States operating risk adjustment programs may propose an alternative methodology for approval by HHS. The final rule is designed to afford states flexibility in how they collect data for risk adjustment.

Final Rule for Student Health  Plans is Set

HHS has issued a final rule for student health plans that, for the most part, incorporates the provisions of the proposed rule issued on February 11, 2011. For student plans taking effect on or after July 1, 2012 but before September 23, 2012, the final rules prohibit the imposition of lifetime limits, restrict annual limits to no less than $100,000, require preventive care coverage with no cost sharing, and prohibit pre-existing condition limitations on those younger than 19. The key provisions of the final rule include:

  • The phase-in for full compliance with restricted annual limits has been revised to $100,000 for plan years from July 1, 2012 to Sept. 23, 2012, $500,000 for plan years on or after Sept. 23, 2012, and no limit for plan years as of January 1, 2014.
  • For the 2013 calendar year, the application of medical loss ratio (MLR) requirements will use a modification similar to that for limited benefit “mini-med” plans and ex-patriot plans, which adjust for unusual expense and premium structure.  For subsequent years MLR will be measured using national aggregation of the student business only with no adjustment factor.
  • Student plans may coordinate required preventive services with student health centers and may designate providers as in-network.
  • Plans must disclose to students coverage that does not meet annual limit requirements, and they must notify students that they may be eligible for coverage as a dependent if they are under age 26.

The rule also provides that non-profit colleges or universities with religious objections to covering contraceptive services will be subject to the same one-year enforcement safe harbor applicable to employers and their group health plans.


You can learn more about the health care reform law by exploring other sections of our Health Reform Connection website. The site offers you access to easy-to-understand information on the law and perspectives on what still needs to be done to realize the vision of providing access to affordable quality health care for all Americans.

Other useful resources include:

Facts About Rising Health Care Costs

AHIP Latest News and Information on Health Reform 
American Benefits Council: Health Care Reform