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Look Out, Look Out: Here Comes Obamacare

January 25, 2013
UPDATE: THIS ARTICLE WAS WRITTEN PRIOR TO THE HEALTH INSURANCE MANDATE BEING DELAYED UNTIL 2016 FOR SELECT EMPLOYERS. READ ENA’S MOST RECENT ACA ALERT HERE.
Now that President Barack Obama has been reelected, there’s little likelihood that the Affordable Care Act (ACA), commonly referred to as “Obamacare,” will be scaled back or eliminated. The ACA has many employers scratching their heads, wondering whether it applies to them and, if it does, how they will comply.

Covered employers

There are a number of new requirements in the ACA that a covered employer will need to monitor and comply with now, in the near future, and in the not-so-distant future. The first real challenge arises out of the term “covered employer.” For some provisions, all employers and health insurance plans are covered. For other provisions, companies must employ a certain number of employees (25, 50, 100, 200, or 250) working an average number of hours for a certain number of months. Another issue that further complicates the applicability of the ACA is whether a group or individual healthcare plan is grandfathered (meaning it was in effect on March 23, 2010). Certain provisions don’t apply to grandfathered plans.

Informational reporting

“Information Reporting of Value of Employer-Sponsored Group Health Plans” must be reported on 2012 W-2 statements. The reports are mandatory for employers that filed 250 or more W-2 statements in the previous year. You should refer to IRS publications for specific coverage types that must be reported (see Notice 2012-9).

Summary of benefits and coverage 

Beginning September 23, 2012, health insurers and self-insured group health plans must provide a summary of benefits and coverage (SBC) to all individuals enrolling in medical coverage. The information must be provided to employers and individuals when they’re shopping for or enrolling in coverage, at each new plan year, and within seven business days of a request for a copy from their health insurance issuer or group health plan. You can review a sample SBC at http://cciio.cms.gov/resources/files/sbc-sample.pdf.

Limits on flexible spending accounts

There is a $2,500 limit on flexible spending accounts (FSAs). This limit applies to employee salary reductions, but it also can apply to employer contributions under certain scenarios (e.g., if a cash option is available). The FSA limits were to be described in open enrollment materials in the fall of 2012 for plan year 2013.

Research fund fee 

There is an annual fee to fund patient-centered outcomes research. The fee will be in effect for a limited number of years from 2012 to 2019. It doesn’t apply to health insurance policies if substantially all the coverage is of excepted benefits (e.g., accident- or disability-only plans or limited-scope dental or vision plans), employees are primarily working and residing outside the United States, or the plan contains stop-loss and indemnity reinsurance policies.

The fee is calculated by multiplying $1 by the average number of members covered under the healthcare plan for policy or plan years ending on or after October 1, 2012, and multiplying $2 by the average number of members for healthcare plans ending after September 30, 2013. It then increases to 6.6 to seven percent per year until 2019. For self-funded plans, the plan sponsors are responsible for paying the fee. For insured plans, the health insurance issuers are responsible for paying the fee.

Medical loss ratio rebate requirements

Beginning in August 2012, insurers must report plan costs for the purpose of calculating their medical loss ratio (the percentage of insurance premium dollars spent on reimbursement for clinical services and activities to improve healthcare quality). Large group insurers must spend at least 85 percent of premium dollars on claims and activities to improve healthcare quality. Individual and small group insurers (those with a total average of one to 50 employees based on the preceding calendar year, depending on the state’s definition) must spend at least 80 percent of premium dollars on claims and activities to improve healthcare quality.

Special considerations for small plans, new plans, mini-med plans, and expatriate plans are accounted for in the program. Rebates to subscribers, policyholders, or governmental entities that paid the premium must be paid by August 1 following the end of the reporting year.

Bottom line 

You will face challenges and uncertainty as you attempt to navigate this new law. Be sure to take action to comply with the immediate requirements of the ACA, closely monitor upcoming requirements, and make necessary adjustments as additional regulations are issued.

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