10 Things Employers Must Know to Navigate the ACA: Part 1

For anyone in the health care delivery, insurance, legal, tax, HR or employee benefit fields the compliance implications of the Affordable Care Act and “what if” risk management parallel strategy projects have been staggering.  Add to that the fact that we all eagerly await the Supreme Court ruling on the individual mandate and potential ripple effect of the severability issue on each of the stakeholders and components of the law.

Some of us have adopted a “see no evil hear no evil” approach and do not want to know anything until it is absolutely certain that action must be taken. Others want to plan out every possible path or scenario to be best prepared even as such things as free-choice vouchers, the 1099 rule, and the CLASS Act are picked off and are no longer worth tracking.

One thing I advise clients as a way to avoid panic or circle-the-wagon reactions is to remember the overall goals of Reform:

  • Cover more of the uninsured to address the drain on our economy, businesses, and hospitals of the burden of uncompensated care (something we all agree on, correct?),
  • Prepare for potential supply issues in the area of primary care,
  • Re-engineer reimbursement models and deploy technology to encourage quality outcomes versus wasteful transactional care;
  • Prevent insurance companies from achieving excessive profits by refusing coverage to those who need care the most;
  • Create baselines for what is considered adequate or qualified coverage in both the individual and employer group markets

While the initial year after enactment focused on insurance reforms such as enhancing and creating standards for preventive care coverage, removing lifetime limits, and creating equal access for dependents, this year has been somewhat of a “behind the scenes” year from the employer perspective since the focus has been on delivery system initiatives such as rules on ACOs and PCMHs, Medicare/Medicaid payment reforms, and laying the groundwork for state-based exchanges.

Even while the future of ACA hangs in the balance due to the pending Supreme Court Ruling there are items that employers need to be aware of and plan for in 2012-2013 and in looking forward to 2014.  We summarize those items that we deem most pertinent below:

1.      SBC Final Rule and Templates:

The Affordable Care Act (ACA) requires group health plans and health insurance issuers offering group or individual health insurance coverage to provide enrollees a summary of benefits and coverage explanation that “accurately describes a plan’s benefits and coverage.” The SBC requirement applies to both grandfathered and non-grandfathered health plans and takes effect by September 23, 2012.  The requirements to provide an SBC, notice of modification, and uniform glossary apply for disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period (including re-enrollees and late enrollees) beginning on the first day of the first open enrollment period that begins on or after September 23, 2012 (moved from the initial date of March 23, 2012).

Final Rules and Regulations, as well as a Compliance Guide and Templates can be found here:

2.      Patient-Centered Outcomes Research Institute and Comparative Effectiveness Research Fee:

The ACA created a Patient-Centered Outcomes Research Institute (PCORI) to conduct research evaluating and comparing health outcomes and the clinical effectiveness, risks and benefits of medical treatments. The PCORI’s work will be paid for by a Patient-Centered Outcomes Research Trust Fund, which will be funded in part through the comparative effectiveness research fees.

On April 12 a Proposed Rule was issued by the U.S. Treasury Department and the Internal Revenue Service (IRS).  Although not yet final, this Proposed Rule provides more information on calculation, reporting and payment of the fee. The comparative effectiveness research fees are to be paid by health insurance issuers and sponsors of self-insured group health plans, who should prepare for these new plan expenses.  Comments on the Proposed Rule are being accepted through July 16, 2012, and the IRS will hold a public hearing on the proposal on Aug. 8, 2012. Plan sponsors may rely on the Proposed Rule pending the issuance of final regulations. While final regulations will be effective as of April 17, 2012 (the date the proposal was published in the Federal Register), to the extent that the final regulations are more restrictive than the proposed rule, they will be applied only prospectively.

The fee structure subject to the final rules determination is laid out to be:

Reporting and payment using IRS Form 720 is required by July 31 of the calendar year immediately following the last day of the policy or plan year.

3.      Technical Guidance: Frequently Asked Questions from Employers Regarding Automatic Enrollment, Employer Shared Responsibility, and Waiting Periods http://www.dol.gov/ebsa/newsroom/tr12-01.html

4.      Automatic Enrollment: This provision is basically on hold until 2014.

Section 18A of the Fair Labor Standards Act (FLSA), as added by section 1511 of the Affordable Care Act, directs an employer to which the FLSA applies, and that has more than 200 full-time employees, to automatically enroll new full-time employees in one of the employer’s health benefits plans (subject to any waiting period authorized by law), and to continue the enrollment of current employees in a health benefits plan offered through the employer. Section 18A further requires adequate notice and the opportunity for an employee to opt out of any coverage in which the employee was automatically enrolled.

On December 22, 2010, the Departments issued frequently asked questions (FAQ) on section 18A of the FLSA, www.dol.gov/ebsa/faqs/faq-aca5.html which noted that the statute provides that employer compliance with the automatic enrollment provisions of section 18A shall be carried out “[i]n accordance with regulations promulgated by the Secretary [of Labor].”That FAQ also stated that it is the view of the Department of Labor that, until such regulations are issued, employers are not required to comply with section 18A. Finally, the FAQ indicated that the Department of Labor intends to complete this rulemaking by 2014.

5.      Employer Shared Responsibility (a.k.a. Play-or-Pay)

The employer shared responsibility provisions, contained in section 4980H of the Internal Revenue Code (Code), provide that an applicable large employer (for this purpose, an employer with 50 or more full-time equivalent employees) could be subject to an assessable payment if any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction payment. Generally, this may occur where either:

  • The employer does not offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; or
  • The employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that either is unaffordable relative to an employee’s household income or does not provide minimum value.
  • For purposes of section 4980H, a “full-time employee” is an employee who is employed on average at least 30 hours per week.

The Treasury Department and the Internal Revenue Service (IRS) have requested and received comments on a number of issues and potential approaches to interpreting and applying the employer shared responsibility provisions. In particular, IRS Notice 2011-36 (www.irs.gov/pub/irs-drop/n-11-36.pdf  ) described and requested comments on a possible approach that would use a “look-back/stability period safe harbor” method that employers might use in determining whether current employees (those who are not newly-hired or transferred) are full-time employees for purposes of the employer shared responsibility provisions. Comments were also requested on potential rules for determining full-time status of new employees and employees who move into full-time status mid-year.

"One thing I advise clients as a way to avoid panic is to remember the overall goals of Reform."

In addition, Treasury and the IRS have described (in IRS Notice 2011-73 www.irs.gov/pub/irs-drop/n-11-73.pdf  a safe harbor allowing employers, for purposes of determining whether they owe an assessable payment under section 4980H(b), to use an employee’s Form W-2 wages (as reported in Box 1) instead of household income in determining whether coverage offered is affordable. Treasury and the IRS requested and received comments on the safe harbor.

Stay tuned for the next installment, which will be posted here late next week!

About Pia Brown

Pia has worked in the Employee Benefits arena for more than 16 years. Since joining Ovation Benefits in 2006 as a Senior Account Manager, she has progressed to Managing Consultant and now leads a team in consulting, design, and execution of Employee Benefit Programs that support and enhance each individual employer’s business strategy. Known for her shoot from the hip, consultative approach, Pia consistently helps move strategy forward. Together with her team, Pia supports employers that want more than “just benefits” for their business, their employees and their families. Pia began her career at Anthem Blue Cross Blue Shield in their rotational internship program, spending time in provider relations, marketing, member services, underwriting, sales and account management. She was a Team Lead in the Major Account Sales unit, specializing in large employer group health, dental and ancillary program designs. Pia completed her Certified Employee Benefit Specialist (CEBS) designation from the International Foundation of Employee Benefits and Wharton School of Business in 2010. She lives in Farmington with her family, including two daughters, Abby, five, and Margaret, 18 months, who keep her lovingly occupied. When there is free time, she enjoys literature, law and spending time with friends and family.