What Does Healthcare Reform Mean for You and Your Business?

by Patrick Casinelli, RHU, REBC - Principal
With the exception of the limits on the federal government’s authority to withhold Medicaid funding, all provisions of the Affordable Care Act (ACA) stand, and compliance efforts likely will move ahead at full speed. In preparation for the major coverage expansion to occur under the ACA in 2014, expect a host of regulations dealing with the definition of minimum essential coverage, employer coverage and reporting requirements, and an array of new taxes and fees, making compliance even more complex.

Important requirements before 2014

  • Summary of benefits and coverage – For any open enrollment periods beginning on or after Sep. 23, 2012, group health plans must provide employees with a new notification called a Summary of Benefits and Coverage (SBC). The SBC is similar to a Summary Plan Description but is intended to be a more concise document focusing on available coverages, cost-sharing provisions, benefit limitations, and similar issues. The SBC, however, is not a substitute for a Summary Plan Description. The group health plan must provide a SBC on an annual basis, typically during each open enrollment period. Failure to provide an SBC may result in a penalty of up to $1,000 per enrollee/participant.
  • W-2 reporting requirements – Employers must report the value of employees’ health coverage on annual W-2 forms. This requirement is effective for the 2012 tax year, so W-2 forms issued in January 2013 should include this information. Employers that issue fewer than 250 W-2 forms are currently exempt.
  • Changes to healthcare spending accounts – Effective on Jan. 1, 2013, the definition of “qualified medical expense” is narrowed, which will affect reimbursements and withdrawals under all types of healthcare accounts. Over-the- counter medications will no longer be a “qualified medical expense.” Additionally, the amount employees could contribute to healthcare flexible spending accounts will be capped at $2,500.
  • Nondiscrimination requirements for fully insured plans – Group health plans that are fully insured will be subjected to annual testing to determine whether their benefits are disproportionately favorable to highly compensated employees. The effective date of these requirements has been delayed, and further guidance is expected before they become effective.

Important requirements beginning in 2014

  • Penalty for no coverage offered – Employers with more than 50 employees that do not offer any group health coverage and have at least one full-time employee who receives a premium tax credit (toward coverage through an exchange) will be assessed a monthly penalty. The penalty is calculated as $166.67 per month (1/12 of $2,000 annual penalty) multiplied by the number of full-time employees in that month, excluding the first 30 employees.
  • Other possible penalty – Employers with more than 50 employees that offer group health coverage, but still have at least one full-time employee receiving a premium tax credit (toward coverage through an exchange) will pay $3,000 for each employee receiving a premium credit, subject to certain overall limits. These provisions apply even to grandfathered health plans.
  • Maximum waiting period – A group health plan may not impose a waiting period on new participants and their dependents in excess of 90 days. This requirement also applies to grandfathered health plans.
  • Wellness program incentives – The maximum incentive, which may be offered in connection with an employer sponsored wellness program, is raised from 20 percent to 30 percent of the applicable premium.

Preparing to implement these new requirements over the next 18 months will be challenging and time-consuming.  It’s important to begin preparing and coordinating with your advisor (attorney/CPA/insurance broker) as soon as possible. Companies should be aware of how each provision will affect it and its employees.