Legally Speaking: Health Care
It can be somewhat difficult to keep
abreast of the developments regarding
the Affordable Care Act (ACA). Following
is some additional information in
simple outline form to assist you as
you prepare for these new regulations.
Individual Mandate
Postponed
The individual mandate originally
required legal residents to obtain
healthcare insurance beginning in 2014
or face a tax penalty. The tax escalates
from
$95 per person in 2014 to $695 per
person in 2016. But on December 19,
2013, President Obama changed the rules
for people whose health plans were
canceled;
the compliance obligation in 2014 is
now vacated. This means that individuals
who lost their insurance plans do not
have to get coverage and do not have to
pay any penalty. They are also
eligible to buy what is known as
“catastrophic insurance.”
Employer Mandate Delayed
Until 2015
One of the biggest news items in
healthcare reform is that the employer
mandate, or
“play-or-pay”
rules, has been delayed a year. The
employer
mandate requires large employers
(i.e., those with at least 50 employees)
to offer full-time employees (i.e.,
those working at least 30 hours per
week)
quality, affordable coverage or pay
a penalty.
Another uncertainty is exactly when
the rules will kick in for employers
that sponsor non-calendar year group
health plans. For example, assume the
employer sponsors a group health
plan on a July 1 through June 30 plan
year. It is unclear whether the rules
for this employer become effective
January 1,
2015 or July 1, 2015.
For more information, see Tower
Watson’s “Employer
Play-or-Pay Mandate Penalties
and
Certain
Employer Reporting Requirements Delayed
Until
2015.”
Electronic Small Business
Health Options Program (SHOP)
Application Delayed a Year
One of the centerpieces of health-care reform is the health-care
exchange or
marketplace. This is where
individuals and small employers (i.e.,
those with fewer than 50 employees) can
go to buy health insurance. The
government envisioned
that the exchanges or marketplace would
be
automated and that individuals and small
businesses could enroll for coverage
electronically. However, that has not
been the
case. In fact, the government announced
that the
electronic enrollment system for
small employers will not be operational
until November 2014. More information is
available in the following article:
“U.S. Delays Online Health
Insurance Enrollment for Small
Businesses” by David Morgan,
Reuters.
www.reuters.com/a
rticle/2013/11/27/us-usa-healthcare-
shop-idUSBRE9AQ12I20131127
There has been a series of
difficulties and issues with the health-care exchange rollout, but it is widely
believed that these issues will be fixed
and the
program will improve over time.
Small Employer Tax Credit
One of the benefits of health-care
reform is a tax credit available to
certain small employers that offer group
health coverage to their employees. In
an
effort to encourage certain small
employers (i.e., those with fewer than
25 employees) to offer their employees
health coverage, the government is
providing a tax credit to help
employers pay for the cost of the
coverage.
The tax credit can be up to 50% of
the amount the employer pays in
premiums, which can provide significant
savings. You can claim the credit by
completing
IRS Form 8941. Ask your tax
professional if you qualify for this
credit.
You can also get more information
from the Internal Revenue
Service’s (IRS’)
website—see “Small Business
Health Care Tax Credit for
Small Employers—What You Need
to Know about the Small Business Health
Care Tax Credit.”
www.irs.gov/uac/Small-
Business-Health-Care-Tax-Credit-for-
Small-Employers
Start Preparing for New
Reporting Requirements
Although the employer mandate has
been postponed, employers need to
prepare for a host of new reporting
requirements. In addition to the
employer mandate, healthcare reform
imposes a penalty on most individuals
who do not have health coverage. The
government needs employers to provide
certain information to
implement the penalty. Therefore,
employers need to start gathering that
data now.
There are 2 sets of reporting
requirements: 1 set of rules applies to
all employers, and the other set only
applies to larger employers. The rules
are
fairly complex. If you use an
outside payroll service, check with them
to see if they can help gather the
information needed to comply with the
rules.
You can read details in the
following resources:
• Buck Consultants’
“IRS Holds Hearings on Employer
Reporting Requirements under Health Care
Reform”
• Alston & Bird
LLP’s “Employee Benefits
& Executive Compensation
Advisory”
Year-End Notices
With 2013 having come to a close, it
is a good time to ensure that all the
required notices have been distributed.
The following is a list of those
year-end notices.
• Children’s Health
Insurance Program Reauthorization Act• HIPAA Notice of Privacy
Practices• Medicare Part D Notice of
Creditable or Non-Creditable Coverage• Notice Regarding
Grandfathered Plan Status• Summary of Benefits and
Coverage• Women’s Health and
Cancer Rights Act
Many of the notices are distributed
by the insurance company—if you
maintain a fully insured plan—or
by the third-party administrator (TPA)
if you are self-funded. In either case,
it is prudent to make sure that the
notices were distributed. For details,
see Miller Johnson’s “Annual
Notice Requirements for Employer
Group Health Plans for 2014.”
www.millerjohns
on.com/pubs/xprPubDetail.aspx?
xpST=PubDetail&pub=2077
Helpful Checklist
There are so many requirements
associated with sponsoring employee
benefit plans that it can be easy to
miss or forget something. A
comprehensive checklist
of all the requirements associated
with offering both retirement and
welfare benefit plans can be found on
Sibson Consulting’s website. This
material
was prepared by one of the largest
consulting houses in the country and
provides a good overview.
www.sibson.com/publications-
and-resources/rd-calendar/
As a practical matter, you should
look to your agent, insurance company,
or TPA to help in your compliance
efforts.
Medicare Part D Creditable
Coverage Notices Due
Medicare Part D is the prescription
drug benefit under Medicare. The
Medicare Part D program was established
under President George W. Bush to help
seniors
pay for prescription drugs under
Medicare. The rules impose a penalty for
those who are eligible for the program
but do not enroll UNLESS the person is
covered under a plan that already
provides prescription drug benefits.
From the employer’s prospective,
there are 2 notice requirements: 1
notice is
distributed to the employees, the
other notice is submitted to the
government electronically. The notice to
government is due within 60 days after
the
close of the plan year. This means
the information had to be submitted to
the government by March 1, 2014 if you
maintain your group health plan on a
calendar-year basis. Hub
International provides some useful
information on these notices.
www.connects.hubinternational.com
/employee-benefits/medicare-part-d-
reminder-cms-reporting-duty/
Increased Medicare
Withholdings
One of the ways the government is
paying for healthcare reform is through
increased Medicare taxes on certain high
earners. The increased tax started in
2013, but the IRS issued some more
guidance recently.
This is a payroll function, but you
should check to make sure your payroll
department is up to speed on the rules.
For more information, see McDermott Will
& Emory’s “Employer
Obligations for Additional Medicare
Tax.”
www.mwe.com/Employer-
Obligations-for-Additional-Medicare-Tax-
12-09-2013
Health Flexible Spending
Account (FSA) “Use it or Lose
it” Rule Modified
Health FSAs have been around for
decades, and the “use it or lose
it” rule has been part of the
health FSAs from the beginning.
Basically, the
rule stipulates that if there is any
money left over in the FSA after the
close of the year, the money has to be
forfeited. Several years ago, the IRS
modified the rules to give
participants a 2½-month grace
period. This allowed people to incur
claims up to 2½ months after the
close of the plan
year to use the money. Healthcare
reform limited the amount an employee
can contribute to his or her health FSA
on a pre-tax basis to $2,500 per year.
The
IRS has gone a step further, and
participants can now carry over $500
from 1 year to the next.
It is up to the employer whether
they want to amend the plan to allow for
this limited carry over. The decision is
not as simple as it may seem. For
example, the employer cannot have
both a 2½-month grace period and
the carry over; they must choose 1 of
the options. Note that there is no limit
on
the amount that can be used during
the 2½-month grace period if the
employer adopts this option. On the
other hand, the maximum carry over is
limited
to $500. For more information on the
pros and cons of adopting the carry over
feature, see the following articles:
• “Implementing the
Health FSA Carryover: Tips and
Traps” by Christine P.
Roberts
www.eforerisa.wordpress.com/2013/
11/22/implementing-the-health-fsa-
carryover-tips-and-traps
• “Use It or Lose
It: New IRS Guidance Permits Carryover
for Health FSAs” by Heather
B. Abrigo and Dawn E. Sellstrom
Government Revises
Children’s Health Insurance
Program Reauthorization Act of 2009
(CHIPRA) Notices
Employers are required to distribute
a notice each year telling people about
the option certain states offer to help
pay the premiums for a child’s
coverage under the employer’s
group health plan. The government has
just updated that notice. Technically
speaking, employers only have to hand
out
the notice to those people who live
in states that have adopted this option.
Ohio, for example, does not currently
participate in the program, but the
conservative approach is for
employers to include the notice in the
annual enrollment materials. The current
notice will expire in 2016. Marsh &
McLennan Agency’s provides a
useful summary.
www
.rjfagencies.com/Blog/UpdatedCHIPNoticef
orUseUntil2016.aspx
Strategies for Offering
Employee Benefits After ACA
Colonial Life’s white paper
“Beyond Health Insurance: Creating
a competitive benefits program in the
health care reform world” provides
general information about offering
various employee benefits.
www.coloniallife.com/Newsroom/~/media/ac
robat/newsroom/white%20papers/ns-
13284.ashx
While this guide was written by a
carrier who certainly has a vested
interest in the topic, it does outline
some useful things to consider when
developing
a total benefit package for
employees.
For further information on health-care compliance, contact health care or
legal experts. Keep in mind that by time
of publication, some of this
article’s information already
may have changed, due to
Washington’s rapid developments.
SIDEBAR
Health
Insurance Mandates Delayed for Medium
and Large Companies
On February 10, the Obama
Administration announced that employers
with 50 to 99 workers would be given an
extension of 2 years—until
2016—before they are required
to provide health insurance to most of
their full-time workers. After this
delay, employers with 50 to 99 workers
risk federal penalties if they
fail to offer health insurance to
the majority of their full-time workers.
Larger companies with 100 workers or
more are also getting a reprieve, and
they
can avoid a fine by offering
insurance to 70% of their full-time
workers in 2015, and will not be
required to offer health care to 95% of
their workers
until 2016. The administration is
offering this extra time to ease the
transition for companies who have not
offered health insurance in the past.