Health Reform: An Ever-Changing Environment for Employers
Despite its complexity, the law remains in an embryonic stage, with multiple government agencies working to develop regulatory guidance. Others seek to render the law unenforceable, challenging its constitutionality or threatening repeal. Notwithstanding this state of flux, employers must continue implementation, particularly in view of the considerable penalties for non-compliance. This article provides a summary of compliance obligations to aid in this task.
A primary objective of health-care reform is expanded coverage. Under the law, most individuals will be required to maintain health insurance coverage or pay a fine. Expanded coverage will be further facilitated by (1) eliminating certain coverage restrictions from employer plans; (2) requiring employers to expand coverage, and to provide affordable health care coverage or pay a penalty; and (3) creating state exchanges on which individuals may purchase coverage.
While health-care reform includes wide-sweeping changes for most health plans, certain provisions will not be applicable to “grandfathered” plans, generally those in effect on March 23, 2010. A plan may lose grandfather status if it makes certain
impermissible change as enumerated in regulatory guidance.
On the Horizon
Employers must anticipate and prepare to comply with upcoming deadlines. A survey of actions to take in the next year or so:
• The non-enforcement period for implementation of certain claims and appeals provisions expires for plan years beginning on or after Jan. 1, 2012. Accordingly, plans should complete compliance efforts in this area.
• To prepare for the W-2 health-care cost reporting requirement (effective for coverage provided in 2012), employers should consider how to value this cost and whether the payroll vendor is prepared to comply.
• Until guidance is issued, enforcement of the provision prohibiting non-grandfathered insured plans from discriminating in favor of highly compensated employees is delayed. For calendar year plans, the earliest the rule could apply is Jan. 1, 2012. Meanwhile, employers should take stock of plans (including severance and employment agreements that provide health benefits) to identify potential discrimination.
• Plans must submit an annual report to Health and Human Services (and to participants) addressing how benefits and provider reimbursement structures may improve health outcomes and patient safety, prevent hospital readmissions and promote wellness (“quality of care” reporting). Guidance is expected no later than March 23, 2012.
This timeline includes some upcoming deadlines, which may change, and some provisions may not apply to grandfathered plans.
2012: Enforcement begins for certain internal claims and appeals provisions; W-2 reporting of health care costs (for W-2s furnished early 2013); nondiscrimination rules for fully-insured plans become effective (although compliance/enforcement will be delayed pending issuance of further guidance); advance notice of material modifications; quality of care reporting; uniform explanation of coverage (guidance needed); comparative effectiveness research fee imposed through 2019 ($1–$2 per participant)
2013: Health FSA salary reductions limited to $2,500; increased Medicare pay-roll taxes; notice to employees of exchange.
2014: Play or Pay mandate; automatic enrollment expected; no pre-existing condition limitations or exclusions; no dollar limits on annual benefits; no excessive waiting periods; additional reporting requirements regarding “minimum es-sential coverage;” increased wellness program incentive permitted.
2018: Cadillac plan tax will impose a 40 percent excise tax on high-cost coverage.
A Compliance Recap
The main tasks employers should have completed at this time:
• Determined grandfathered status and complied with related disclosure requirements.
• Offered enrollment to adult children up to age 26.
• Re-enrolled participants whose coverage was terminated due to a lifetime limit.
• Provided coverage, without cost-sharing, for certain preventive services.
• Allowed participants to select a primary-care provider and eliminated preauthorization or increased cost sharing for out-of-network emergency services (grandfathered plans exempt).
• Updated plan materials and processes to comply with external review process and most internal claims and appeals rules.
• Communicated to flexible spending account participants the new restrictions on reimbursements for over-the-counter drugs and amended plan to reflect same.
Staying ahead of health care reform developments in the current environment is challenging. However, in light of the significant potential penalties, employers are well advised to commit attention and resources to the task.
Lisa A. Van Fleet is a partner and leader of the employee benefits and executive compensation practice at the Bryan Cave law firm’s St. Louis office.
P | 314.259.2326
E | lavanfleet@bryancave.com
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