Ask the Experts
Question: There has been so much talk about the Affordable Care Act. We realize there may be a few things we’ve missed regarding coverage of our staff. Help!
Jude A. Dainton: Individual open enrollment for the insurance exchanges begins on October 1, 2013. With less than a month to go, insurance companies, government officials and regulators of all stripes are working hard to implement this key phase of the nation’s largest expansion of private health insurance.
At the same time, employers are focused on the rollout of significant changes in the way group health plan benefits are administered and reported — as well as the manner in which employees (and the details of their health coverage) are tracked. Although on July 2 the IRS announced that the employer Shared Responsibility payments (the so-called “Play or Pay” mandates) would not take effect until January 1, 2015, there is still plenty to do in this home stretch before full implementation.
No single checklist can address the detailed requirements for all the various types of employers, but this list of items human resources professionals have been focused on is a good place for you to start. (Note that all effective dates provided assume a non-grandfathered plan operating on a calendar-year plan.)
Catching Up: Some Things Are Already in Effect
There are already a good number of Affordable Care Act employer requirements in effect, including:
- W-2 Reporting. Beginning with the issuance of 2012 W-2s in January 2013, employers who issue 250 or more W-2s were required to report the “aggregate cost” of “applicable employer sponsored coverage” on an employee’s Form W-2. To comply with this requirement, which will continue to apply for current and future W-2 reporting, you will need to:
- Determine the categories and cost of applicable employer-sponsored coverage provided to each employee.
- Calculate the aggregate cost of such coverage for each employee.
- Report that cost on each employee’s Form W-2.
- SBC. All participants and beneficiaries of group health plans must be provided with a Summary of Benefits Coverage (SBC). The SBC provides a consistent format across plans to describe coverage details. The SBC was first required during the open enrollment that preceded the 2013 plan year. If material changes occur to coverage (other than renewal), participants must be provided with 60 days’ advance notice.
- Preventative Care Services for Women. You should have confirmed with your carrier (or amended the plan, if self-insured) to ensure that, beginning January 2013, the plan covers specific preventative care services for women without cost-sharing requirements.
- Health FSA Election Limitation. Employers should have confirmed that, beginning with the 2013 plan year, participants may not elect pre-tax salary contributions exceeding $2,500 to a health flexible spending account through a cafeteria plan.
- Additional Medicare Tax. Effective January 1, 2013, employers are required to withhold an additional 0.9 percent in Medicare tax on wages in excess of $200,000. This requires monitoring wages to switch from the 1.45 percent to the 2.35 percent Medicare tax withholding once earnings exceed the threshold.
- PCORI. The first deadline for filing IRS Form 720, on which a carrier or self-insured plan sponsor reports the amount owed for the Patient-Centered Outcomes Research Trust Fund fee (or PCORI fee) was July 31, 2013. Note that employers should have already paid this fee for Health Reimbursement Accounts (HRAs), unless the HRA is integrated with the employer’s group health plan.
Remaining 2013 Items
If you can safely say you’ve checked off all of those, it’s time to move on to the rest of 2013. Here’s your to-do list for going forward:
- Notices. Provide exchange notices to current employees by October 1, 2013. Notices to new employees must be provided within 14 days of hire. A template notice, which must be customized, is available on the Department of Labor website.
- Updated SBC Form. The template for the required SBC form has been revised and is available on the Department of Labor website. Employers must provide the updated (customized) form to employees during fall open enrollment. Steep penalties apply for willful failure to provide the notice.
- Eliminate Stand-alones. Terminate any stand-alone, non-retiree HRAs that are not integrated into a group medical plan, and which fail to satisfy the ACA prohibitions on annual limits as of January 1, 2014.
- Play or Pay. Employers should continue to fine-tune an assessment of exposure to the so-called Play or Pay penalties, and determine what, if any, changes to make in benefit offerings, employee hours or pay, accordingly.
- Real-World Testing. Notwithstanding the delay of the Play or Pay penalties, employers may want to prepare for 2014 real-world testing of their information tracking and reporting systems, potentially resulting in a smoother transition to full implementation in 2015.
- Employee Counting. Each employer should be finalizing its method for tracking employee-hours worked, if needed, to determine (1) whether it will be treated in 2015 as a “large employer” under the applicable employee counting rules; and (2) if so, which individual employees must be treated, in 2015, as “full-time” (i.e., 30 hours per week) employees. Failure to provide benefits to 30-hour employees may result in employer penalties. For some employers, the safe-harbor employee counting methods (which include a “measurement period” and “stability period”) will be an attractive, if technically complex, way to ensure compliance.
- Outside Help. Employers should consider whether all counting, measurement and reporting requirements can be satisfied in-house, or if engaging the services of a third-party administrator offering Affordable Care Act compliance assistance may be appropriate.
Plan Sponsor Requirements for 2014
- Substantive Coverage Terms. For 2014 group health plans coverage, employers must ensure the insurance carrier agrees (or a self-insured plan is amended to provide) that:
- The plan will offer the required “essential benefits” and “minimum value” as defined under the law.
- The plan will not impose any annual limit on the insurance of “essential health benefits” for 2014 or beyond.
- An eligibility waiting period does not exceed 90 days.
- No pre-existing condition exclusions will be imposed on any covered individual, regardless of age.
- The plan does not discriminate on its face, or in operations, against participants who participate in clinical trials.
- Amended Plan. Group health plan documents, including Summary Plan Descriptions, should be amended to reflect these changes.
- Wellness Programs. Employers that offer a group health insurance premium (or surcharge) based on health standards established under a wellness plan may increase the premium differential from 20 percent to 30 percent in 2014 for those participants who do (or don’t) satisfy the health standard. For tobacco-related incentives only, the premium differential between a person who meets the standard and a person who doesn’t (absent any exceptions) may be increased to 50 percent.
More to Come
The following requirements are expected to take effect at varying times in the future, once additional guidelines are issued:
- Employers who are subject to the Fair Labor Standard Act and have more than 200 employees must automatically enroll new full-time employees in a health plan and satisfy related notice requirements.
- Insured plans must adhere to nondiscrimination rules that remain to be specified.
Jude A. Dainton is Firm Administrator with Higier Allen & Lautin in Addison, Texas. She has been working in law firms for over 20 years. She holds a Bachelor of Business Administration – Finance from the University of Texas at Arlington and has been a member of the Dallas Chapter of ALA since 2005.
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