Attention Employers: Is your company in compliance with the Affordable Care Act?

When the U.S. Supreme Court last week held the individual mandate provision of the Patient Protection and Affordable Care Act to be constitutional, the Court also upheld all of the other employer and group health plan provisions in the Act. With effective dates of the Act’s various provisions spread over four years, employers should now be reviewing all of the Act’s provisions and confirming that they – and their group health plans – are in compliance with the provisions currently effective, and are taking the necessary steps to comply with provisions becoming effective in the future.

Group Health Plan Provisions

Employer-sponsored group health plans should already be in compliance with the following requirements of the Act:

• Reimbursements for non-prescription drugs (other than insulin) not permitted from health flexible spending accounts or health reimbursement accounts (applicable to expenses incurred after 12.31.2010)
• Pre-existing condition exclusions prohibited for children under age 19 (plan years beginning after 9.22.2010)
• Recissions of coverage prohibited (plan years beginning after 9.22.2010)
• Phase-out of annual limits on essential health benefits (plan years beginning after 9.22.2010, with annual limits totally prohibited for plan years beginning after 2013)
• Life-time limits on essential health benefits prohibited (plan years beginning after 9.22.2010)
• Children up to age 26 must be eligible for otherwise available coverage for children (plan years beginning after 9.22.2010; grandfathered plans not required to offer until 2014 if child has own employer-based coverage available)
• First-dollar coverage for preventive services required (plan years beginning after 9.22.2010; non-grandfathered plans only) 
• Emergency services must be covered without pre-authorization (plan years beginning after 9.22.2010; non-grandfathered plans only)
• Out-of-network emergency services must be covered at in-network level (plan years beginning after 9.22.2010; non-grandfathered plans only)
• Enhanced internal and external procedures required for appeals of denied claims (plan years beginning after 9.22.2010; non-grandfathered plans only)
• Enhanced access to participating providers required (plan years beginning after 9.22.2010; non-grandfathered plans only)

Employer-sponsored group health plans need to be ready to comply with the following requirements in the near future:

• Summary of Benefits and Coverage must be distributed to plan participants (initial distribution to all participants required for open enrollment periods beginning after 9.22.2012; initial distribution to all new enrollees required for plan years beginning after 9.22.2012)
• Employee contributions to health flexible spending accounts must be limited to $2,500 (flexible spending account plan years beginning after 12.31.2012)
• Pre-existing condition exclusions prohibited for all covered individuals (plan years beginning after 2013)
• Waiting period to participate in plan cannot exceed 90 days (plan years beginning after 2013)
• Coverage must include essential health benefits (plan years beginning after 2013; non-grandfathered plans only)
• Plans may not discriminate in coverage or benefits against individuals in approved clinical trial (plan years beginning after 2013; non-grandfathered plans only)
• Increased limits on plan-based rewards for complying with wellness programs (plan years beginning after 2013)
• Non-discrimination rules for fully-insured group health plans (effective after regulations published)

Employer Provisions

Qualifying employers are currently eligible for the following provisions of the Act:

• Small employer tax credit for providing employer-sponsored health care (beginning with 2010 tax year; maximum credit increases for tax years after 2013)
• Reinsurance program for retiree health care expenses (claims incurred after 5.31.2010; program closed to claims incurred after 12.31.2011)
• Simple cafeteria plans for small employers (tax years beginning after 2010)

Employers need to be prepared to comply with the following provisions of the Act:

• Reporting cost of employer-sponsored health care on Forms W-2 (beginning with calendar year 2012 Forms W-2 for employers that filed at least 250 Forms W-2 for the prior calendar year; employers that file fewer than 250 Forms W-2 not subject to this requirement until IRS issues further guidance)
• Tax deduction not permitted for retiree prescription drug expenses applied to receive Medicare Part D subsidy (tax years beginning after 2012)
• Withholding of increased Medicare Hospitalization Insurance on wages in excess of $200,000 (calendar years beginning after 2012)
• Payment of comparative research initiatives annual fee (plan years ending after 10.1.2012)
• Employer shared responsibility penalty for failure to offer affordable group health insurance (calendar years beginning after 2013)
• “Free choice” vouchers required to be given to some employees (calendar years beginning after 2013)
• Automatic enrollment of eligible employees in group health plan (employers with more than 200 full-time employees; effective after regulations issued)
• Excise tax on “Cadillac” group health plans (calendar years beginning after 2017)

Employers that were waiting for the Supreme Court’s decision before moving ahead with preparations for the compliance deadlines above need to start moving quickly to ensure that they and their group health plans meet the applicable effective dates. With resolution of the legal challenges to the Act, the Internal Revenue Service and the Departments of Labor and of Health and Human Services are expected to issue the remaining required regulations and other guidance in the near future, adding to employers’ short-term compliance burdens.

For more information, please contact:

Antoinette M. Pilzner

248.220.1341 

apilzner@mcdonaldhopkins.com