Affordable Care Act – Update for Employers
On June 28, 2012, after much anticipation and speculation, the U.S. Supreme Court upheld the Affordable Care Act (“ACA”) as constitutional. The main issue in the case was whether Congress had the authority under the U.S. Constitution to enact ACA’s individual mandate. Beginning in 2014, the individual mandate requires most individuals to obtain health care coverage or pay a penalty. While the future of the ACA remains uncertain, with Republicans in Congress pledging to repeal it and the results of the November elections looming, the ACA is a business reality, and at least for the time being companies must identify the requirements of the ACA and implement regulations for calendar year 2012 and beyond. Thus, employers should continue to prepare for ACA changes that become effective in 2012 and 2013. Employers should also keep in mind the ACA reforms that take place in 2014.
Summary of Benefits and Coverage Regulations
Employers sponsoring group health plans now need to focus on ensuring compliance with the summary of benefits and coverage regulations. These require distribution of summaries of benefits and coverage during upcoming open enrollments. The summaries must be distributed no later than the first day of the first open enrollment period beginning on or after September 21, 2012. Employers that are negotiating collective bargaining agreements now must take into account the near- and long-term effects of the health care reform requirements. Employers also must prepare to issue Form W-2s for 2012 that include the cost of group health coverage.
Plans and insurance issuers must provide a Summary of Benefits and Coverage (SBC) to participants and beneficiaries. The SBC is intended to be a concise document – no more than four double-sided pages – providing simple and consistent information about health plan benefits and coverage in plain language. A template for the SBC is available, along with instructions and examples for completing the template and a uniform glossary of terms.
Plans must start providing the SBC for health plans effective Sept. 23, 2012. Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period beginning with the first day of the first open enrollment period that begins on or after Sept. 23, 2012. Thus, many plans will need to include the SBC in their open enrollment packages for 2013.
Summary of Other Key Health Care Reform Provisions Affecting Employers
- Play or Pay. Each employer with 50 or more full-time employees will have to either (a) provide at least a specified minimum level of health coverage that its employees can afford or (b) pay a penalty beginning in 2014.
- Benefit Dollar Limitations. Employer group health plans are prohibited from imposing lifetime or annual limits on benefit amounts, waiting periods in excess of 90 days, and pre-existing condition limitations.
- Tax Treatment. Eliminated are the Code’s tax-free reimbursements for over-the-counter medicines and, beginning next year, the law limits the maximum health care flexible spending account amount to $2,500.
- Retiree Drug Costs. Beginning next year, the employer tax deduction for retiree prescription drug benefit costs for employers receiving a related subsidy is eliminated.
- Non-discrimination. Insured group health plans are barred from discriminating in favor of highly compensated individuals regarding coverage and benefits. (The Internal Revenue Service has not yet issued implementing regulations for this prohibition to become effective.)
- Tax Reporting. Employers must report the annual cost of health coverage on each employee’s W-2, supplement information already reported on annual Form 5500 reports, and pay a per-plan-participant fee to the government for research purposes.
- Automatic Enrollment. Beginning in 2014, employers with more than 200 full-time employees are required to automatically enroll new full-time employees in group health plans.
- Patient Rights. The law already requires plans to provide coverage for children up to age 26, provide specific preventive care benefits on a first-dollar basis, and supplement the claim procedures already required under ERISA.
If you have any questions about employer obligations under the ACA, please contact Matt Stokely or call 937.223.1130.