Obama's Victory Secures Future of the Affordable Care Act
The battle over health care reform appears to be over, as President Obama's re-election eliminated the last major threat to the his signature healthcare reform law, the Affordable Care Act ("ACA"). The US Supreme Court's June 2012 decision upheld the ACA in its entirety, which means that employers must now prepare to implement its provisions.
In addition to those requirements which have already gone into effect, the ACA imposes several duties on employers and plan sponsors which are effective between now and 2014, including:
- Mandatory Employee Coverage – Employers with an average of 50 full-time employees must offer health coverage that meets minimum essential coverage requirements or pay a fine ($2,000 per employee over 30 FTEs). Effective: January 1, 2014.
- Summary of Benefits and Coverage – Employers are required to provide a standardized summary of benefits and coverage ("SBC") to all applicants and enrollees at initial enrollment and annual enrollment. Effective: Plan years beginning on or after September 23, 2012.
- W-2 Reporting Requirement – Employers are required to report the aggregate cost of applicable employer-sponsored health coverage on W-2s provided to employees. Effective: Calendar year 2012.
- Comparative Clinical Effectiveness Research Fee – The ACA imposes a fee on all health plans to fund comparative clinical effectiveness research. Effective: Plan years beginning November 1, 2011.
- Limit on Flexible Spending Account Contributions – Employee pre-tax contributions to a Section 125 health flexible spending account ("FSA") will be limited to $2,500 annually. Effective date: Plan years beginning on or after January 1, 2013.
- Medical Loss Ratio Rebates – Employers must begin handling medical loss ratios rebates received from insurers in accordance with guidance issued by the Department of Labor (for ERISA plans) and the Department of Health and Human Services (for non-federal governmental and church plans). Effective: First applied to 2011 plan year and the first rebate is due by August 1, 2012.
- Health Insurance Exchange Notices – Employers must prepare notices to employees as to the availability of health insurance coverage through the state’s health insurance exchange, and eligibility for premium tax credits through the exchange, if the employer’s health care coverage does not satisfy the ACA’s minimum value test. Effective: March 2013.
While most employers are generally aware of the ACA's requirements, implementation of the legislation remains unclear without further regulatory guidance addressing vague and undefined provisions. Following President Obama’s victory, employers can expect increased activity by federal regulatory agencies to address critical aspects of the ACA, such as:
- Essential Health Benefits – Guidance on the definition of essential health benefits, which will determine which benefits the health insurance exchange plans must offer and, for insured or self-insured plans, which benefits are subject to the prohibition on lifetime and annual limits (for plan years beginning before January 1, 2014).
- Minimum Value Test – Rules for determining whether a plan satisfies the ACA's "minimum value" test (i.e., covers at least 60% of the costs of benefits that the employer has determined will be provided under its plan).
- Shared Responsibility – For employers with 50 or more full-time employees, the ACA's “shared responsibility” provision imposes penalties on the employer if any full-time employee obtains subsidized coverage through a health insurance exchange, either because the employer does not offer coverage at all or because the coverage offered is "unaffordable" or does not satisfy the ACA’s "minimum value test."
- "Full-Time" Employees – Standards for calculating the number of full-time employees.
- Automatic Enrollment – Standards addressing the ACA's automatic enrollment provision, which requires employers with 200+ full-time employees to automatically enroll employees into a default plan if the employee does not affirmatively elect health plan coverage or opt-out.
- Wellness Plans – Rules governing the design of employee-sponsored wellness programs and the ACA’s employee incentives to participate in such wellness plans.
Employers should take immediate action to begin the process of implementing ACA requirements, communicate plan changes to employees, and continue monitoring regulatory activity regarding implementation guidance. The Department of Labor website provides regulatory guidance and FAQs.
If you require assistance complying with the ACA's employer requirements, you may contact Amy Kauppila at firstname.lastname@example.org or (206)390-1071.