The U.S. Supreme Court's decision on the health care reform law has been subject to a lot of analysis already, but the bottom line is that all of the health care reform provisions that apply to group health plans and insurers that sell coverage to group health plans have been left standing and employers must make sure that their health plans comply. Many of the health care reform requirements are already in effect, and the U.S. Department of Labor includes questions and requests for documents relating to those requirements in its health plan audits. Some employers may have deferred their compliance efforts pending the outcome of the constitutional challenges to health care reform and some may have been overwhelmed by the number of requirements and the amount of work required to ensure compliance. This is a good time for all employers to review the requirements that are already in effect as well as those that will take effect in the next few months.
Some employers may be under the impression that their health plans can take advantage of the grandfathering provisions of the health care reform law in order to delay or avoid compliance requirements. But grandfathered plans are not excepted from complying with all of the health care reform law—only specific provisions—and remain subject to many other provisions. In addition, a plan can lose its grandfathered status in several ways. Any employer relying on the grandfathered plan exceptions should review its plans carefully to make sure that their grandfathered status has not been lost inadvertently. Also, employers face special compliance requirements for their grandfathered plans—for example, they are required to provide special notices to plan participants, maintain records dating back to March 23, 2010 documenting the plan terms and make those records available for examination.
For plans not relying on the grandfathered exception, the following are some of the important requirements that are already in effect or will become effective in the next 12 months.
Health Care Reform Requirements That Are Effective Now
- Reporting of aggregate cost of health coverage on W-2s for calendar year 2012 (see our Updates from November 29, 2011 and January 10, 2012 more information).
- For insured plans, proper handling of any medical loss ratio rebates for 2011 (to be distributed by insurers by August 1, 2012).
- Distribution of Summaries of Benefits and Coverage ("SBCs") at the first annual open enrollment that begins on or after September 23, 2012, including notices of availability of non-English language services and documents depending on the county to which the SBC is sent.
- Coverage of employees' adult children up to age 26 (for plans that allow coverage of dependents) (limited exception for grandfathered plans until January 1, 2014).
- Prohibition on preexisting condition exclusions for children under 19.
- First-dollar coverage of preventive care services (grandfathered plans excepted).
- Patient protection provisions (e.g., choice of primary care provider, coverage of out-of-network emergency services) (grandfathered plans excepted).
- Prohibition on health FSA reimbursements for over-the-counter drugs and medicines without a prescription, except insulin.
- Prohibition on lifetime limits and restrictions on annual limits for essential health benefits (grandfathered plans excepted from some restrictions).
- Enhanced requirements for claims and appeals, including the addition of external review, the treatment of eligibility decisions as subject to claims and appeals and external review in many instances, and inclusion of notices of availability of non-English language services and documents depending on the county to which the claim or appeal information is sent (grandfathered plans excepted).
- Strict limits on retroactive cancellation of coverage (rescission), except for nonpayment of premiums.
Health Care Reform Requirements That Will Take Effect in the Next 12 Months
- Health FSA employee salary-reduction limit of $2,500 for plan years beginning on or after January 1, 2013 (see our Update from June 6, 2012 for more information).
- Patient-Centered Outcomes Research Trust Fund fees, calculated on average number of covered lives, generally due July 31, 2013.
- Additional Medicare tax of 0.9% on individual wages or salaries over $200,000 beginning with calendar year 2013 (employer required to withhold; no employer matching payment).
- Exchange Notices to be distributed by March 1, 2013.
Shared Responsibility Requirements (a.k.a. Pay-or-Play)
Large employers should also be planning for the shared responsibility requirements that will take effect in 2014. These requirements include the pay-or-play penalties that will be imposed on employers that employed an average of at least 50 full-time employees (including full-time equivalents) on business days during the prior calendar year. In a nutshell, a $2,000 to $3,000 per employee per year penalty will be imposed if the employer does not offer health coverage to its employees or offers health coverage that does not cover at least 60% of the cost of benefits or costs more than 9.5% of the employee's household income. The details of the shared responsibility requirements are still being developed and promise to be complex, but large employers will almost certainly need to work closely with their advisors and consultants to design benefit structures that will meet their recruiting and retention goals, while still allowing them to manage costs and avoid penalties to the maximum extent possible.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.