2013 – The year to cross the Ts and dot the Is
In an effort to strategize for the upcoming Patient Protection and Affordable Care Act (PPACA) changes in 2014, plan sponsors must review their list of compliance on employer mandate and public exchange. With many moving parts and new regulations, the health care reform has imposed a great deal of additional tasks on employers. Read on for a few of the important compliance deadlines.
1 – Employer Mandate
Large employers must prepare to offer minimum essential coverage, as well as determine who will be eligible to obtain such coverage. The 2014 employer mandate requires that employers with 50 or more full time equivalent (FTE) employees must offer minimum health coverage that is affordable. Not only employers need to configure affordability, they also need to determine who is going to be covered under the new law. Companies with 50 or more full-time workers (averaging at least 30 hours per week) ought to be in compliance. Once the determination has been made of being a large employer, the minimum value standards of contributions from the employees is set. This value cannot exceed 9.5% of the worker’s income (based on their W-2 wage information).
We expect more guidance on this issue since employees’ contributions to their dependents are higher than their own. Otherwise, an employee offered qualified coverage by their employer, may not use the public exchange, unless they can prove their employer-sponsored coverage is unaffordable.
The prediction is that high deductible health plans are the most likely to qualify for the minimum value standards. Guidance so far has indicated that employer contributions toward HSA and HRA plans will count toward the minimum value. What hasn’t been determined yet is if 100% of the amount will count toward the plan or if it’s discounted in the actuarial value formula that is being developed by the HHS.
2 – Public Insurance Exchanges
Employers are required to provide employees with a notice informing them of the public exchange. The government has postponed the March 1 deadline to provide this information to employers, but will soon release a notice or guidance about this requirement. There are still many questions unanswered about the state exchanges, federal exchanges and partnership exchanges and whether or not they will go in effect at the schedule date of October 2013.
3 – Waiting Periods
Under PPACA, waiting periods for health coverage cannot exceed 90 days. Employers will have factor in this new design upon new hires and incorporate it to shorten current long waiting periods. Workplaces with high turnover and long waiting periods will have to accommodate the new requirement. Seasonal, temporary or contract workers are classes that will need their hours monitored closely and will need to be evaluated for coverage eligibility in order to avoid penalties.
4 – Non-discrimination Prohibitions
New for insured plans in 2014 are the non-discrimination rules. Even though these rules are in effect, they have not been enforced. The non-discrimination policies make sure that a sponsor does not discriminate in favor of highly compensated employees and will include non-grandfathered fully insured plans. Prior to PPACA, only self-insured plans were subject to non-discrimination rules. Specifically, a plan cannot discriminate with respect to the eligibility to participate in the plan or with respect to the benefits offered under the plan.
5 – Wellness Programs
PPACA includes rules that prohibit plans from discriminating against individuals based on their health-related conditions. Plans cannot increase employee costs or impose restrictions on eligibility based on these factors. HIPAA regulations will govern wellness programs and the potential rewards for meeting the requirements under these programs. Beginning in 2014, PPACA expands HIPAA’s wellness program exemption to allow employers to offer employees incentives of up to 30%, and could be expanded to 50% (incentives related to tobacco cessation) of the cost of their coverage for meeting employer-defined health targets.
6 – Transitional Reinsurance Program
Effective from 2014 to 2016, this program is designed to help stabilize premiums in the individual health insurance market for those with pre-exisiting conditions. Health insurance issuers and third party administrators will pay the assessment to fund state nonprofit reinsurance entities, which will take on high-risk individuals.
The total amount of fees to be collected over the three year period is $25 billion. Reaching this goal will require and estimated annual contribution of $63 per covered life. HHS will revise this contribution rate near the end of the first year, when it can better estimate the number of covered lives for the calendar-year.
The IRS has confirmed that the reinsurance program fees are tax deductible by self-funded plan sponsors as ordinary and necessary business expenses.