The U.S. Supreme Court announced its long-awaited decision on June 28 upholding key provisions of the Patient Protection and Affordable Care Act (ACA) that impact employers, health care providers, insurance companies and individual taxpayers.
The Court’s decision means that ACA’s implementation will proceed and should serve as a wake-up call to those employers that have deferred action to comply with the act’s requirements in the hope that it might be invalidated.
Certain provisions of ACA will have a profound impact on employer-sponsored group health plans, particularly the “employer shared responsibility” requirement. Beginning in 2014, employers with at least 50 full-time employees must make available affordable coverage to their workers or face exposure tax penalties. In addition, for the first time, fully insured plans will be subject to nondiscrimination requirements. The law also affects waiting periods and, for larger plans, mandates automatic enrollment.
Most likely, the Court’s decision will result in added pressure on regulators such as the Treasury Department, the IRS, and the Departments of Health and Human Services and Labor to accelerate the rule-making process. Practitioners should be aware of state government activity. Some states will begin or continue to implement health care exchanges, although other states may delay. For purposes of long-term planning and negotiations with insurers, employers should consider that beginning in 2017 large employers may use state exchanges.
What has not changed is the tax code’s overall favorable treatment of employer-provided health coverage and the popularity of that benefit among employees. These are strong incentives for employers to continue offering health benefits – at least for the time being.
Although uncertainty over the future of the law lingers due to the 2012 election and possible congressional action, ACA deadlines are approaching and employers need to prepare. Despite the political environment, compliance efforts should resume in earnest or employers risk not being ready for effective dates.
Below is a summary of the major deadlines for employer-sponsored group health plans and significant plan design and administration considerations to help practitioners and their clients.
ACA Deadlines
W-2 Reporting (Deadline 2012 Form W-2)
Include for informational purposes the cost of employer-sponsored health insurance coverage. If no exception applies under interim guidance, employers should begin or continue putting procedures in place to track, calculate, and provide the information required.
Claims & Appeal Processes (Deadline July 1,2012)
Review internal claims and external review processes (if any) to make sure that they comply with current requirements both in form and implementation. For example, external review must be conducted by one of the approved Independent Review Organizations (IROs) with which the plan has contracted. Non Grandfathered self-insured plans could have taken advantage of an enforcement safe harbor that allowed them to contract with as few as two IROs. However, as of July 1, 2012, that pool must increase to at least three IROs for the safe harbor to apply.
Medical Loss Ratio Rebates (Deadline Aug. 1,2012)
Procedures in place to handle any rebates received from the insurer in accordance with the rules for distribution, including the rules requiring ERISA plans to determine the extent to which rebates are plan assets. Rebates need to be apportioned if premiums are paid with both employer and employee contributions.
Preventive Health Services for Women (Deadline Aug. 1, 2012)
Non Grandfathered group health plans provide recommended preventive health services without cost sharing and adjust services covered in accordance with changes to recommended preventive services guidelines.
Summary of Benefits & Coverage (Deadline Sept. 23, 2012)
Self-insured plans and insurance issuers (or the insured plans to which they provide coverage), supply an SBC explanation to participants and beneficiaries in addition to summary plan description. The initial distribution of SBCs was delayed by regulation generally to open enrollment periods beginning or after September 23, 2012, or, for other enrollments, beginning on the first day of the first plan year that begins on or after September 23, 2012. Plans need to be sure that compliance procedures are in place sufficiently in advance of the open enrollment deadline. The SBC rules are particularly demanding and failure to comply can result in significant penalties.
Quality of Care Reporting (Deadline is after guidence is issued)
After agencies develop reporting requirements for non grandfathered plans to disclose information regarding plan or coverage benefits and health care provider reimbursement structures, plans make the annual report available to enrollees during each open enrollment period. If agency guidance is issued soon, plans could need to report during their fall 2012 open enrollment period for 2013.
Nondiscrimination Rules (Deadline is after guidence is issued)
Expect agency guidance regarding the prohibition against non grandfathered insured plans discriminating in favor of highly compensated individuals. Plans will have to comply for “plan years beginning a specified period after issuance” of the guidance.
Annual Limits (Deadline Dec. 31, 2012)
Plans that choose to extend waivers of restricted annual limits, resubmit application information by this date.
Flexible Spending Arrangements (Deadline Jan. 1, 2013)
Cafeteria plans must be amended to provide that employees may elect no more than $2,500 (adjusted for inflation for 2013), in salary reduction contributions to a health FSA.
Retiree Prescription Drug Expenses (Deadline Jan. 1, 2013)
Employers cannot take a deduction for the subsidized portion of expenses.
FICA Tax (Deadline Jan. 1, 2013)
Systems must be modified to provide for increase in HI portion of FICA by 0.9% for employees with wages in excess of $200,000 ($250,000 for a joint return).
Notice of Exchange Option (Deadline Mar. 1, 2013)
In accord with agency guidance to be issued, employers will have to provide notice to employees of the existence of state exchange and options and implications of obtaining health care through an exchange.
Comparative Clinical Effectiveness Research Fees (Deadline July 31, 2013)
First temporary fees imposed on self-insured health plan sponsors (IRC sec 4376) and insurers for insured plans (IRC sec 4375) paid by this date (pursuant to proposed regulations).
Plan Communications with Providers (Deadline Dec. 31, 2013)
By this date, plans must certify and document compliance with HHS rules for electronic transactions between providers and health plans.
Employer Shared Responsibility Excise Tax (Deadline 2014)
Employers with 50 or more full-time employees must provide health insurance that meets affordability and value requirements or pay a penalty of the lesser of $2,000 per employee (minus 30 employees) or $3,000 per exchange certified employee. Employers should make a cost/benefit analysis of their current plan and possible alternatives, but no meaningful decisions should be made until the IRS and HHS issue guidance containing definitions, calculations, and safe harbors.
High Cost Health (“Cadillac”) Plans (Deadline 2018)
Sponsors will have to pay an excise tax calculated based on the excess value of coverage.
Other Requirements
Employers must comply with other health plan-related requirements for which implementing guidance has not yet been issued: (1) Minimum essential coverage notices regarding whether the health coverage offered qualifies as MEC. (2) Automatic enrollment required for employers with more than 200 full-time employees. (3) Restricted annual limits on essential health benefits do not apply beginning in 2014. (4) Cafeteria plans of employers with 100 or fewer employees may offer coverage of full-time employees through an exchange. (5) Preexisting condition exclusions for adults enrollees and other discrimination based on health status not permitted. (6) Wellness program restrictions not permitted. (7) Waiting periods over 90 days not permitted.