The ABC’s of the ACA

Stephanie Bunten, CPA, JD, LLM

The Affordable Care Act has its own language, some of which isn’t intuitively obvious! So we’ve put together a glossary of frequently used terms presented at our recent Employer Compliance Workshop.

 

ACA = AFFORDABLE CARE ACT

ADMINISTRATIVE PERIOD
Used in administering employer shared responsibility provisions. Time after measurement period where variable hour employees’ full-time or part-time status is determined and insurance is offered.

AFFORDABILITY
For purposes of the employer shared responsibility provisions, affordability is defined as 9.5% of household income. Safe harbors do apply: 9.5% of Box 1, W-2; 9.5% of rate of pay; and 9.5% of federal poverty level.

For purposes of the individual shared responsibility provisions, affordability is defined as 8% of household income.

ALE = APPLICABLE LARGE EMPLOYER
An employer with 50 or more full-time equivalent employees.

CADILLAC TAX
Begins 1/1/18. A 40% excise tax assessed on value of health insurance benefits exceeding $10,200 for individual coverage and $27,500 for family coverage (will be indexed for inflation).

CAFETERIA PLAN
A separate written plan maintained by an employer that allows employees an opportunity to receive certain benefits on a pretax basis. Governed by Section 125 of the Internal Revenue Code. Ex: Health Flexible Spending Account, Dependent Care Flexible Spending Account, Premium Only Plan, etc.

COMMON CONTROL/AFFILIATED SERVICE GROUP RULES
Complex set of rules found under Section 414 of Internal Revenue Code. Organizations with certain percentages of common or related ownership or certain service groups may be considered as one employer.

ESR = EMPLOYER SHARED RESPONSIBILITY
Enforcement begins 1/1/2015. Every applicable large employer with 50 or more full-time equivalent employees must provide minimum essential coverage that is “affordable” and provides minimum value to their full-time employees or risk paying penalties. Certain transition relief applies in 2015.

FEDERAL POVERTY LEVEL
A measure of income level issued annually by the Department of Health and Human Services, which is used in administering various program and regulations, such as Head Start, the Children’s Health Insurance Program, and some of the provisions under the Affordable Care Act. Separate guidelines are issued for the 48 contiguous states, Hawaii, and Alaska.

FTE = FULL-TIME EQUIVALENTS
A calculation that takes into account all of the hours worked by employees (full-time and part-time) of an employer and determines how many full-time employees it would take to work all of those hours.

FULL-TIME EMPLOYEE
For purposes of the employer shared responsibility provisions, an employee who averages 30 or more hours per week.

ISR = INDIVIDUAL SHARED RESPONSIBILITY
Enforcement began 1/1/2014. Every individual must obtain minimum essential coverage or pay a penalty, unless an exemption applies.

LOOK-BACK MEASUREMENT PERIOD
Period during which variable hour employees’ hours are tracked to determine if they are considered full-time (averaging 30 or more hours per week).

MARKETPLACE
Also known as the “Exchange.” The place for individuals and small businesses to compare health insurance plans and pricing and obtain health insurance coverage. Individuals may obtain subsidized health insurance coverage by applying for premium tax credits or subsidies through the Marketplace.

MEC = MINIMUM ESSENTIAL COVERAGE
The type of health insurance coverage that an individual must have in order to avoid the penalty for not having health coverage under the Affordable Care Act. Ex: employer-sponsored group health insurance coverage, Medicaid, coverage purchased in the individual market.

MVC = MINIMUM VALUE COVERAGE
Health insurance coverage designed to pay at least 60% of total cost of medical services for a standard population.

NONDISCRIMINATION RULES
Rules intended to keep plans from discriminating in favor of highly compensated employees and company executives. Currently apply to self-insured plans. Extended to fully insured plans but enforcement has been suspended until further guidance is issued.

PPACA = PATIENT PROTECTION & AFFORDABLE CARE ACT

POP = PREMIUM ONLY PLAN
A written plan that allows employees to pay their portion of medical insurance premiums with pretax dollars. Governed by Section 125 of the Internal Revenue Code.

PTC = PREMIUM TAX CREDIT
Subsidy available for individual health insurance coverage purchased through Marketplace for individuals with household income between 100% and 400% of federal poverty level. A cost-sharing reduction subsidy is available for individuals with household income between 100% and 250% of federal poverty level.

SBHCTC = SMALL BUSINESS HEALTH CARE TAX CREDIT
Available to businesses with fewer than 25 full-time equivalent employees with average annual wages of less than $50,000. Business must pay at least 50% of employee premiums.

Beginning 1/1/2014, health insurance coverage must be purchased through small business health options program through Marketplace.

SELF-INSURED PLANS
Plans in which the employer funds the benefits provided by the plan.

SHOP = SMALL BUSINESS HEALTH OPTIONS PROGRAM
Open to businesses with fewer than 50 full-time equivalent employees.

STABILITY PERIOD
Period during which employers are required to maintain “full-time employees” on health insurance coverage.

VARIABLE-HOUR EMPLOYEE
An employee with respect to whom the employer cannot determine whether the employee is reasonably expected to be employed on average at least 30 hours of service per week because the employee’s hours are variable or uncertain.