DDI – Health Care Reform Legislative Update – February 2012
It has been nearly 2 years since the President signed into law the historic “Patient Protection and Affordable Care Act” (PPACA). While some of the provisions have been implemented, most will not happen until 2014 and beyond. Click here to view the timeline of what’s changing and when.
Below are highlights of what has happened and important reminders about upcoming changes. As always, contact DDI with any questions or go to www.ddibenefits.com/news for an archive of legislative updates and health reform articles.
2010-2011 – A Reminder of what’s been implemented…
Provisions that have taken affect:
- Dependents allowed to remain on health plans until age 26
- Lifetime limits on health plans removed
- Preventive care is covered at 100%
Some small employers, under 25 full time equivalent employees, are eligible for health care premium tax credits
Medical loss ratio – applies to Insurers offering fully insured plans
Summary:
Insurers must provide an annual rebate to policyholders after claims and other medical services are paid for—if the percent of premium left over meets a certain level. Called the medical loss ratio, this amount is based on a “block” of business to which the individual or group belongs. A rebate would be issued if the block’s medical loss ratio is less than 85 percent for large groups or 80 percent for small groups or individuals. A block may also be called a “cell.”
This provision applies to fully insured plans, including shared returns. Issuers of limited medical and expatriate international plans are subject to separate calculation rules.
2012 – The PPACA will create administrative standards in health care…
W-2 Reporting Requirements- applies to employers filing more than 250 W-2’s
Summary
Employers that filed 250 or more W-2 forms in 2011 will be responsible for reporting to employees the total cost of their group health benefit plan coverage on their 2012 W-2 forms issued in January 2013. This reporting requirement is informational only and does not mean that coverage will be subject to income tax.
On Jan. 4, 2012, the IRS issued Notice 2012-9 on the W-2 Reporting Requirement of the Patient Protection and Affordable Care Act. See how this recent notice and the W-2 requirement may affect employers filing more than 250 W-2 forms in 2011.
Reporting Requirements
Employers that are required to file fewer than 250 W-2 forms in 2011 will not be required to report the cost of health coverage under the Patient Protection and Affordable Care Act. This transition relief will continue until further guidance is issued. Any additional guidance will not apply to any calendar year beginning within six months of the date the guidance is issued.
Employers are not required to report the cost of health benefit coverage on any W-2 forms furnished to employees prior to January 2013.
It’s important to note that only covered employees that elect the coverage and pay the premiums or contribution amounts will receive cost of coverage information on their W-2 forms. For example, if a husband and wife work for the same company and are covered under the same health benefit plan, and the husband signed up for the plan and pays the premiums, he is considered the covered employee. Only the husband, in this case, would have the cost of coverage reported on his W-2. The wife is considered a beneficiary or dependent on the plan and would not have the cost of coverage on her W-2.
Cost of coverage is reported on W-2 forms for 2012 in box 12, using code DD.
Calculating Cost of Coverage
The cost of coverage generally includes both the portion of the cost paid by the employer and the portion of the cost paid by the employee, regardless of whether the employee paid for that cost through pre-tax or after-tax contributions.
Coverage that Does Not Need to be Reported
Notice 2012-9 confirms that applicable employer-sponsored coverage does not include:
- Coverage for excepted benefits under the Health Insurance Portability and Accountability Act (HIPAA) (such as long-term care, accident, disability income, liability and supplemental liability insurance, automobile medical payments, and workers’ compensation insurance)
- Coverage for a specific disease or illness or hospital indemnity insurance
- Coverage provided by the federal government, state government or agency of the government under a plan that is maintained primarily for members of the military and their families
- Coverage under a self-funded plan that is not subject to any federal continuation requirements Consolidated Omnibus Budget Reconciliation Act (COBRA), Public Health Services Act (PHSA) continuation, Federal Employee Health Benefits Program (FEHBP) continuation, such as a group
health benefit plan sponsored by a church - Coverage under a health reimbursement account (HRA)
- Contributions to a health savings account (HSA) or Archer medical savings account (MSA)
- Salary reduction contributions to a health flexible spending account (FSA) unless the amount of the FSA benefit exceeds the salary reduction election. In this case, the reportable cost would include the amount that exceeds the salary reduction election.
- Coverage under a “stand-alone” dental or vision plan if the plan satisfies the requirements for being excepted benefits for purposes of HIPAA
- Coverage for employee assistance program (EAP), wellness program, or on-site medical clinic, if that employer does not charge a premium for this type of coverage under COBRA
Ultimately, it is the employer’s responsibility to accurately determine which employees should receive cost of coverage information. Employers are encouraged to consult with their legal counsel or tax preparer for
advice on who should be included and what should be reported to meet the W-2 reporting requirement.
Summary of Benefits and Coverage (SBC) – applies
to insurers and health plans
Summary:
Effective September 23, 2012 for health plans and insurers
Your Health Plan Summary of Benefits will look a little different….
On February 9, 2012, Department of Health and Human Services’ Center for Consumer Information and Insurance Oversight (CCIIO) issued its final rule regarding the Summary of Benefits and Coverage provision.
The rule and accompanying guidance provide detailed instructions about what insurers and health plans must do to comply with Section 2715 of the Patient Protection and Affordable Care Act (PPACA).
The rule requires that insurers and health plans provide a standardized Summary of Benefits and Coverage (SBC) and Uniform Glossary to consumers “when shopping for coverage, enrolling in coverage, at each new plan year, and within seven business days of requesting a copy from their health
insurance issuer or group health plan.”
The rule applies to employees and dependents of domestic and international group and individual health plans. It applies to all fully insured and self-insured plans, regardless of grandfathered status. It does not apply to Medicare plans.
The penalty for “willful” non-compliance is $1,000 per enrollee for each failure to comply.
Intent of Regulation
In developing the regulation, HHS stated that its aim is to help consumers understand and evaluate their health insurance choices by providing a “simple”, consistent document that outlines benefits and coverage in plain language. It may be provided in paper, or electronic form under current ERISA electronic
distribution rules.
Effective Date
Group:
- For participants enrolling or reenrolling at open enrollment (including late enrollees) – prior to the first day of open enrollment beginning on/after 9/23/2012
- For participants enrolling other than through open enrollment (including newly eligible and special enrollees) – starting on the first day of the plan year beginning on/after 9/23/2012
- For SBCs provided to insured plan sponsors – immediately on 9/23/2012 upon application, when changes occur, at renewal and upon request
Individual:
- Immediately on 9/23/2012
Highlights
The SBC must be provided in a consistent four-double-sided-page format with 12-point font. Individuals must be informed in writing 60 days ahead of any significant plan changes that affect the SBC (other than in connection with a renewal or reissuance of coverage). And, it must include a customer service phone number and internet address for questions and copies of plan documents.
2013 – Final preparations for major changes in 2014…
Flexible spending account limits in 2013
Summary:
Individuals are limited to a maximum of $2,500 per year in their health care flexible spending accounts.
2014 – The year several key health reform provisions take effect
Summary:
The biggest impacts of the PPACA happen in 2014. Many key changes that are expected to get health insurance to millions of uninsured Americans, improve care and reduce costs begin.
The year’s provisions are:
- State health benefit exchanges
- Individual mandate
- Employer mandate
- Essential health benefits
- No pre-existing conditions for all ages
- Clinical trials
- Dollar limits on essential health benefits: annual
- Eligibility-related provisions
- Guaranteed availability/renewability
- Waiting periods
- Auto enrollment
- Health care excise taxes
**Sources include Cigna Healthcare, UnitedHealthcare
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