Now that the U.S. Supreme Court has pronounced the healthcare reform law, or Affordable Care Act, constitutional, we asked Fisher & Phillips’ attorney Sheldon Blumling, an expert in employee benefits, to outline what employers need to do in response.
Most expensive or soonest? For BLR subscribers, Blumling chose to start with the issues that will arise the most immediately. The first of them is what to do with medical loss ratio (MLR) rebates. Employers are now or soon will be receiving checks from their insurance carriers, representing administrative expenditures by the carriers that exceeded prescribed levels. Does the rebate belong to the company? "Not just to the employer," says Blumling. "Under ERISA, [the Employee Retirement Income Security Act], all assets of a plan belong to the plan, including its participants."
Having looked at its plan documents then, an employer should divide up the rebate between participants and the company based on plan requirements, including the percentage of premiums paid by employees. In reality, however, most rebates are so small that many employers, Blumling reports, have simply rebated all of it to participants, either by check or, preferably, through what he calls a "premium holiday." That way, the rebate doesn’t get mixed in with employees’ income. And, even though the rebate is based on 2011 coverage and claims, employers may simply allocate it among current participants.
Here are three more upcoming requirements. A second obligation is that at employees’ next open-enrollment date, employers must provide a Summary of Benefits and Coverage. If you are fully insured, your carrier will provide this, but you must include it with other material you hand out during enrollment. If you’re self-insured, your third-party administrator is likely to provide the summary.
Third, as many employers are aware, beginning with 2012 W-2s for employees, the forms must show the total cost of any group healthcare coverage provided to the employee. Remember that if you offer an EAP, the cost per employee must be included. The final figure is not taxable income, just an informational item. So HR should start now to coordinate with your company’s payroll provider, which will need input it’s never needed in the past. Programming for this addition to W-2s is likely to take some time.
Finally, the fourth development that’s coming up soon is a new limit on medical Flexible Spending Accounts--just $2,500 beginning in 2013. So before January 1, modify your cafeteria plan to reflect this change.
Let’s look ahead at big-ticket items. Although the recent focus has been on the individual mandate, employers must consider the employer "play or pay" mandate, which kicks in for companies with 50 or more full-time equivalents beginning in 2014. Note that a 30-hour week counts as full time. For more on healthcare reform, see "ACA: Prepare now for healthcare changes, potential penalties."