The Patient Protection and Affordable Care Act (PPACA) was signed into law more than two years ago. Although stakeholders and advocacy groups hotly debated the constitutionality of the law, on June 29, 2012, the U.S. Supreme Court upheld its constitutionality in a 5-4 landmark decision. In its decision, the Court considered two aspects of PPACA: (1) The individual mandate to purchase health insurance (along with the associated penalty for failure to purchase coverage); and (2) the expansion of Medicaid.
In the Court's opinion, it first addressed whether judicial consideration of the individual mandate was precluded by the Anti-Injunction Act until penalties were actually assessed. The Anti-Injunction Act specifies that taxes may only be challenged after they are paid. The Court decided that Congress's use of the term "penalty" in PPACA (as opposed to calling it a "tax") controls for purposes of the Anti-Injunction Act. Therefore, the Court was not precluded from addressing the constitutionality of the individual mandate.
While some expected the Court to address the tax based on Congress's power to regulate interstate commerce, the Court concluded that the individual mandate is constitutional under Congress's power to tax. In its explanation, the Court reasoned that the shared responsibility payment functions as a tax because the amount is relatively modest and the payment is collected by the IRS in the same way it collects taxes. Having decided that the federal government can impose a tax on those who do not purchase health insurance, the Court did not need to address whether the individual mandate was severable from the rest of the law.
Lastly, the Court struck down a portion of the law which permits HHS to condition federal Medicaid funding available to states on implementation of PPACA's Medicaid expansion. Although the Court upheld the expansion of Medicaid, it prohibited the federal government from taking existing Medicaid funds from states electing not to expand Medicaid. Group health plans must actively work to get in compliance with PPACA and its implementing regulations. This edition of Focus summarizes the top priorities for 2012-2013.
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For plan years beginning on or after August 1, 2012, group health plans are required to cover women's preventive services without charging a copayment, coinsurance or deductible. The mandate applies to the following services:
• Well-woman visits
• Gestational diabetes screening
• Human papillomavirus (HPV) DNA testing for woman ages 30 and older
• Sexually transmitted infection counseling
• HIV screening and counseling
• FDA-approved contraception methods and contraceptive counseling (subject to the religious employer exemption)
• Breast-feeding support, supplies and counseling
• Domestic violence screening and counseling
Action Steps:
Group health plans will need to be amended to reflect full coverage of women's preventive services. Summary plan descriptions will also need to be amended to disclose the new scope of coverage.
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Group health plans must provide a Summary of Benefits and Coverage (SBC) to applicants and enrollees that accurately describes the benefits and coverage under the plan. It must be distributed to all applicants, policyholders, and enrollees for each benefit package offered for which the participant is eligible. For plans without open enrollment periods, the SBC must be provided on the first day of the first plan year that begins on or after September 23, 2012.
For plans with open enrollment periods, the SBC must be provided on the first day of the first open enrollment period that begins on or after September 23, 2012. In general, an SBC is required for each group health plan maintained by an employer. However, an SBC is not required for health Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), or any fully-insured dental and vision policies. An SBC is required for a self-insured dental and vision plan unless employees either (i) affirmatively elect coverage under the plan; or (ii) pay an additional premium for the coverage. Additionally, an SBC will be required for Employee Assistance Programs (EAPs) and wellness programs.
Health Reimbursement Arrangements (HRAs) will typically require an SBC, but there is an exemption if the HRA is integrated with the employer's medical plan. For instance, an HRA that reimburses an employee for deductibles under the major medical plan would be deemed to be integrated with the plan. Therefore, a separate SBC would not be required, provided that the SBC for the medical plan includes information regarding the HRA. Alternatively, a separate SBC would be required for a stand-alone HRA that provides for more general reimbursements of qualified medical expenses.
The SBC is also required to be provided in a culturally and linguistically appropriate manner for employees who reside in a county where 10% or more of the population is illiterate only in the same non-English language. A list of counties that meet or exceed the 10% threshold for 2012 is available online at http://www.cciio.cms.gov/resources/factsheets/clas-data.html. For employees residing in these counties, the SBC must include a statement in the relevant non-English language describing how foreign-language assistance may be accessed.
Action Steps:
• Identify each group health plan for which an SBC will be required.
• If the employer has employees residing in a county where 10% or more of the population is illiterate only in the same non-English language, the SBC will need to include the foreign translation assistance message.
• If the employer maintains an HRA, a determination should be made whether the HRA is stand-alone and requires an SBC, or whether the HRA is integrated with the employer's medical plan.
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Effective September 23, 2012, plans may not apply annual dollar limits on essential health benefits greater than $2 million.
Action Steps:
• Amend plans to remove annual limits on essential health benefits that are below $2 million.
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Beginning January 2013 (for 2012 W-2 Forms), employers must report the aggregate cost of applicable employer-sponsored coverage on the employee's Form W-2. In general, all employers providing group health coverage to employees, including government entities, tax-exempt organizations and churches and other religious organizations, are subject to the reporting requirement. Additionally, this reporting requirement will only apply to employers required to file more than 250 W-2s from the preceding calendar year.
Except as indicated below, the cost of all coverage provided under an employer-sponsored group health plan must be reported on the W-2, including the cost for coverage of the employee, a spouse or domestic partner, and any dependents. The cost must be determined and reported on a calendar year basis, regardless of plan year. Amounts contributed to or received under the following are not required to be reported:
• Health Reimbursement Arrangement (HRA)
• Health Flexible Spending Account (FSA)
• Health Savings Account (HSA)
• Archer MSA
The cost of coverage under dental or vision plans does not have to be reported if either: (1) The coverage is fully-insured; or (2) If self-insured, employees decline coverage or pay an additional amount for the coverage.
Action Steps:
• Employers should determine the extent they are subject to the Form W-2 reporting rules.
• Employers should work with their benefits and payroll departments to get the information that needs be included
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PPACA required the establishment of the Patient-Centered Outcomes Research Institute ("PCORI") to perform clinical effectiveness research for use by patients, clinicians, consumers and policy-makers to make informed health decisions. PCORI is to be funded by fees imposed on health plans, including self-funded plans. Some governmental entities are subject to the fee, as well as retiree-only plans. The fee is paid using IRS Form 720, and is due by July 31st of each year.
Initially, the annual fee is payable for the first plan year ending on or after October 1, 2012 and will continue to be imposed annually through plan years ending on or before September 30, 2019. The fee is calculated on the basis of the average number of covered lives under a plan for the applicable plan year. During the first year that the fee is assessed, the fee is $1 multiplied by the average number of covered lives. Thereafter, the fee increases to $2 per the average of covered lives. Self-insured plans may select one of three methods to determine the average number of covered lives:
• Actual Count Method. The average number of lives covered under the plan is determined by calculating the sum of the lives covered for each day of the plan year, and dividing that sum by the number of days in the plan year.
• Snapshot Method. The average number of lives is calculated by adding the total number of lives covered on one day in each quarter, or an equal number of dates for each quarter, and dividing the total by the number of dates on which a count was made.
• Form 5500 Method. For plans providing coverage which is not limited to self-only coverage, the average number of lives is equal to the sum of the number of participants reported for the beginning of the plan year and the number reported for the end of the plan year. If a plan provides only self-only coverage, the average number of covered lives is the sum of the total participants at the beginning and at the end of the plan year (as reported on the Form 5500), divided by two.
The following types of plans are not subject to the fee:
• Health Savings Accounts
• Flexible Spending Accounts
• Fully-insured dental or vision plans
• Self-insured dental and vision plans if employees decline coverage, or pay an additional contribution for the coverage
• Employee Assistance Plans
Action Steps:
• Self-funded plans will need to budget for payment of these fees.
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Beginning January 1, 2013, annual health FSA contributions are capped at $2,500 each year. The cap applies to FSA plans that begin on or after January 1, 2013. If family members are covered under an employee's FSA, the employee will not be permitted to make a higher FSA salary reduction. However, spouses who are each eligible for their own employment-based FSAs will have separate limits and can each make health FSA salary reductions up to the limit (even if they have the same employer and participate in the same health FSA).
Action Steps:
• Cafeteria plan documents must be amended to reflect the $2,500 limit (or lower limit selected by the employer).
• Plan sponsors have until December 31, 2014 to amend their plans to reflect the limit's requirements, so long as the amendment is effective retroactively and the plan operates in compliance with the limit for plan years beginning after December 31, 2012.
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Beginning March 1, 2013, employers must provide employees with information pertaining to the health insurance Exchange in the applicable state. The notice must be provided to current employees by March 31, 2013. Going forward, employers must provide the notice to employees upon hire.
The notice is required to advise employees of the following:
• The existence of a state insurance Exchange, including a description of the manner in which the employee may contact the Exchange to request enrollment assistance
• If the employer's share of the total allowed costs of benefits provided under a plan is less than 60% of such costs, that the employee may be eligible for a premium tax credit that can be used to purchase a qualified health plan through the Exchange
• If the employee purchases a qualified health plan through the Exchange rather than enroll in an employer-sponsored plan, that the employee may lose the benefits of the tax free treatment of the employer-paid coverage under its plan
Action Steps:
• Guidance on this requirement is expected to be issued.
• HHS also intends to produce a model Notice of Exchange
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For past issues of Focus, please click here.
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