Navigating ACA Compliance for Self-Funded Insurance Plans
Do self-funded insurance plans have to comply with ACA? The short answer is: Yes, they do. Here’s a quick rundown:
- Dependent coverage for adult children up to age 26
- No lifetime or annual dollar limits on essential health benefits (EHBs)
- Coverage of preventive health services without cost-sharing (with some exceptions)
- No rescissions of coverage except in specific cases
- No waiting periods exceeding 90 days
Navigating these requirements can seem overwhelming; however, it’s simpler than it looks. To start, let’s break down what self-insurance is and why it’s an option worth considering.
Self-insurance means your business directly funds employee health claims instead of paying premiums to an insurance company. This can offer greater control over your plan and potential cost savings. However, self-funded plans must still adhere to many ACA mandates to remain compliant.
I’m Les Perlson, an experienced partner at NPA Benefits. With over 40 years in the health insurance industry, I’ve helped many businesses steer the complexities of self-funded insurance plans while ensuring ACA compliance. Let’s dive into the key details and requirements you need to know.
What is Self-Insurance?
A self-insured health plan is a type of health insurance where the employer funds and pays for employee health claims directly, rather than paying premiums to an insurance company. This approach gives employers more control and flexibility over their health plans.
Employer-Funded
In a self-insured plan, the employer sets aside a pool of funds to cover health care claims. This means the employer retains the risk of paying these claims, but also keeps any savings if claims are lower than expected.
Cost-Sharing Limits
Employers can set their own cost-sharing limits, which include how much employees pay out-of-pocket for services. This flexibility allows employers to design plans that best meet their employees’ needs while managing costs.
Health Care Networks
One of the benefits of self-insurance is the ability to choose or customize health care networks. Employers can negotiate directly with providers or use a third-party administrator (TPA) to establish and maintain these networks.
Stop-Loss Limits
To protect against unexpectedly high claims, many self-insured employers purchase stop-loss insurance. This coverage kicks in when claims exceed a certain threshold, safeguarding the business from catastrophic financial losses.
Self-insurance can be a powerful tool for managing health care costs, but it requires careful planning and adherence to regulatory requirements. Next, let’s explore how self-insured plans must comply with the Affordable Care Act (ACA).
ACA Compliance for Self-Funded Insurance Plans
Self-funded insurance plans give employers more control over their health benefits, but they still need to comply with key provisions of the Affordable Care Act (ACA). Here’s a breakdown of the most important requirements.
Key ACA Provisions for Self-Funded Plans
Dependent Coverage: Employers must offer coverage to employees’ children up to age 26. This applies to all plans, regardless of funding method.
Preventive Health Services: Preventive services must be covered without any cost-sharing. This means no copays, coinsurance, or deductibles for services like vaccines and screenings.
No Rescissions: Coverage can’t be canceled retroactively, except in cases of fraud or intentional misrepresentation.
No Lifetime or Annual Dollar Limits: Plans can’t set lifetime or annual dollar limits on essential health benefits (EHBs). This ensures continuous coverage for critical services.
Internal Claims Process: Plans must have an improved internal claims and appeals process. This ensures fair and timely handling of claims.
No Waiting Periods: Plans can’t impose waiting periods longer than 90 days.
No Pre-existing Condition Exclusions: Coverage can’t be denied based on pre-existing conditions, ensuring everyone has access to necessary care.
Clinical Trials: Participants in clinical trials can’t be discriminated against. This ensures they have the same coverage as other plan members.
Out-of-Pocket Expenses: There are limits on the maximum out-of-pocket expenses for essential health benefits. This protects employees from excessive medical costs.
Reporting Requirements
Form 1094-C and Form 1095-C: Applicable Large Employers (ALEs) with 50 or more employees must file these forms with the IRS.
- Form 1094-C: Summarizes the information provided in 1095-Cs.
- Form 1095-C: Details the health coverage offered to each employee, including covered individuals.
PCORI Fee: The Patient-Centered Outcomes Research Institute (PCORI) fee helps fund research to improve health care outcomes. Self-funded plans must report and pay this fee annually using Form 720.
Minimum Essential Coverage: Employers must report offers of minimum essential coverage under sections 6055 and 6056. This ensures compliance with the individual mandate and helps the IRS verify coverage.
Self-funded plans must stay on top of these requirements to avoid penalties and ensure they provide comprehensive, compliant health benefits.
Next, we’ll discuss exemptions and non-applicable ACA provisions for self-funded plans.
Exemptions and Non-Applicable ACA Provisions
Specific Exemptions for Self-Funded Plans
While self-funded insurance plans must comply with many ACA requirements, they are exempt from several key provisions. Understanding these exemptions can help employers steer ACA compliance more effectively.
Essential Health Benefits (EHB) Package: Self-funded plans are not required to offer the EHB package. This package is a set of health care service categories that must be covered by certain plans, such as those in the individual and small group markets. For example, EHBs include maternity care, mental health services, and prescription drugs.
Medical Loss Ratio (MLR) Rules: Self-funded plans are exempt from MLR rules. These rules mandate that insurers spend a certain percentage (80-85%) of premium dollars on medical care and health care quality improvement. Since self-funded plans are not traditional insurance, they do not have this spending requirement.
Small Employer Tax Credit: This tax credit is designed to help small employers afford the cost of providing health insurance. However, it is only available for plans purchased through the Small Business Health Options Program (SHOP) exchanges. Self-funded plans do not qualify for this credit.
Premium Review Process: Self-funded plans do not have to undergo the ACA’s premium review process. This process requires insurers to justify unreasonable premium increases to state or federal regulators. Since self-funded plans are not subject to state premium regulations, they are exempt from this requirement.
Annual Insurance Fee: The ACA imposes an annual fee on health insurers to help fund the law’s provisions. Self-funded plans are not subject to this fee because they do not operate as traditional insurance companies.
Insurance Market Reforms: Self-funded plans are also exempt from certain insurance market reforms. These reforms include guaranteed issue and renewability, as well as premium rating restrictions. While these protections are vital for fully insured plans, self-funded plans have more flexibility in designing their coverage.
By understanding these exemptions, employers can better assess whether a self-funded plan is the right fit for their organization. This knowledge helps them steer the complexities of ACA compliance while taking advantage of the benefits that self-funding offers.
Next, we’ll explore special considerations for non-Federal governmental plans.
Special Considerations for Non-Federal Governmental Plans
Opt-Out Provisions
Non-Federal governmental plans—like those sponsored by states, counties, school districts, and municipalities—have unique considerations under the ACA. These plans are defined under the Public Health Service (PHS) Act and are subject to different regulations compared to private employer health plans.
Before the ACA, sponsors of self-funded, non-Federal governmental plans could opt out of certain PHS Act provisions. This was authorized under section 2721(b)(2) of the PHS Act. However, the ACA amended this, reducing the number of provisions that these plans can now opt out of.
Key Regulations and Enforcement
HIPAA: Self-funded, non-Federal governmental plans must comply with HIPAA. This includes adopting policies for the Privacy Rule, Security Rule, and Breach Notification Rule. They must also train their workforce on these policies.
CMS Enforcement: The Centers for Medicare & Medicaid Services (CMS) enforce compliance with ACA requirements for non-Federal governmental plans. If a plan fails to comply, CMS can investigate, implement corrective actions, or impose civil monetary penalties.
Limited Applicability and Exemptions
While some ACA provisions apply to these plans, others do not. For example, self-funded, non-Federal governmental plans can still opt out of some PHS Act requirements, but they must adhere to restrictions on annual limits and other key provisions of the Patient’s Bill of Rights.
State and Local Government Employers
State and local government employers need to be aware of these opt-out provisions and compliance requirements. They must ensure their plans meet federal standards while leveraging the flexibility that self-funding offers.
For any questions or concerns regarding non-Federal governmental plans, employers can contact CMS at NonFed@cms.hhs.gov.
Next, we will address frequently asked questions about ACA compliance for self-funded plans.
Frequently Asked Questions about ACA Compliance for Self-Funded Plans
Who Must Comply with the ACA?
All Applicable Large Employers (ALEs) must comply with the ACA. An ALE is any employer with 50 or more full-time employees or full-time equivalent employees (FTEs). This means if your business meets this threshold, you need to follow ACA rules, regardless of whether you offer a fully-insured or self-funded health plan.
Do Self-Funded Plans Have to File Form 1095?
Yes, self-funded plans must file Form 1095. Specifically, ALEs need to file Forms 1094-C and 1095-C with the IRS. Form 1095-C provides details about the health coverage offered to each employee, while Form 1094-C is a summary transmittal form. Even if you have a level-funded plan, which combines elements of both self-funded and fully-insured plans, you must still comply with these ACA employer mandate returns.
Key Forms:
– Form 1095-C: Details on health coverage for each employee
– Form 1094-C: Summary transmittal form to the IRS
Does ERISA Apply to Self-Funded Plans?
Yes, the Employee Retirement Income Security Act (ERISA) applies to self-funded health plans. ERISA sets minimum standards for most health plans in the private industry, including self-insured plans. This means you must provide plan documents, summary plan descriptions, and annual reports. ERISA also preempts most state insurance laws, but some state-specific requirements may still apply.
ERISA Requirements:
– Plan Documents: Detailed plan documents and summary plan descriptions
– Annual Reports: Form 5500 filing with the Department of Labor
– Fiduciary Responsibilities: Acting in the best interest of plan participants and ensuring reasonable plan expenses
Understanding these requirements helps ensure that your self-funded health insurance plan is compliant, protecting both your company and your employees from potential legal and financial risks.
Next, we will explore special considerations for non-federal governmental plans.
Conclusion
Navigating ACA compliance for self-funded insurance plans can seem overwhelming, but it doesn’t have to be. At NPA Benefits, we specialize in helping businesses understand and manage their self-funded health insurance options.
Flexible Health Insurance Options
Self-funded plans offer flexibility that traditional insurance often lacks. You can customize coverage levels and incorporate innovative health solutions like Flexible Spending Accounts (FSAs). This flexibility ensures your employees receive the best possible care without unnecessary financial strain.
Cost-Saving Benefits
Self-funding can lead to significant savings by reducing taxes and fees associated with traditional insurance premiums. With increased cost transparency, you know exactly where your money is going. This clarity helps you make informed decisions about your healthcare spending.
Control for Businesses and Individuals
With self-funded plans, you maintain control over plan design and can adapt quickly to changing healthcare needs. This control not only benefits your business by managing costs effectively but also provides your employees with high-quality health benefits.
Ready to take control of your healthcare benefits? Explore how NPA Benefits can transform your approach to healthcare today.
By choosing NPA Benefits, you invest in a smarter, more flexible, and cost-effective solution for your business and your employees.
