How Obamacare Changed Employer-Sponsored Health Insurance

Because so many of the Affordable Care Act's (ACAs) provisions apply to the individual market, the employer-sponsored insurance market is sometimes left out of the discussion. But employer-sponsored health insurance is by far the most common form of coverage in the United States. Only about 6% of Americans had coverage purchased in the individual market in 2018, as opposed to 49% who had coverage from an employer.

The individual health insurance market is vastly different today than it was before the ACA (aka, Obamacare) was implemented. And while the changes have not been as pronounced in the employer-sponsored health insurance market (particularly the large-group market), there are numerous aspects of the ACA that apply to the health plans that employers offer to their employees.

Large employers are required to offer coverage

Prior to 2014, there was no requirement that employers offer health insurance to their employees. The vast majority of large employers did offer coverage, but that was their choice. The ACA's employer shared responsibility provision (employer mandate) requires employers with 50 or more full-time equivalent employees to offer affordable health insurance to their employees who work at least 30 hours a week. If they don't, they face a penalty.

Although the ACA's individual mandate penalty no longer applies (as of 2018), large employers that don't provide affordable, minimum value coverage to their full-time employees will continue to face penalties. This employer mandate means that employers must offer coverage that provides minimum value and is considered affordable for the employee. However, the "family glitch" means that in some cases, coverage may not be affordable for employees' dependents.

All plans must cap out-of-pocket costs

In 2020, all non-grandfathered health plans must cap out-of-pocket costs at $8,150 for an individual, and $16,300 for a family. And family plans must have embedded individual out-of-pocket maximums that don't exceed the allowable individual out-out-of-pocket amount, regardless of whether the plan has a family deductible.

The out-of-pocket limit only applies to in-network care (if you go outside the plan's network, out-of-pocket costs can be much higher, or even unlimited).

The provision to limit out-of-pocket costs applies to group plans as well as individual plans, as long as they're not grandfathered (plans that were already in effect when the ACA was signed into law on March 23, 2010) or grandmothered (plans that were in effect before the end of 2013).

No dollar limits on essential health benefits

The ACA defined ten "essential health benefits" that must be covered by all new individual and small group plans (in most states, small group is defined as up to 50 employees).

If you work for an employer with no more than 50 employees and your employer enrolled in the plan since January 2014, your health plan covers the essential health benefits with no dollar limits on how much the plan will pay for those benefits in a year or over the entire time you have the coverage.

If you work for a large employer (in most states, more than 50 employees; but in California, Colorado, New York, or Vermont, more than 100 employees), your health plan might not cover all of the essential health benefits, as it's not required to do so under the ACA. But for whatever essential health benefits the plan does cover, it cannot impose an annual or lifetime dollar limit on how much the plan will pay for those benefits (most large group plans do cover most of the essential health benefits, particularly now that large group plans are required to provide minimum value).

The ban on lifetime benefit maximums for essential health benefits applies even to grandfathered plans. And the ban on annual benefit maximums for essential health benefits applies to grandfathered employer-sponsored plans.

No medical underwriting on small group plans

Prior to 2014, insurers could base a small group's premium on the group's overall medical history although some states limited or prohibited this practice. The ACA has prohibited health insurance carriers from using a small group's medical history to determine premiums. Again, in most states, this applies to employers with 50 or fewer employees.

Pre-Existing Conditions Are Covered Without Waiting Periods

Prior to the ACA, employer-sponsored plans could impose waiting periods for pre-existing conditions if the enrollee hadn't maintained continuous coverage prior to enrolling in the plan (under the terms of HIPAA, enrollees who had maintained continuous creditable coverage prior to enrolling were not subject to waiting periods for their pre-existing conditions).

That meant that a new employee's coverage could be in force (with the employee paying premiums), but pre-existing conditions weren't yet covered. The ACA changes that. Employer-sponsored health plans cannot impose pre-existing condition waiting periods on new enrollees, regardless of whether they had continuous coverage prior to enrolling in the plan.

All plans include maternity coverage

Since 1978, employer-sponsored health plans in the US have been required to include maternity coverage if the employer had 15 or more employees and chose to offer health insurance. And in 18 states, regulations were in place prior to the ACA that required maternity coverage on small group plans even when the employer had fewer than 15 employees.

But maternity care is one of the ACA's essential health benefits, which means it's been included in all new individual and small-group plans sold since 2014. That filled in the gaps in states where very small group plans (fewer than 15 employees) didn't have to cover maternity care prior to 2014. There's no employer mandate for employers with fewer than 50 employees. But if small groups choose to offer coverage to their employees, the plan will now include maternity care in every state.

Waiting periods cannot exceed 90 days

Once an employee is determined eligible for coverage under an employer-sponsored plan, the waiting period for coverage to begin cannot exceed 90 days (other rules apply in cases where employees are required to work a certain number of hours or receive a particular job classification in order to be determined eligible for coverage).

[Note that this is different from the pre-existing condition waiting periods described above. An employer can still make an eligible employee wait up to 90 days for coverage to begin. But once it begins, there cannot be any additional waiting period before coverage takes effect for pre-existing conditions.]

Kids can remain on parents' plan until age 26

Since 2010, all health plans have been required to allow children to remain on a parent's plan until they turn 26. This applies to employer-sponsored plans as well as individual plans, and it also applies to grandfathered plans. There's no requirement that young adults be students or financially dependent on their parents in order to remain on their health insurance plan.

Preventive care is covered for free

Preventive care is one of the essential health benefits that's covered on all individual and small group plans under the ACA. But it's also required to be covered on large group plans and self-insured plans that use a third-party administrator (grandfathered plans are exempt from the preventive-care mandate). You can find an extensive list of preventative health services that are covered at no cost to the patient under the ACA's preventive-care mandate on the U.S. Centers for Medicare & Medicaid Services' website: HealthCare.gov.

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