Benefits in Brief, a website for our Employee Benefits Practice Group at Spencer Fane, recently published a newsletter describing the significant aspects of the Health Reform Bill that employers need to consider and respond to now.
Please enjoy the introductory article by Kenneth A. Mason, leader of the Employee Benefits Practice Group.
Health Care Reform: The Near Term
Kenneth A. Mason
Congressional passage of comprehensive health care reform legislation means that employers and other health plan sponsors can no longer take a wait-and-see approach to this subject. Like it or not, change is coming. And while many key provisions do not take effect until 2014, a surprising number of changes will apply to employer-based health coverage well before then. We are therefore devoting this entire issue of our quarterly newsletter to a discussion of several significant short-term changes.
When the Affordable Care Act becomes fully effective in 2014, a number of related provisions are designed to reduce the number of Americans without health coverage. These include an “individual mandate” (requiring that all legal residents have some type of health coverage — or pay a tax penalty for failing to do so), the establishment of statewide clearinghouses (known as “exchanges”) as a way of connecting individuals and employers with health insurance policies, tax subsidies designed to assist individuals in obtaining health coverage through the exchanges, and penalties on larger employers (those with more than 50 full-time employees) that fail to offer their employees “affordable” health coverage.
But much will be happening in the next 3½ years. President Obama has directed the agencies responsible for administering the Act’s provisions (the Department of Health and Human Services [“HHS”], the Department of Labor [“DOL”], and the Internal Revenue Services [“IRS”]) to give top priority to issuing necessary guidance. Those agencies have taken that directive to heart, having already started to issue substantive guidance. We expect to see more such guidance throughout the remainder of 2010.
Below are links to additional articles about the Affordable Care Act’s effects on employee benefits. You can find all of these articles in the Employee Benefits Practice Group’s newsletter.
Short-Term Incentives for Expansion of Health Coverage
Recognizing that the key provisions of the Affordable Care Act do not take effect until 2014, Congress included a number of short-term incentives for the expansion of health coverage during the intervening period.
In the weeks and months leading up to the enactment of the Affordable Care Act, one of the oft-repeated “campaign promises” made by promoters of the legislation was, “If you like your current health care coverage, you can keep it.” In keeping with the spirit of that promise, the Act includes provisions that exempt so-called “grandfathered” plans from some, but not all, of the benefit mandates in the Act. Unfortunately, the Act leaves many questions unanswered with respect to the application of these grandfather rules.
New Reporting and Disclosure Requirements
In addition to transforming the rules governing the benefits that health plans must offer, the Affordable Care Act substantially alters the way that plan sponsors and health insurers must describe and report those benefits. From new claim appeal procedures to standardized benefit summaries to additional governmental reporting, the Act will almost certainly increase administrative costs and complexities for employers. And like many other aspects of the Act, determining precisely how and even when to comply with some of the new reporting and disclosure obligations will be difficult. Although regulations will likely answer some of these questions, plan sponsors should start revising many of their procedures immediately.
While the focus of the Affordable Care Act is clearly on the nation’s health insurance system the Act does include several rifle-shot changes to the Tax Code’s cafeteria plan rules. These include the following (listed in the order they become effective):
Dependent Coverage Requirements (and Options)
Under the Affordable Care Act, group health plans providing coverage to dependent children will soon be required to make coverage available to a covered employee’s adult child until the child’s 26th birthday, even if the child is no longer a full-time student and even if the child can no longer be claimed as the employee’s “dependent” on the employee’s federal income tax return. This requirement to extend group health plan coverage until an adult child’s 26th birthday applies to both insured and self-insured plans (regardless of the plan’s status as a “grandfathered” plan), and is effective for plan years beginning after September 23, 2010 (i.e., January 1, 2011, for calendar-year plans).
Insured Health Plans Now Subject to Nondiscrimination Rules
Prior to enactment of the Affordable Care Act, employee health benefits provided through an insurance contract (i.e., fully insured benefits) were not subject to any income-based nondiscrimination requirements under the Tax Code. Thus, an employer could provide more generous health insurance benefits to executives or other highly compensated individuals through the purchase of individual or group insurance policies. As a result of the Act, that will soon change.
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