Perhaps the biggest news involving health care plan administration for 2012 was the Patient Protection and Affordable Care Act (PPACA) requirement to prepare and distribute a four-page Summary of Benefits and Coverage (SBC). Another issue for 2012 is the requirement to report employee health care plan costs on Form W-2. Finally (for purposes of this bulletin), employers should be anticipating the application of the health insurance plan discrimination rules. These issues have been the subject of delay, partial delay and delay.
Summary of Benefits and Coverage (SBC)
First of all, how does the SBC relate to the summary plan description (SPD)? The SPD is an obligation arising out of ERISA. The SPD regulations specify numerous disclosures. Out of concern for liability for omitted information, many sponsors have loaded the SPD with extensive detail. It is not uncommon to see a health plan “summary” plan description of 100 or more pages. These SPDs are presented in a wide variety of formats and often use inconsistent terminologies and approaches to disclosures. For these and other reasons, PPACA added a requirement for preparation and distribution of SBCs emphasizing brevity and consistent terminology. The requirement to prepare an SPD was not repealed. Plans must continue to prepare and distribute SPDs and must prepare and distribute SBCs when regulations are completed.
As indicated above, an SBC is limited to four pages, although double sided. The SBC must reference a standard “glossary of terms” and advise employees on how they may obtain a copy. This glossary of terms will be prepared by the government agencies and will bring some uniformity to terminology. Specific SBC information requirements include:
- uniform definition of health coverage terms,
- a description of coverage and cost sharing for categories of benefits,
- exceptions, reductions and limitations of coverage and
- many other disclosures.
The SBC must also contain examples of expected costs for treatment of certain common health care needs, including child birth, treatment of breast cancer and diabetes management. If the plan offers multiple options, such as an HMO and a conventional option, an SBC must be provided for each option. Cost of the coverage options must be included. Beginning in 2014, the SBC must also state whether the plan provides “minimum essential coverage.” A model disclosure template prepared by the government agencies is available at www.dol.gov/ebsa/pdf/SBCtemplate.pdf. The uniform glossary is available at www.dol.gov/ebsa/pdf/SBCUniformGlossary.pdf.
The proposed regulations specify the timing of distribution, such as when first available for coverage, inclusion with open enrollment materials, within seven days of a request, and within seven days of marriage or request for special enrollment. Another requirement is that the SBC must be “culturally and linguistically appropriate.” Among other things, this means that it must be provided in a Non-English language for employees of any county where at least 10% of the population is literate only in the same Non-English language. A map identifying those counties throughout the country is available from the DOL.
Severe penalties apply if the SBC is not distributed in a timely manner with the required content.
The distribution due date was scheduled for March 23, 2012. Late last year, the administration announced an indefinite delay of this requirement due to the delay in issuing final regulations. The requirement for a 60-day advance notice of mid-year plan changes was also delayed. Plan sponsors may breathe a sigh of relief. However, we recommend that celebrations be brief and that plan sponsors use this time to better understand what this disclosure rule requires and how they will respond when the obligation becomes effective.
W-2 Reporting of Health Care Plan Costs
Employers must report the cost of health care plans on Form W-2 for 2012 and future years (W-2s distributed in 2013 and later). This applies to employers issuing 250 or more W-2s for 2012 and until changed. The effective date for smaller employers has not been announced. This report is for information only and there are no tax consequences.
Employers must report the cost of a covered health plan. Covered health care plans include insured and self-insured plans. Both employer and employee payments for this coverage is reportable. Reportable coverage does not include contributions to a health savings account (HSA), contributions to a health reimbursement account (HRA), separate coverage for dental and vision benefits, long term care insurance and certain disease-specific policies and certain hospital indemnity and similar policies. Contributions to health care spending accounts from employee payroll deductions (i.e., contributions in excess of employer contributions) are also exempt.
Health Insurance Discrimination Rules
Nongrandfathered health plans must satisfy anti-discrimination rules similar to those applicable to self-insured health care plans. Exemptions for employees who have not satisfied the length of service requirement of the plan or who are part-time apply. The plan must cover 70% of the remaining employees or face severe penalties. Late in 2010, the IRS announced that it would not assess the penalty against any employer for violations of this requirement until after regulations have been published. No regulations have yet been proposed or published on this subject.
PPACA has been challenged in several jurisdictions with mixed results. The Supreme Court has agreed to hear the challenge to the constitutionality of PPACA later in the year. Also, PPACA has been a political football in the presidential primaries leading up to the national elections in November. Significant changes could result, depending on the outcome. Regardless of the Supreme Court and election outcomes, many of the PPACA features are likely to continue or be readopted. We recommend that employers use this time to learn more about how health care plans will change if PPACA remains in substantially its present form.
Please call us at Mika Meyers if you have questions about PPACA or other legal issues of your health care plans.
"Health Care Plan News for 2012 - Delay," 1/23/2012