What Health Insurance Terms Do I Need to Know as an Employer?
The Affordable Care Act (ACA)
The ACA is a health care law that went into effect in 2010 and requires certain employers to offer health insurance to their teams. The Act is huge—clocking in at over 1,990 pages—and outlines health care rules for companies, individuals, insurance companies, and many other entities.
Applicable large employer (ALE)
This is any company that has 50 or more full-time equivalent (FTE) employees. These companies are required to provide their team with health care.
COBRA is a program that provides temporary (and pricey!) health coverage for people who lose their job. The acronym stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, which was created to ensure employees and their dependents could continue their health insurance after losing their jobs.
Do you have 20 or more people on staff? Then you’re required to offer COBRA. Do you have less than 20 people on staff? You may still be subject to your state’s mini-COBRA laws.
When you first roll out a group health plan, there needs to be an explanation in the summary plan description (SPD) about what employees’ rights are under COBRA. If your team has any questions, they can get in touch with the plan administrator or refer to their handy SPD.
In total, there are four notices you should know about:
COBRA General Notice: Within 90 days of coverage on your group health plan, all employees need to receive an overview that describes their rights under COBRA.
COBRA Election Notice: Within 14 days of a qualifying life event (QLE), each plan has to explain how a person can continue their health insurance coverage under COBRA.
Notice of Unavailability of Group Health Coverage: If someone doesn’t qualify for COBRA, the plan must tell them why within 14 days after their QLE.
Early Termination Notice: If a plan needs to end coverage early, they need to tell the beneficiaries why, what their options are, and when their coverage will come to a close.
Have any other COBRA questions? Make your way over to this guide from the Department of Labor (DOL).
The mandate is a section in the ACA that requires companies with 50 or more employees to offer health insurance or get penalized.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA)
HIPAA is a law that secures people’s protected health information, or PHI. It does this by spelling out the kinds of health information that must be kept private, along with creating high standards to hold everyone who has access to sensitive information responsible for its security. If you’re HIPAA compliant, it means that you follow all the laws laid out in this important act.
HIPAA business associate agreement (BAA)
This one sounds like it’s all business, but don’t get frightened. A BAA is a simple agreement that allows companies that follow HIPAA, called covered entities, to hire other employees or contractors, called business associates.
The BAA itself is designed for those who deal with personal health information (also abbreviated as PHI), and serves as a promise that they’ll agree to follow the same HIPAA rules that you do. For example, anyone who works on patient billing, claims, or benefits management needs a BAA in order to comply with the labyrinth of HIPAA regulations out there.
Check out this sample agreement from the US Department of Health & Human Services to get a taste of what an actual agreement looks like.
Marketplace notice to new hires
Since October 1, 2013, the Affordable Care Act has required businesses to coach their new employees about the health exchanges available in their state. This notice can be sent by email or paper to both part-time and full-time employees.
You have the option of either using the sample notice issued by the DOL, or you can create your own if you stick to the points below:
You have to tell your team about the Marketplace, describing the actual services offered and how to get in touch for more information.
If you do not offer minimum essential coverage, you have to tell your worker that they might be able to obtain a Marketplace tax credit.
Communicate that if an employee buys a plan through the Marketplace, they may lose the contribution they get from you.
Medicare summary notice (MSN)
Every three months, people who receive Medicare benefits get a little letter in their mailbox that breaks down all the services they received during that window. The MSN also includes a list of any outstanding balances they might owe. If they didn’t use any, no notice is sent—simple as that.
Notice of creditable coverage (Medicare part D)
Part D is a big part of Medicare you should know about.
If you offer a plan that contains drug coverage for those enrolled in Medicare, then you have to tell those folks by October 15 if your plan’s coverage is considered “creditable.” Or in other words, let them know if your coverage matches Medicare’s Part D plan, which many participants can also use to receive prescription drug benefits.
Make sure your employees hold on to that notice, because there’s a chance they’ll need to refer to it if they join a Medicare plan later on.
Whenever you need to understand the basics of your plan, this is the blueprint you’ll unroll. Inside, you’ll find the terms and conditions that spell out how your plan is managed, along with a description of your benefits, the name of the person administering the plan, and other vital details.
Summary plan description (SPD)
While the plan document is your guide for how to run the plan, the summary plan description is where your team can turn for information.
Nicknamed the “four-page summary,” the document lays out how the plan works, what’s offered, how to file claims, and more specifics. If anything changes, you’re required to give employees a new version that reflects those updates. Generally, the carrier certificates alone do not satisfy the SPD requirement.
Summary of benefits and coverage (SBC)
The SBC was designed to provide a quick look into coverage options so people can easily understand the pros and cons of each. This is what you’ll find inside:
The monthly premium price
And other details
Here’s a template from the Department of Labor that will help you get a feel for what you’ll see on your own SBC. And be sure to check out this overview for more guidelines on how to actually read one. Is your team trying to compare different plans? Any shopper or plan participant has the right to request a copy directly from their carrier—no strings attached.
1094-C and 1095-C forms
Do you have 50 or more FTEs on staff? Then these forms need to be sprinkled into your vocabulary. The two documents exist so you can show the IRS that you’re giving your team meaningful health insurance.
The 1095-C needs to be handed to your employees by January 31. Once that’s done, send a copy of both the 1094-C and 1095-C to the IRS by February 28, or March 31 if you fill it out online. Get more instructions here.
The Employee Retirement Security Act of 1974 (ERISA)
The Employee Retirement Income Security Act, or ERISA for short, was created because of concerns about the labor and tax aspects of employee benefit plans. The law standardizes benefit plans for workers, and it helps champion increased access to plan information for participants. All business owners who provide health care have to abide by the rules outlined in ERISA.
Premium-only plan (POP)
Section 125 plans—also called cafeteria plans—let employees use their pre-tax salary to pay for a qualified benefit, like POP plans. These plans are the most basic kind of section 125 plans, and enable employees to pay for their health insurance before taxes are taken out. This translates into a hefty chunk of tax savings on the benefits you already provide to your team.
Studying the vocabulary above will make it easier to understand what’s happening as you delve into unfamiliar territory. The more you learn, the more you’ll become a health insurance champ.