What Employers Should Know
JULY 5, 2012
Now that the U.S. Supreme Court has ruled that the Patient Protection and Affordable Care Act’s individual mandate did not violate the U.S. Constitution, employers must continue to implement the law as its provisions go into effect. In particular, employers will want to note the following provisions:
- Medical Loss Ratio Rebates. It is expected that many group health plans will receive premium rebates from their insurers after August 1, 2012. For public employers there is a specific method for allocating the rebates between employers and employees, but for private employers there are alternative allocation methods. In some situations, private employers may need to amend plan documents before the rebate is received.
- Forms W-2. Generally, employers that filed at least 250 Forms W-2 for 2011 must report the value of health care coverage provided to employees on the 2012 Form W-2 that will be provided to employees in January 2013. Until further guidance is issued by the IRS, employers will not be subject to this reporting requirement for any year if the employer was required to file less than 250 Forms W-2 for the preceding year.
- Anti-Dumping. The Act prohibits providing incentives which encourage an individual to disenroll from a group health plan. Regulatory guidance clarifying what falls within the purview of a prohibited incentive has not yet been issued. In the interim, employers should consult their benefit advisors before offering employees incentives to decline coverage based on the employee’s health status.
- Summary of Benefits and Coverage. Summaries of Benefits and Coverage (SBC) must be provided by plan administrators of group health plans and, generally, uninsured health reimbursement arrangements. (The SBC requirements, however, will not generally apply to health flexible spending accounts (FSA) or health savings accounts.) The SBC requirements take effect for the first open enrollment period that begins on or after September 23, 2012. Penalties of up to $1,000 for each enrollee will be imposed for the willful failure to comply with the SBC requirements.
- Health FSA Contributions. Starting in 2013, annual salary reductions to a health FSA are limited to $2,500.
- Medicare Tax. Beginning in 2013, the employee share of Medicare taxes is increased by 0.9 percent on earnings in excess of $200,000 and on a married couple’s earnings in excess of $250,000, if filing a joint return. Employers will be required to withhold the additional Medicare tax only on an employee’s wages in excess of $200,000 for the year.
- Individual Mandate. Beginning in 2014, most individuals and their dependents must carry “minimum essential coverage” or pay a penalty. The penalty will be included on the individual’s annual income tax return. Employers do not have an obligation to monitor or collect the penalty.
- Mandatory Group Health Coverage. As of January 2014, employers with 50 or more full-time employees will be required to pay penalties to the IRS if: (1) the employer does not offer health care coverage to full-time employees, offers unaffordable coverage or offers coverage that does not meet certain requirements; and (2) any of the employer’s full-time employees buys health insurance through a state exchange and a tax credit or cost sharing reduction is allowed to the employee.
- Nondiscrimination Rules. The Act provides that insured group health plans will now be prohibited from discriminating in favor of highly compensated individuals with respect to eligibility or benefits. Implementation of this law has been postponed pending the issuance of regulations. Nonetheless, employers should be prepared to modify plans that limit coverage to select individuals.
- Automatic Enrollment. Employers with more than 200 full-time employees that offer enrollment in health benefit plans will be required to automatically enroll new full-time employees once regulations are issued by the Department of Labor (DOL). However, the DOL has announced that such regulations will not be ready to take effect by 2014.
Group health plans continue to be subject to rules that:
- Require the availability of coverage of adult children (also applies to health FSA, health reimbursement arrangements and health savings accounts),
- Prohibit pre-existing condition exclusions for children under 19 (and for everyone starting in 2014),
- Limit circumstances in which policies may be rescinded,
- Provide coverage of certain preventive health care services without cost sharing,
- Prohibit lifetime limits, and
- Phase out annual limits on “essential health benefits.”
In addition, the tax credits for qualifying small employers, including tax-exempt employers, continue to be available.
Best Best & Krieger’s Employee Benefits group will be issuing future legal alerts expanding on some of the topics highlighted above. In addition, BB&K will be hosting a webinar on this subject soon. In the meantime, if you have any questions regarding the Patient Protection and Affordable Care Act, please contact John Wahlin, Isabel Safie or Allison De Tal in the firm’s Employee Benefits group, or your BB&K attorney.
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Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.