Employee Benefits Compliance, Employer Mandate, Exchanges

Health Care Reform After the 2012 Election

After hard-fought campaigns by both candidates, President Barack Obama has been re-elected for a second term in office. Obama’s victory in the election, along with last summer’s Supreme Court decision upholding the health care reform law, cements the Democratic Party’s dedication to the legislation. 

While opponents of the law have called for its repeal, health care reform’s supporters consider the legislation to be the major achievement of Obama’s first term. Obama’s re-election, along with continued Democratic control of the Senate, means that implementation of the law will now continue without additional roadblocks.What Guidance Will We See Soon?

Regulations on a number of important issues remain outstanding. The regulatory agencies responsible for implementation and enforcement of the health care reform law—the Departments of Labor, Treasury and Health and Human Services—began issuing additional guidance once the Supreme Court upheld the law. Additional regulations and other guidance are expected now that the election is over.
Issues that will be addressed in future guidance include:
o  State Insurance Exchanges.  November 16th is the date by which States must tell the Obama administration whether they will implement a state health insurance exchange, a State Partnership exchange (with HHS) or default to a federally-facilitated exchange.  On November 9th HHS extended the deadline to February 15th 2013 for states that want to partner with the federal government, but the November 9th deadlines remains for states to declare if they want to set up state exchanges.
o  Exchange Notices.  By March 1, 2013, employers must give new hires and current employees an Exchange Notice that will tell employees about the upcoming establishment of the exchanges and that employees might be eligible for federal subsidies.  HHS is expected to issue a model notice but has not yet done so.
o  Employer “Pay or Play” Mandate. The agencies have indicated that they will soon issue more guidance for employers to help them determine how to comply with the shared responsibility provisions of the law.  In particular, interim final regulations are expected soon (perhaps even by November 22nd?) on how to determine full-time status of variable hour and seasonal employees.
o  “Non-offering” Employer Penalty.   The ACA imposes a penalty of $2000 per full-time employee (minus the first 30) on employers who do not offer health coverage to all full-time employees and their dependents.  The Treasury Department indicated last year that future regulations would clarify that the penalty would not apply if an employer covered “substantially all” employees, so an employer would not face the stiff penalty if it inadvertently failed to offer coverage to as small percentage of employees.
o  “Un-affordable Coverage” Penalty.  If an employee must pay more than 9.5% of his/her wages (from the employer) for self-only coverage under the employer’s group health plan, the employer will be subject to this penalty if the employee buys coverage in an exchange and receives a subsidy to help pay for it.  Last year the Treasury Department indicated it is considering whether the 9.5% should apply to the cost of family coverage if the employee has a family.
o  Transitional Reinsurance Fee.  Starting in 2014, plan sponsors must pay an annual fee for three years to fund a federal reinsurance program that will partially reimburse health insurers that cover high-claims individuals.  HHS has yet to issue regulations to clarify many unanswered questions, most significantly how much plan sponsors must pay to fund the $25 billion reinsurance program.  Estimates are that the assessment will be $60-$90 per participant annually.
o  Essential Health Benefits and Actuarial Value.   Additional guidance is needed to specify what “essential health benefits” health insurance policies must cover.  For now, the Administration will allow each state to select its benchmark plan based on small-group insurance plans currently available in that state.  Additional guidance is also needed on how to determine the actuarial value of plans offered in and outside the exchanges.
o  Women’s Preventive Care – Contraceptive Coverage. The administration still needs to finalize rules on how certain religious employers can comply with or avoid the requirement to provide insurance coverage for contraceptives.
o  Automatic Enrollment. The Department of Labor is required to issue regulations implementing the rule requiring large employers that offer health coverage to automatically enroll new employees in the health plan (and re-enroll current participants).
o  Nondiscrimination Rules for Fully-insured Plans. Under health care reform, non-grandfathered fully-insured plans will not be able to discriminate in favor of highly-compensated employees with respect to their health benefits.  Similar rules already apply to self-insured plans.  The IRS delayed the effective date of this new rule for additional regulations, which have yet to be issued. What Do Employers Have to Do Next?

With the landscape of employer-provided health care potentially changing over the next few years, employers should consider their future plans related to their role in employee health care. They may have to make some big decisions about whether to continue providing coverage to their employees. The “pay or play” penalties provide some incentive for employers to continue coverage, since they will be at risk for significant penalties if they do not. However, employers may decide that paying the penalty is more cost-effective than continuing to pay the ever-increasing costs of health care for employees and their families.On the other hand, uncertainty among employees about the quality and cost of individual health coverage continues to make employer-provided health coverage an attractive recruiting and retention tool. Because of these advantages, most employers plan to continue offering coverage for now. The additional uncertainty for employers, with compliance obligations hinging on court decisions and the political process, has made many companies hesitant to make any large-scale changes.

Whatever their future decisions may be, employers that will continue to sponsor group health plans for the near future must prepare for upcoming deadlines. Significant health care reform provisions with looming effective dates include:

o  Summary of Benefits and Coverage. Health plans and issuers must provide an SBC to participants and beneficiaries that includes information about health plan benefits and coverage in plain language. The deadline for providing the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period is the first open enrollment period that begins on or after Sept. 23, 2012. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) effective for plan years beginning on or after Sept. 23, 2012.
o  60-Days’ Notice of Plan Changes. A health plan or issuer must provide 60 days’ advance notice of any material modifications to the plan that are not related to renewals of coverage. Notice can be provided in an updated SBC or a separate summary of material modifications. This 60-day notice requirement becomes effective when the SBC requirement goes into effect for a health plan.
o  $2,500 Limit on Health FSA Contributions. The health care law will limit the amount of salary reduction contributions to health flexible spending accounts to $2,500 per year for plan years beginning on or after Jan. 1, 2013.
o   W-2 Reporting. Beginning with the 2012 tax year, employers that are required to issue 250 or more W-2 Forms must report the aggregate cost of employer-sponsored group health coverage on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are issued in January 2013.
o  Preventive Care for Women. Effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must cover specific preventive care services for women without cost-sharing requirements. Calendar year plans must comply effective Jan. 1, 2013.
o  Employee Notice of Exchanges. Effective March 1, 2013, employers must provide a notice to employees regarding the availability of the health care reform insurance exchanges. HHS has indicated that it plans on issuing model exchange notices in the future for employers to use.
o  Additional Medicare Tax for High-wage Workers. In 2013, health care reform increases the hospital insurance tax rate by 0.9 percentage points on wages over $200,000 for an individual ($250,000 for married couples filing jointly). Employers will have to withhold additional amounts once employees earn over $200,000 in a year.
Challenges for Implementation
As we get closer to full implementation of the health care reform law, questions linger about whether the framework is in place for all pieces to be operational by their deadlines. Insufficient staffing of the responsible agencies is one potential issue, along with employer and state government hesitation or inability to implement certain parts of the law. Compliance efforts are likely to pick up now that the election is over. 
The Leavitt  Group will continue to monitor progress of the health care reform law and its implementation and will keep you informed of important developments.