Some people like it. Some people hate it. The Supreme Court has now spoken. What does the Supreme Court decision upholding most of the ACA mean for 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in our crystal ball to determine which ACA provisions might stay or be readopted and which provisions, if any, might be repealed.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 making preparations for provisions effective in the near future is the best course of action. 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 insurance company or your third party administrator (TPA) 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 2012 tax year 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 to recite the annual maximum (unless a conforming limit is already in place) and the annual limit can be no greater than $2,500. Additional first dollar preventative and other coverage requirements for women (including contraception) become effective with 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 hires thereafter). This will be interesting in Michigan as the State is unlikely to have established an exchange and we have not seen much progress on the Federal substitute exchange. The tax benefits of the Medicare Part D subsidy program previously available to certain employers providing retiree prescription drug coverage are eliminated. Also, a new level of Medicare taxes applies to high-income earners. An employer must withhold an additional 0.9% on wages that it pays in excess of $200,000 in 2013 and later years.
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. 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. The coverage must satisfy the “minimum essential coverage” requirements. Failure to offer required coverage results in a tax on the employer. There has been much speculation in the press about whether employers will terminate their coverage for all employees and simply pay the tax. This is where employee relations concerns become most acute. However, it points out the importance of learning the requirements, determining the possible tax consequences and evaluating alternative responses. One possible strategy is to continue broad-based, but not universal coverage (selected exclusions). The cost of the taxes on selected omissions and resulting employee relations fallout may be less than the cost of attaining universal coverage in your workforce. The new non-discrimination rules for insured plans have an earlier effective date, but enforcement has been delayed pending issuance of regulations. Finally, 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 new state laws limiting the amounts they may pay for health insurance costs. Government employers must examine and reconcile potential conflicts of the state law limitations with the minimum benefits required by ACA before 2014.
Finally, adoption of high deductible health plan (HDHP) insurance coupled with a health savings account (HSA) is an approach that is compatible with ACA. High deductible health insurance reduces some of the objectionable consequences of the ACA. 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. A carefully drafted and simple set of plan documents, consistent with employer policies, with insurance policies and with the current state of health care reform legislation will provide a good platform from which to address your compliance with ACA and the many other 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 dates (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 Tim Tornga or another attorney from the firm.