Affordable Care Act (ACA) – Impact on Governmental Employers
Some people like it. Some people hate it. The Supreme Court has spoken. So what does the Supreme Court decision upholding most of the ACA mean for governmental employers? What do we do now?
Even though the Supreme Court has ruled, political debate will continue. Some employers may want to adopt a “wait and see” approach. After all, it is an election year and we do not know what will happen with the election or after the November election. We do not have enough clarity in our crystal ball to determine which ACA provisions will stay or be readopted and which provisions, if any, will be repealed. But we know that some of the ACA provisions become effective this year or before the next Congress can act. Regardless of election results, many of the ACA provisions will either be continued or adopted in some form in any successor health law.
All employers must comply with the provisions of the ACA that are currently effective. We believe that preparation for provisions effective in the near future is the best course of action and is consistent with maintaining healthy employee relations. This will mean looking ahead at compliance requirements and taking the steps needed to address those requirements when the time comes. Here is a summary of some of the most significant steps.
You and your third party administrator (TPA) or your insurance company have probably implemented the 2011 and earlier steps such as determination of grandfather status, preventative health service coverage, the insurance contract changes and notices regarding pre-existing conditions, coverage of children to age 26 and the lifetime and annual limits on essential health benefits. The compliance steps for 2012 were less noticeable and have probably been implemented already. One big exception is the preparation and distribution of the four-page Summary of Benefits and Coverage (SBC). These must be distributed during open enrollment periods beginning on or after September 23, 2012 and at later initial enrollments for new employees and at the time of special enrollment events.
The requirements for 2013 are more dramatic and some require preparatory action now in order to be ready in 2013. One of these is the new W-2 reporting of the value of health insurance coverage. This reporting was optional for 2011 and becomes mandatory for the tax year 2012 for employers issuing 250 or more W-2 forms. This information must be included on W-2s distributed in January 2013. Another significant change for 2013 is the limitation of health flexible spending accounts to $2,500 for any year. Flexible benefit (section 125 or cafeteria) plans must be amended (unless a conforming amendment is already in place) to recite the annual maximum and the annual limit can be no greater than $2,500. The tax benefits of the Medicare Part D subsidy program previously available to certain employees providing retiree prescription drug coverage are eliminated. Additional first dollar preventative and other requirements for women (including contraception) become effective for the first plan year beginning on or after August 1, 2012, which will be January 1, 2013 or later for most employers. Employers must give employees information about health care exchanges by March 1, 2013 (continuing employees and new employees thereafter). Also, a new level of Medicare taxes apply to high-income earners.
The most significant changes (from the employer viewpoint) occur in 2014. The employer mandate (also known as “pay or play”) will then apply to employers with more than 50 employees. This means that coverage must be offered. The coverage must satisfy the minimum essential coverage requirements. Cost sharing by employees is limited. All employees working 30 or more hours/week must be offered coverage at or before the first day of the month after they complete 90 days of work. Failure to offer required coverage results in a tax on the employer. The new non-discrimination rules for insured plans have an earlier effective date, but enforcement has been delayed pending issuance of regulations. Employers of more than 200 full-time employees who are subject to the FLSA labor law, including governmental employers, must automatically enroll their new employees beginning in 2014. However, automatic enrollment will be delayed unless regulations are issued soon.
Michigan governmental units are also dealing with the PA 152 limitations on health insurance costs (hard cap and percentage cap) and are now implementing the changes to qualify for the EVIP payments in response to PA 63. The minimum employee payment under the PA 152 percentage rule may conflict with the maximum percentage of pay under the ACA in 2014 for some employees. PA 152 offers some flexibility in your response, so that you can avoid this conflict if addressed prior to 2014.
Finally, high deductible health plan (HDHP) insurance coupled with a health savings account (HSA) is an approach that is compatible with ACA and the new state law requirements. If you have not recently reviewed this option, now is a good time.
This is a lot of information to digest. How does an employer evaluate its compliance? We suggest a review of employment policies, health insurance contracts and health care plan documents. Review and/or restatement of health care plan documents is an effective way to become more confident about your compliance with ACA and the many other state and federal requirements applicable to health care plans. This will also demonstrate good faith if challenged about plan operations at a later point. Then study the various requirements and effective date, (particularly the pay or play and discrimination rules) to design a response that is most effective for your organization that you may implement as the requirements become effective.
If you have questions or need assistance in understanding or implementing these new rules, contact another attorney in our Local Government Law Practice Group.