Health Care Reform for Employers
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HR the human resource, August-September 2010, Vol. 3, Issue 4
By Lisa English Hinkle and Luke A. Wingfield, McBrayer law
Enacted in March 2010 with the goal of having almost all citizens covered by health insurance in 2014, the Patient Protection and Affordable Care Act ("PPACA") demands attention as many requirements become mandatory for employers almost immediately. New interim regulations released in June — over 190 pages — provide detailed guidance about PPACA's requirements and also create a "bill of rights" that establishes significant new requirements that give consumers the right to appeal decisions, including claims denials and rescissions, made by health plans. Even though the penalties for not providing health care coverage for employees do not come into play until 2014, many of the required changes for coverage and benefits for both self-funded and insured employer health care plans take effect earlier. While the interim regulations primarily address insurance companies, employers and human resources departments must be aware of the new requirements, particularly as they relate to responsibilities to give notice to employees and for reporting obligations. The following addresses some of the more important aspects of PPACA as they apply to employers
The Grandfather Exception
One of the most important things that an employer must immediately determine is whether its current health coverage will meet PPACA's grandfather exception. Many of the new requirements of PPACA and its implementing regulations do not apply to grandfathered health plans, retiree-only plans, dental and vision plans, and flexible spending accounts. Grandfathered health plans are group plans in which an individual was enrolled on March 23, 2010. Some of the important changes that grandfathered plans don't have to meet include changes in the appeals process, providing preventive care with no cost sharing, providing clinical trial coverage, and complying with the prohibition against discrimination based on health status. If employers make significant changes to their plans like reducing benefits or increasing costs, those plans may lose their grandfathered status. Grandfathered plans may not significantly cut or reduce benefits, raise co-insurance charges, raise co-payments, raise deductibles, lower employer contributions, add or tighten annual limits on what insurance pays, or change insurance companies. If a plan loses its status, participants will gain new benefits including coverage of preventive health care services with no cost sharing and increased patient protections, such as guaranteed access to OB-GYNs and pediatricians. The regulations also contain an anti-abuse feature to prevent employers from reorganizing their business by transferring employees among division or between related employers to avoid losing grandfathered status.
Notice must be given to employees if an employer has a grandfathered plan; employers must advise participants that their grandfathered plan does not include certain PPACA consumer protections that apply to other plans.
PPACA Requirements For All Plans
Certain PPACA provisions apply to all health plans, including grandfathered plans. The practices that are now prohibited include the placement of lifetime limits on coverage, the rescission of coverage for sick individuals and the rescission of coverage for minor mistakes on the application. All health plans are now required to extend parent's coverage to adults 26 and younger irrespective of the dependent's marital status.
Model Notices Are Available
The Department of Labor has published a series of model notices, in conformity with the new June regulations, to help employers comply with the PPACA provisions. These notices are models that inform plan participants of plan lifetime limits, the grandfathered status of their health plans and dependent coverage. Employers should look to these notices, which can be found at http://www.dol.gov/ebsa/healthreform/, as a model for developing their own.
Automatic Enrollment For Employees Of Large Employers
Employers with more than 200 full-time employees offering one or more health benefit plans must now automatically enroll new full-time employees in a health plan. If an employee does not want health care coverage, the employee will have to affirmatively opt out. Employers are required to give additional notices to new employees. At the time of hiring, employers will be required to give new employees notice including detailed information about existence of exchanges as well as an employee's ability to qualify for any tax credit starting March 1, 2013.
Health Care Coverage Reporting To Treasury
Any employer that provides health care coverage is now required to file a return reporting the coverage on a form that will be released by the Secretary of the Treasury. Anyone who is required to file a return is also required to furnish a written statement to the individual detailing the contents of the informational return. The penalty for failing to timely file an informational return is up to a maximum of $250,000. Providing information about the value of the health insurance provided to an employee through the W-2 wage form is an effort to educate consumers about health insurance costs with the goal of giving consumers information to make better decisions about the value of the health care they receive.
Small Business Tax Credits
For 2010 through 2013, PPACA provides qualified small employers a special tax credit for employer contributions for the purchase of health insurance. An eligible small employer is one with 25 or fewer full-time employees and whose employees have annual full-time equivalent wages that average $50,000 or less. For tax years 2010 through 2013, the tax credit is up to 35 percent lesser of the employer's premium contributions of the average premium for the small group market in the area. For tax years 2014 and beyond, the credit will be up to 50 percent.
Consumer Bill Of Rights Established
Affecting employer's self-insured health plans as well as group health plans, the "bill of rights" establishes requirements that give consumers new avenues to challenge decisions about health insurance coverage and institutes standards for internal and external review appeals that guarantee the right to an independent decision-maker. The bill of rights applies to all states and all health coverage. While 44 states offer external review, including Kentucky, the lack of uniformity and consistent standards for the process has led to tremendous variance and plan-favored bias. One study reported that when patients have the right to appeal to an independent reviewer, consumers won those appeals 45 percent of the time. These new rules are intended to standardize and simplify the review process.
Disclosure Requirements For Health Care Policies
To increase the transparency and give consumers better tools to make informed choices when selecting health insurance, PPACA requires the Secretary of HHS to issue regulations that establish new disclosure requirements for health policies. PPACA requires the new disclosure statement to be a four-page description of the coverage, cost-sharing rules, information about benefits and renew ability, etc., and should be effective by 2013.
At its core, PPACA is focused on increasing access to health care with key elements that create incentives and penalties that are designed to encourage large employers to offer health care coverage to their employees and is coupled with incentives and penalties to encourage individuals to procure their own health coverage. PPACA poses many challenges for employers with new mandates on what needs to be included in their health plans, new reporting and disclosure requirements, new subsidies and tax credits, and new excise penalties. The good news is that many of the changes will not be effective for a few years with time for employers to plan. Employers, however, must be aware of the new mandates and take steps to comply with requirements as they become effective.
About the Authors:
Lisa English Hinkle is a Member of McBrayer law. Ms. Hinkle concentrates her practice area in healthcare law and is located in the firm's Lexington office. She can be reached at firstname.lastname@example.org or at 859-231-8780, ext. 1256.
Luke A. Wingfield is an associate of McBrayer law. Mr. Wingfield's practice areas are litigation, employment law, insurance, administrative law and health care law. He is located in the firm's Lexington office and can be reached at email@example.com or at 859-231-8780, ext. 1265.