HR That Works Blog

On February 6, 2012, the Department of Health and Human Services extended the effective date of yet another mandate of the Patient Protection and Affordable Care Act. Effective September 23, 2012 (rather than March 23, 2012, as previously announced), employers will be required to provide employees and new hires with certain disclosures about the healthcare benefit plans offered by the employer. Employers will be required to provide a “Summary of Benefits and Coverage” (“SBC”) to employees summarizing and explaining the benefits and coverage provided by the company’s group healthcare plan (a sort of mini summary plan description). Employers also will have to supply a glossary of commonly used health plan terms. These notices will have to be provided to employees who enroll in the employer’s healthcare on or after September 23, 2012 and annually during each open enrollment period thereafter. The format and content of the SBC also must conform to several specific requirements. For example, the SBC cannot be more than four pages long and the print not less than 12-point font. It must be written in a “culturally and linguistically appropriate manner” and use language that is easily understandable by the average plan participant. The content of the SBC must include a summary description of the coverage that is available under the plan, using uniform definitions of standard terms. It must include explanations of the cost sharing features (e.g., deductibles, coinsurance, and co-payments) and provide examples of “common benefits scenarios” (e.g., pregnancy, serious and catastrophic medical conditions, etc.). The Department of Labor has online resources for plan sponsors to comply with the new SBC requirements that can be found at Model SBC and a Glossary of Health Coverage and Medical Terms.

Article courtesy of Worklaw Network firm Shawe Rosenthal.

There is a great resource for anyone interested in knowing more about the health care insurance challenge. The Health Policy Center of the Urban Institute is a non-partisan thinktank with great information. Start at http://www.urban.org/health_policy/

For example, their excellent article on Why Employers Will Continue to Offer Health Care, which can be found at the link above, forecasts that the Affordable Care Act (ACA) will leave employer-sponsored coverage largely intact; in contrast, some economists and benefit consultants argue that the ACA encourages employers to drop coverage thereby making both their workers and their firms better off (a “win–win” situation). This brief’s analysis shows that no such “win–win” situation exists and that employer-sponsored insurance will remain most workers’ primary source of coverage. Analysis of three issues-the terms of the ACA, worker characteristics, and the fundamental economics of competitive markets-supports their conclusion.

Looks like the new benefits information form has been drafted in rough. Take a look at it here http://www.healthcare.gov/news/factsheets/labels08172011b.pdf. Once the comment period expires and any adjustments are made it will be finalized and put into place beginning 2012. Here’s what I believe: benefit providers and their client companies should already be providing this level of information to employees…at the minimum. It’s a great outline to follow for training on benefits. Maybe even provide a quiz afterwards to reinforce the learning and make sure they “get” what you want them to get.

Fact is, employers need to get a bang for the benefit buck. The best way to do that is with constant education around those benefits.

Congress gave business a break and repealed a portion of the health care reform law last week, when the Senate approved legislation rescinding a controversial tax-reporting requirement. The measure, signed by President Barack Obama on April 14th, repeals a provision that would have required all businesses to file 1099 tax forms for transactions of $600 or more. White House released a statement announcing the Obama had signed the measure, which it said “repeals the expansion in the Affordable Care Act of requirements for businesses to report information to the Internal Revenue Service on payments for goods of $600 or more annually to other businesses and increases the amount of overpayment subject to repayment of premium assistance tax credits for health insurance coverage purchases through the Exchanges established under the Affordable Care Act.”

The Department of Labor’s Employee Benefits Security Administration has updated its Affordable Care Act web page with Affordable Care Act Implementation FAQs Part VI, available at http://www.dol.gov/ebsa/faqs/faq-aca6.html.

The Department of Health has issued a new fact sheet on Grandfathered Health Plans: http://www.hhs.gov/ociio/regulations/grandfather/factsheet.html.

The Affordable Care Act requires all non-grandfathered group health plans to implement internal claims and appeals processes beginning with the first day of the first plan year occurring on or after September 23, 2010.  The agencies have now released model notices for the plans to provide participants with (1) notice of an adverse benefit determination, (2) notice of a final internal adverse benefit determination, and (3) notice of a final external review decision.  To download copies of the notices, use the following links:

Notice 1: http://www.dol.gov/ebsa/IABDModelNotice1.doc
Notice 2  http://www.dol.gov/ebsa/IABDModelNotice2.doc
Notice 3: http://www.dol.gov/ebsa/IABDModelNotice3.doc

Also, IRS published a Notice (2010-63, 2010-41 IRB, 9/20/2010) on September 20, 2010, explaining its interpretation of the Affordable Care Act’s extension of Section 105(h) non-discrimination testing to fully insured group health plans.  IRS is requesting public comments for the forthcoming IRS guidance on the new rules.

As we have discussed in prior Employment Law Advisories, the Affordable Care Act extends to non-grandfathered, fully-insured group health plans, the long-standing Section 105(h)  non-discrimination requirements previously imposed only on  self-insured medical expense reimbursement plans.  (Medical expense reimbursement plans under Section 105(h) are employer sponsored, self-funded plans that reimburse a participant or beneficiary for an eligible medical expense not otherwise covered by a policy of health insurance.) 

Self-insured medical expense reimbursement plans have been subject to Section 105(h) since the 1970s.  Under Section 105(h) self-insured medical expense reimbursement plans have been barred from discriminating in favor of highly-compensated individuals as it relates to plan eligibility and total benefits delivered.  If a plan is found to be discriminatory under Section 105(h), then any excess benefit delivered to a highly compensated individual must be included in that individual’s gross income, subject to tax.

In Monday’s Notice, IRS explained that it is the intent of the Affordable Care Act to extend some, but not all of the 105(h) non-discrimination rules to fully-insured group health plans.  IRS said it interprets the Affordable Care Act to use the same non-discrimination testing and definition of “highly compensated individual” as Section 105(h).  However, under the Affordable Care Act, if a fully-insured group health plan is found to discriminate in favor of highly compensated individuals, the result of the excess benefit is not treated as taxable income to the highly compensated individual.  Instead, a fully-insured group health plan failing to comply with Section 105(h) is subject to a civil action to compel it to provide non-discriminatory benefits, and to an excise tax of $100 per day per individual discriminated against for each day the plan does not comply with Section 105(h), or a civil money  penalty of $100 per day per individual discriminated against.

To summarize then:  (1) A self-insured medical expense reimbursement plan that fails to comply with Section 105(h) results, under long-standing rules, in the loss of a tax-free benefit to the highly compensated individual, but (2) a fully-insured group health plan that fails to comply is subject to a civil action to compel the plan to provide non-discriminatory benefits, and the plan or plan sponsor is subject to an excise tax or civil money penalty of $100 per day per individual discriminated against.

Again, the Affordable Care Act’s extension of Section 105(h) non-discrimination testing to fully-insured group health plans does not apply to grandfathered group health plans.  But the pre-existing Section 105(h) non-discrimination testing rules continue to apply to self-insured medical expense reimbursement plans regardless of whether they are grandfathered plans.

IRS is considering issuing guidance on the extension of Section 105(h) testing and has requested public comments be received by IRS no later than November 14, 2010.  To send IRS a comment:

(1) E-mail to Notice.Comments@irscounsel.treas.gov and include “Notice 2010-63″ in the subject line of your e-mail; or

(2)  Snail mail to CC:PA:LPD:PR (Notice 2010-63), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Article courtesy of Lehr Middlebrooks Vreeland (www.lehrmiddlebrooks.com).

The Department of Labor’s Employee Benefits Security Administration has posted the following related to the Affordable Care Act (ACA):

• FAQs on ACA Implementation, available at  http://www.dol.gov/ebsa/faqs/faq-aca.html
• Interim Procedures for Internal Claims and Appeals (Technical Release 2010-02), available at  http://www.dol.gov/ebsa/newsroom/tr10-02.html
• Revised Model Notice of Adverse Benefit Determination, available at  http://www.dol.gov/ebsa/IABDModelNotice2.doc
• ACA Compliance Assistance Webcast Series Archive:
  • Part I – http://event.on24.com/r.htm?e=238925&s=1&k=B82F56FA1A2599FC703EF7B0D7E68EAF
  • Part II – http://event.on24.com/r.htm?e=238931&s=1&k=0405A0AFD955D973EE2FA8F900305128
• Public Comments on the Interim Final Rule on Dependent Coverage of Children to Age 26, available at http://www.dol.gov/ebsa/regs/cmt-1210-AB41.html
• Public Comments on the Interim Final Rule on Grandfathered Health Plans, available at http://www.dol.gov/ebsa/regs/cmt-1210-AB42.html

The US Department of Health and Human Services has a web site designed to help employers and employees better understand and manage the ACA: http://www.healthcare.gov/center/index.html. As part of this effort a task force has identified many “wellness” options insurers should consider that won’t require co-pay by employees. It’s a good checklist in general for any wellness program: http://www.healthcare.gov/center/regulations/prevention/taskforce.html. Employer information can be found at http://www.healthcare.gov/foryou/employers/index.html.

Many of the most aggressive aspects of the Health Care Reform Act don’t kick in until 2014. What follows are some of the most important aspects to consider until then.

1. Starting in September 2010 all existing health insurance plans (unless grandfathered) must:
   • Prohibit lifetimes limits
   • Prohibit rescissions
   • Restrict annual limits
   • Include limitations on excessive waiting periods
   • Offer a choice of providers
   • Include a requirement to provide coverage for non-dependent children up to age 26; before 2014, this requirement is limited to non-dependent children who do not have an employer offer of coverage.
   • Plans must pay “first dollar” coverage on all preventative measures and not require cost savings.
2. Employers must provide “reasonable break time” and a private, non-bathroom place to express breast milk during the workday, up until the child’s first birthday. Note: Determine if your current set up will satisfy the rules. If you have less than 50 employees and the accommodation will cause an undue hardship—document it!
3. Small employers (less than 25 employees, averaging less than $50,000 per employee) may be eligible for tax credits.
4. In 2010, small businesses (those with 25 or fewer employees) may be eligible for a tax credit up to 35 percent of employer health insurance costs. The actual amount varies based on employer size and employees’ average income.
5. Required W-2 Reporting – Beginning in 2011, employers will be required to report the value of employees’ health benefits on W-2 forms.
6. 2011 – Requires individual and small group market insurance plans to spend 80% of premium dollars on medical services. Large group plans will have to spend at least 85 percent.
7. 2011 – Employers can apply to receive reimbursement for benefits provided to early retirees age 55-64. $5 billion has been allocated to the program, and it is first-come, first-served.
8. 2011 – No pre-existing condition exclusion for children under 19 (applicable to all enrollees in 2014) is permitted. This is applicable to insured and self-insured plans and grandfathered plans.
9. 2011– No reimbursement of over-the-counter drugs unless prescribed.
10.   2011 – Companies with more than 50 employees must report:
    • Whether they offer their full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan.
    • Waiting periods.
    • Lowest cost options in the plan.
    • Employer’s share of each option.
    • Number and names of full-time employees receiving coverage.
11.    As of January 1, 2011, employers with calendar plan years starting six months after enactment will, among other requirements, be prohibited from using:
    • Lifetime maximums.
    • Restrictive annual maxis.
    • A bar on the participation of adult children if the children are younger than 26 (with a corresponding tax exclusion for adult children).
    • Pre-existing conditions exclusions for children under 19 years old.
    • Discriminatory eligibility or benefit provisions in insured group health plans (although this does not apply to grandfathered plans).
12.    In 2012, employers must disclose the cost of the benefits they provided in 2011 on the annual W-2 form.
13.    In 2012, covered employers will be required to submit reports on the quality of care in their health plans to the HHS, although this does not apply to grandfathered plans. Plan administrators will be required to provide plan participants with a uniform summary of benefits (based on standards developed by HHS) for all plans by March 23, 2012.
14.    2013 – Caps on the amount that can be directed to flexible spending account (FSAs) will kick in as of     January 1, 2013. FSAs will be capped at $2,500 per employee. The $2,500 limit will be indexed for inflation for years after 2013. Medicare taxes increase as of January 1, 2013. Costs for retiree drug expenses for which subsidies are received cease to be deductible for the plan sponsor and also become taxable on that date.
15.    In 2013, by March 1, employers must notify employees about:
    • State health insurance exchanges.
    • If the employer’s plan meets minimum coverage requirements.
    • Information about subsidies available for exchange based on coverage.

Again, this is geared to giving you a head start. Chances are, your broker and insurance company will be well versed in assisting with these legal requirements.