Supreme Court Largely Upholds PPACA

Our partners at UBA have helped us to provide you with the latest on Health Care Reform:

The Supreme Court Largely Upholds PPACA

Yesterday, the U.S. Supreme Court upheld the individual mandate and most of the Patient Protection and Affordable Care Act (PPACA).  As expected, it was a close decision -- 5-4 -- with Chief Justice Roberts and Justices Breyer, Ginsburg, Kagan and Sotomayor agreeing that the individual mandate is a permissible tax. Because the individual mandate was found to be acceptable, most of the rest of the law (including the exchanges and the requirement that larger employers provide minimum coverage or pay penalties of their own) automatically stands.  For additional information on the decision, CLICK HERE.

Because PPACA has been upheld, employers need to move forward with implementing the changes required by the law.  The most immediate requirements are:

• All group health plans, regardless of size, must provide "summaries of benefits coverage" (SBC) with the first open enrollment beginning on or after Sept. 23, 2012.  The content and format of these SBCs must meet strict guidelines, and the penalties for not providing them are high (up to $1,000 per failure).  Insurers will be expected to provide the SBCs for fully insured plans, while self-funded plans will be responsible for preparing their own.
  ---
• Employers that issued 250 or more W-2s in 2011 must report the total value of each employee's medical coverage on their 2012 W-2 (which is to be issued in January 2013).
  ---
• High income taxpayers (those with more than $250,000 in wages if married and filing jointly, or more than $200,00 if single) must pay additional Medicare tax, and employers will be responsible for deducting a part of the tax (an additional 0.9 percent on the employee's wages in excess of $200,000) from the employee's pay beginning in 2013.
  ---
• The maximum employee contribution to a health flexible spending account (FSA) will be $2,500 beginning with the 2013 plan year.
  ---
• The Patient Centered Outcomes fee (also called the comparative effectiveness fee) is due July 31, 2013.  The fee is $1 per covered life for the 2012 year.  Insurers will remit the fee on behalf of the plans they cover, while self-funded plans will pay the fee directly.

Politically, while House Republicans have pledged to repeal PPACA, it is unlikely a repeal bill would pass the Senate, and it would be vetoed in any event by President Barack Obama.  The fall elections, of course, could result in a change in control of Congress and/or the White House, and Republican victories would likely re-energize efforts to repeal PPACA or to discontinue funding needed to implement various parts of the law.

The opinion is long (193 pages) and complex, and we will provide additional details -- through both written alerts and a webinar -- once there has been more time to study the opinion.   

This information is general and is provided for educational purposes only, and does not contain legal advice.  You should not act on this information without consulting legal counsel or other knowledgeable advisors. 

Thanks to our partnership with our friends at UBA, we are able to provide you with the latest Health Care Reform Update:

PREPARING FOR THE SUPREME COURT DECISION

ON HEALTH CARE REFORM

The U.S. Supreme Court is expected to publish its decision on the legality of the Patient Protection and Affordable Care Act, or PPACA (also called health care reform, HCR and ACA), by the end of June.  What they will decide is anyone's guess.  Here are the possibilities (in no particular order), and a brief overview of what the decision would mean to employers that sponsor group health plans.  For additional information on the issues the Court is considering,
CLICK HERE.


Entire Law is Constitutional
If the Court decides that all parts of the law are constitutional, employers will need to move forward with implementing the changes that the law requires.  For 2012 and 2013, these include:

• Providing summaries of benefits coverage with the first open enrollment on or after Sept. 23, 2012
• Reporting the value of medical coverage on the 2012 W-2
• Reducing the maximum health flexible spending account (FSA) contribution to $2,500 (beginning with the 2013 plan year)
• Paying the Patient Centered Outcomes fee (due July 31, 2013)

Note: Details on these requirements are included in recent Employer Compliance Alerts.


Part of the Law is Constitutional and Part is Not
The Court could decide that the requirement that individuals obtain health coverage or pay a penalty (the "individual mandate") exceeds Congress' authority but that other parts of the law are permissible.  They could then either specify which parts should stay and which should go, or they could send the case back to a lower court to determine the details.  Either way, employer obligations to comply with the law would continue, and the actions needed for 2012 and 2013 would continue to apply.


Entire Law is Unconstitutional
The Court could decide that the entire law is flawed, in which case employers will not need to implement the changes that were to take effect for 2012 and later.  There would be some uncertainty (and choices) with respect to the parts of the law that have already been implemented.  Keep in mind that if the plan or policy has been amended or written to include the 2010 and 2011 changes, the plan document or policy will need to be revised to remove the changes -- the mere fact that the law is unconstitutional will not void the changes in the plan or policy.
Several carriers -- Aetna, Humana and UnitedHealthcare -- have stated that they will continue to administer their policies to include many of the changes that have already been implemented, even if that is not legally required.  Employers that have self-funded plans will need to decide -- and those who have fully insured plans may need to decide -- if they want to roll back changes such as:

• Covering dependent children to age 26 (there will be tax issues with this unless the IRS provides a waiver)
• Elimination of lifetime and annual maximums for most benefits
• Elimination of pre-existing condition limitations for dependents under age 19
• First-dollar coverage for preventive care
• Excluding over-the-counter prescription drugs for health FSA and health savings account (HSA) coverage

The Supreme Court decision is unlikely to end the debate over PPACA, particularly with the fall congressional and presidential elections looming.  If the Supreme Court upholds the law, House Republicans have pledged to introduce legislation to repeal it, but they likely do not have the votes in the current Congress to prevail.


This information is general and is provided for educational purposes only, and does not contain legal advice.  You should not act on this information without consulting legal counsel or other knowledgeable advisors.

FSA Limits & Tax Credits

Are you concerned how the  laws surrounding Flexible Spending Accounts will affect you in the years to come? Don't worry... we've got the answers for you! We've worked with our partners at UBA to bring you latest updates in Health Care Reform:


The IRS on Wednesday provided regulatory relief for health care flexible spending account (FSA) participants and also said it is reconsidering its longtime use-it-or-lose-it rule for FSAs! 


Employer benefits lobbying groups, including the American Benefits Council (ABC) had complained that the new $2,500 annual limit set to go into effect on January 1, 2013 would effectively force noncalendar-year plans to comply with the rule before the statutory effective date. 


Let's break it down: If an employee has an FSA with a fiscal year that begins on July 1, 2012, elects to contribute $3,600 during that plan year, making contributions of $300 a month from July 1, 2012 through June 30, 2013, the employee would violate the $2,500 annual limitation for 2013, the ABC noted, because the employee would have contributed $300 a month for the first six months of 2013 and $208.33 for the last six months of 2013 (a total of $3,050 during 2013).



In Notice 2012-40, the IRS said participants in noncalendar-year plans can still make the maximum contributions to their FSAs during the first year that a mandated FSA contribution cutback goes into effect under the health care reform law.


In addition, the IRS made clear that amounts that remain in so-called grace period FSAs can be rolled over to the next year without those funds counting against the $2,500 limit.  Grace period FSAs -- allowed by the IRS under a 2005 rule -- are those in which unused balances from the prior plan year can be used to pay expenses that are incurred during the first 2.5 months of the next plan year.


The guidance also addresses plan grace periods and provides relief for "certain salary reduction contributions exceeding the $2,500 limit that are due to a reasonable mistake and not willful neglect and that are corrected by the employer."  Further, the notice clearly establishes that the limit in PPACA does not does not apply to certain employer nonelective contributions (sometimes called flex credits), nor does it apply to non-healthcare FSA contributions, HSAs, HRAs or health plan premium payments made under a Section 125 plan.


Finally, in a development that stunned benefit experts, the IRS also disclosed that it considering "modifying" its 28-year-old use-it-or-lose-it rule.  If use it or lose it were eliminated, FSAs would become even more popular.  The fear of losing unused contributions is a disincentive for some employees to participate, and others contribute less than they would in the absence of the requirement, experts said.


Few small employers claim small employer tax credit 


Few of the estimated 1.4 million to 4 million eligible small employers claimed the Small Employer Health Insurance Tax Credit in tax year 2010, according to a recent report from the Government Accountability Office (GAO).  The GAO noted that only 170,300 small employers claimed the tax credit, which represents only 7 percent (plus or minus 3 percent) of the estimated eligible small employers. 


The cost of credits claimed was $468 million, and most claims were limited to partial rather than full percentage credits because of the average wage or full-time equivalent (FTE) requirements.  The report noted that only 28,100 employers claimed the full credit percentage in 2010.   In addition, 30 percent of claims had the base premium limited by the state premium average


The report, "Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity," noted that employer representatives, tax preparers and insurance brokers that GAO interviewed identified a number of factors limiting the credit's use:

• Approximately 83 percent of small employers do not offer health insurance, and the tax credit was not large enough to incentivize these employers to begin offering insurance

• Rules on FTEs and average wages are too complex

• Calculating and filing a claim for the credit is too complex

The GAO noted that options to address these factors (such as expanded eligibility requirements) have trade-offs, including less precise targeting of employers and higher costs to the federal government.

NAHU Hosts Webinar on Exchanges

NAHU Hosts Webinar on Exchanges
On May 10, NAHU conducted a one-hour webinar on health insurance exchanges.  It was an exceptionally thorough overview of the topic, and I would encourage folks to listen/view it.  The link to the Professional Development page of NAHU's site (the webinar is the first item under the NAHU Webcasts heading):
http://www.nahu.org/education/programs/webcasts.cfm?ibcToken=a0a490fb-9052-4c36-bd08-d7da54f8f2ef.
Just a couple of highlights (there were many):

• Premium subsidies and cost-sharing reduction subsidies will only be available via the Individual coverage exchanges (low-income people who buy coverage via a SHOP exchange are not eligible for subsidies)
  --
• Low-income people who have access to "adequate" and "affordable" group coverage cannot leave the group plan and buy coverage via an exchange
  --
• Employers will be required to help verify coverage in virtually any situation:
• Whether or not any employee purchases coverage through an exchange 
• If an employer doesn't offer coverage at all
• After an employee enrolls in an exchange (and likely every year thereafter)
  --
• The small-business tax credits currently available to any qualifying small employers will only be available after Jan. 1, 2014, to employers purchasing coverage through a SHOP exchange
  --
• If an individual state elects to allow "large" groups to access an exchange on Jan. 1, 2017, or thereafter, and even one large employer elects to participate, all of the SHOP exchange requirements will apply to every insured large group in that state.  Examples: modified community rating rules (no more experience rating for an employer's large group plan), minimum benefit requirements, guarantee issue, etc.
  --
• Private exchanges are not subject to SHOP exchange rules
  --

Many items that require further regulatory guidance are noted

We have partnered with our colleagues from UBA, and we are happy to able to provide you with the latest Employer Compliance Alert:

IRS ANNOUNCES 2013 AMOUNTS for HSAs and HDHPs On April 27, the IRS issued Revenue Procedure 2012-26, announcing the 2013 inflation-adjusted dollar limitations applicable to health savings accounts (HSAs) and qualifying high-deductible health plans (HDHPs). The maximum HSA contribution for an individual with self-only coverage under an HDHP will increase to $3,250 - up from $3,100 in 2012.  The maximum HSA contribution for an individual with family HDHP coverage will be $6,450 - up from $6,250 in 2012.  The "catch-up contribution" limit, for individuals who will attain age 55 by the end of the year, will remain at $1,000. To qualify as an HDHP, a plan must specify a minimum annual deductible amount, with that amount based on whether the coverage is self-only or family.  Those deductibles have also been adjusted for inflation.  For self-only coverage, the annual deductible must be no less than $1,250 - up from $1,200 in 2012.  For family coverage, the annual deductible must be no less than $2,500 - up from $2,400 in 2012. Finally, to qualify as an HDHP in 2013, the total annual out-of-pocket expenses (deductibles, copayments, and other amounts - but not premiums) may not exceed $6,250 for self-only coverage or $12,500 for family coverage. Sponsors of HSA arrangements and/or HDHPs will want to incorporate these new dollar amounts into their 2013 open enrollment materials. Chadron J. Patton, Associate Spencer Fane Britt & Browne LLP

Health Care Reform Update: SBC Rules; Voluntary Enrollment

We have once again partnered with our friends at UBA to bring you the latest Health Care Reform Update:
Employers Get More Flexibility in Health Care Plan Communications Rule
Clarifications made by regulators in the recently released FAQs regarding summary benefit and coverage (SBC) statements include making clear that separate statements do not have to be provided for each coverage tier.  Also, regulators said they do not intend to impose penalties during the first year the requirement is in effect, so long as employers are working in "good faith" to comply.

Expert Views on Approaches to Encourage Voluntary Enrollment
The Patient Protection and Affordable Care Act as amended (PPACA) mandates that individuals, subject to certain exceptions, obtain health insurance coverage or pay a financial penalty beginning in 2014 -- the "individual mandate."  Because of the possibility that legislative or judicial action could result in a change to, or elimination of, the mandate, Congress asked the Government Accounting Office (GAO) to identify potential alternatives to encourage, rather than require individuals to obtain private health insurance coverage. 

The experts interviewed by the GAO discussed nine specific approaches to encourage voluntary health insurance enrollment during our interviews.  The approaches are summarized below, generally presented in the order of frequency with which they were proposed by the experts for consideration.

• Modify open enrollment periods and impose late enrollment penalties.
• Expand employers' roles in auto-enrolling and facilitating employees' health insurance enrollment.
• Conduct a public education and outreach campaign.
• Provide broad access to personalized assistance for health coverage enrollment.
• Impose a tax to pay for uncompensated care.
• Allow greater variation in premium rates based on enrollee age.
• Condition the receipt of certain government services upon proof of health insurance coverage.
• Use health insurance agents and brokers differently:
• Exchanges or small employers that do not offer insurance could hire agents and brokers to assist uninsured individuals or employees to select and enroll in appropriate plans.
• The MLR requirement in PPACA could be amended to provide insurers with more flexibility to use premium revenue to compensate brokers for providing certain value-added services, such as identifying opportunities for explaining variations in plans through the exchanges for individuals as well as opportunities for premium tax credits and cost sharing reductions.
• Agents and brokers could be paid a flat fee for enrolling previously uninsured individuals in qualifying coverage in the exchanges.
• Require or encourage credit rating agencies to use health insurance status as a factor in determining credit ratings.

In discussing these approaches, four key themes emerged:

• Experts emphasized that most people would prefer to purchase health insurance coverage; however, to the extent that high cost is a barrier, the use of financial incentives is key.
• Regardless of the particular approach taken to increase voluntary enrollment in the absence of an individual mandate, the availability of affordable, high-quality health care plans with a basic set of benefits, and full coverage of preventive care services is essential to encouraging voluntary enrollment in the coverage.
• Strong marketing and public education from trusted, community-based sources informing people about their health care choices, their costs, and the consequences of not enrolling in a timely manner are important.
• Convenient access to the health insurance system through multiple access points staffed by knowledgeable individuals would further facilitate enrollment.

Experts noted that various approaches would have different impacts on encouraging voluntary enrollment, and that a combination of multiple approaches holds more potential to encourage voluntary enrollment than any single approach.  Furthermore, they emphasized that independent research is required to fully evaluate the potential effectiveness and legal or other implications associated with any approach or combination of approaches.
The full report can be found at: http://www.gao.gov/assets/100/97317.pdf.

Health Care Reform Update: Determining Actuarial Value

We've partnered with our friends at UBA to bring you the latest Health Care Reform Update:

 
THE LATEST HEALTH CARE REFORM UPDATE:

HHS Outlines Intended Approach for Determining Actuarial Value for Individual and Small Group Coverage (Including Good News for HSAs and HRAs)
On Feb. 24, the Department of Health and Human Services (HHS) released a bulletin that describes their approach to valuing plans that will be offered in the nongrandfathered small and individual markets after Jan. 1, 2014 (whether or not offered as qualified health plans inside an exchange).  The bulletin also describes HHS's intended approach for implementing one of the features of health care reform that is intended to make individual coverage obtained through an exchange affordable for eligible low-income individuals -- the actuarial value (AV) calculator would be used to determine required cost-sharing reductions for such individuals who purchase silver-level individual coverage through an exchange.

Standard Data: HHS's proposed approach to the actuarial value requirements established by the Patient Protection and Affordable Care Act (PPACA) would be to create a national standardized approach to determining a plan's actuarial value (AV) and develop a national "actuarial value calculator" to score plans based on their included benefits.  However, the bulletin also allows for a proposed degree of state-by-state flexibility.  Since provider payment levels and utilization can vary substantially by state, the bulletin provides for a means for states to develop their own standardized deviation of the national actuarial value formula that insurers could use to come up with AV scores in that state. 

AV Calculator Tool: HHS intends to develop a publicly available calculator tool, pre-loaded with standard data, which insurers would use to calculate their plans' AVs by inputting key information about benefit coverage and cost-sharing provisions.  A plan's AV would need to be within two percentage points above or below the specified AV for the level (e.g., a gold plan's AV could be between 78 percent and 82 percent).  HHS is soliciting comments on exactly what input fields the calculator should consider and how AVs should be calculated for plan designs that do not fit within the calculator's logic.

Treatment of HSAs and HRAs: The bulletin also makes a provision to address the treatment of employer contributions to health savings accounts (HSAs) and health reimbursement arrangements (HRAs) linked to high-deductible health plans (HDHPs).  HHS recognized that simply calculating the actuarial value of the HDHP based on the insurance product alone would understate the value of coverage and cause many HDHPs to fall below the bronze level of coverage required.  However, they also noted that accounting for the total coverage provided by the combination of the HDHP and the full value of the HSA or HRA could overstate actuarial value because, empirically, only a portion of these accounts are used toward health in a given year.  To address the issue fairly, HHS states in the bulletin, "we intend to propose that for purposes of calculating the AV of an employer health benefit plan, the annual employer contribution to the employee's HSA associated with a qualifying HDHP and the amount made available for the first time in a given year under a HRA that is linked to an employer health benefit plan shall be considered part of the benefit design of the health plan."  (Editorial comment: "How will the insurer know what HSA contributions an employer will make?")
HHS has solicited comments on the proposed bulletin, but has not specified a date by which comments must be submitted.  The full 16-page bulletin can be found at:
http://www.cciio.cms.gov/resources/files/Files2/02242012/Av-csr-bulletin.pdf.