Benefits Briefing: Health Care Reform - What Is Going Away?
The tide of regulations interpreting the 2010 Patient Protection and Affordable Care Act (PPACA) began to ebb in 2011, and portions of the law have even been repealed or put on hold. Nonetheless, health plan sponsors will still face new compliance burdens in 2012. This article briefly addresses these aspects of the PPACA.
Legal Challenges to Individual Mandate
Foremost on the mind of many plan sponsors is the constitutionality of the PPACA’s “individual mandate.” Starting in 2014, this would require that virtually all U. S. citizens either have health insurance or pay a monetary penalty. Several lower federal courts have examined this issue during the past year, with varying outcomes. On November 14, the United States Supreme Court agreed to review three lower court decisions addressing this and other PPACA-related questions – scheduling an extraordinary 5 ½ hours of oral arguments. Those arguments will likely take place in March, with a decision possible by the end of the Court’s term in June.
If the Supreme Court declares the individual mandate unconstitutional, Republicans could gain some momentum toward repealing the entire PPACA. On the other hand, Democrats believe the remainder of the law would still be viable. They also see a silver lining; if the least popular provision of the PPACA is repealed, what remains may become stronger and more popular with the public. Nevertheless, if the individual mandate – which would require millions of young, healthy people to buy coverage – is struck down, but the rules compelling insurers to cover sick people remain intact, the cost of coverage could skyrocket. Plan sponsors will surely be anxious to see how this situation unfolds.
Repeal of Form 1099 Reporting Requirement
As predicted in our February 2011 article, Congress and the president eventually agreed on legislation repealing the PPACA’s expanded Form 1099 reporting requirements. Those requirements were described in our April 2011 article, along with a summary of the changes that were made to the PPACA as a way of offsetting the cost of this repeal.
Repeal of Free-Choice Voucher Requirement
Somewhat more surprisingly, Congress and the president also agreed to repeal the PPACA provision that would have required employers to issue “free-choice vouchers.” The coalition backing that repeal included both large employers and unions. The “adverse selection” concerns underlying this repeal were outlined in a second April 2011 article.
Shelving of CLASS Act
Most recently, in October, the Obama Administration tabled the Community Living Assistance Services and Supports program (CLASS Act), after determining that this long-term care insurance program is not financially sustainable. This national, government-run program was designed to allow certain individuals the option of buying insurance for benefits that would largely supplement, but not replace, existing public programs or insurance. The president opposes efforts to permanently repeal the program, however, and he may veto any attempt to do so.
Uniform Summary of Benefits and Coverage
The PPACA will require that each employer health plan provide a four-page summary of the plan’s benefits to all individuals who are eligible for coverage. This requirement was scheduled to take effect on March 23, 2012 (two years after the PPACA’s enactment).
The agencies charged with implementing the PPACA proposed regulations on this topic in August, along with templates of proposed formats under which a plan may furnish this new “summary of benefits and coverage” (SBC). See our August 2011 article for more details. In a recent FAQ, the agencies repeated their intention to issue final regulations as quickly as possible. The agencies also noted, however, that plans and insurers need not issue SBCs until those final regulations are issued. Moreover, those regulations will give plans and insurers “sufficient time to comply.” It therefore seems highly unlikely that SBCs will be required before 2013.
Women’s Preventive Services
The PPACA also requires that group health plans (other than plans that are “grandfathered”) cover a list of “preventive health services.” In August, the agencies charged with administering the PPACA issued additional rules describing women’s preventive services that must be covered. Like the services listed in earlier agency guidance, these women’s preventive services must be covered on a first-dollar basis, and with no cost-sharing requirement.
Our August 2011 article briefly summarized the new rules. Generally speaking, the new services must be covered during plan years beginning on or after August 1, 2012. Thus, although calendar-year plans need not cover these services until January 1, 2013, the requirement will take effect during 2012 for plans with plan years beginning during the last five months of the calendar year.
Form W-2 Reporting of Health Coverage
As a result of the PPACA, employees’ Forms W-2 must provide useful and comparable consumer information on the cost of their employer-sponsored health coverage. On March 29, 2011, the IRS issued Notice 2011-28, providing interim guidance on this new reporting requirement.
As we discussed in our October 2010 article, this W-2 reporting is optional for 2011, but required for the 2012 Forms W-2 (to be given to employees in January of 2013). As we also noted, such reporting will not affect the tax treatment of employer-sponsored coverage. See our April 2011 article for more information on this topic.
Clearly, plan sponsors have much to do to prepare for this new reporting requirement. At a minimum, they will want to make sure they have systems in place to track this additional information. Sponsors may also want to prepare a special communication to be provided with their employees’ 2012 Forms W-2. This would not only explain the new tax-reporting number, but also emphasize that the reporting is mandated by the PPACA for informational purposes only, and that it will not affect the employees’ tax withholding or liability.
Nondiscrimination Requirements for Insured Health Plans
As we reported in our December 2010 article, the Internal Revenue Service announced (in Notice 2011-1) that insured group health plans will not be required to comply with the PPACA’s income-based nondiscrimination requirements until sometime after the IRS issues regulatory guidance on those requirements. That guidance has yet to be issued. Therefore, sponsors of fully insured plans continue to enjoy a temporary reprieve from these nondiscrimination requirements – and the onerous penalties associated with noncompliance.
Absent a statutory repeal of the PPACA provision mandating that insured plans comply with these nondiscrimination rules, however, non-grandfathered insured plans will eventually be subject to nondiscrimination requirements that are similar to the “nondiscriminatory eligibility” and “nondiscriminatory benefits” tests currently applicable to self-funded plans under Code Section 105(h). Employers sponsoring fully insured plans should therefore consider the steps they would need to take to comply with these requirements.
Chadron J. Patton, Associate
Spencer Fane Britt & Browne LLP
via United Benefit Advisors