You’re no doubt aware that the Patient Protection and Affordable Care Act (PPACA) includes massive changes in healthcare coverage for which employers must prepare. BLR recently presented a webinar featuring Blue Water Benefits consultant Mark Combs and Attorney Mark Jones, in the New York office of Pillsbury Winthrop Shaw Pittman. The two experts provided valuable information about PPACA.
First things first. You probably also know that changes mandated by the law extend from 2010 through 2018. Here, we’ll focus only on the changes that employers must make in their plans this year. But let’s be clear: These changes are effective for plan years beginning after September 23, 2010—6 months after the law became effective.
Combs and Jones clarified that the vast majority of plan years run on a calendar basis, beginning January 1, 2011. So that’s the true effective date for most changes. A few employers, they noted, have even less time to prepare, because their plan years match their fiscal years, beginning October 1, 2010 or even September 1.
Whenever your plan year begins, we’ll cover only the changes you must make to prepare for your next plan year. The three first steps recommended by Combs and Jones: Take a deep breath, and don’t panic; remember that all employers are in the same boat. Second, rely on your “brain trust”—your broker, your insurance carrier, your benefits attorney, and other sources. And third, quickly gather all your healthcare records and contracts, including any reports of how your employees are using the healthcare coverage you provide.
Here are the soonest changes that affect all plans, both self-insured and fully insured.
- Plans cannot impose preexisting condition exclusions on anyone under the age of 19 (for plan years starting on or after Jan. 1, 2014, that prohibition will apply to participants of any age).
- Plans may not set eligibility rules based on health status, medical condition, claims experience, genetic information, disability, and so forth. But, employers will be permitted to offer more generous wellness programs (such as smoking cessation, weight loss, or fitness activities) to employees.
- Plans must extend coverage to any participant’s children younger than 26, without limiting that to full-time students or unmarried children.
- Plans may not impose a lifetime dollar limit on “essential health benefits”—which have yet to be defined by federal regulators. This change will not apply to dental and vision care, say Combs and Jones, but typically to retiree, mental health, and out-of-network care.
- Annual limits that your plan sets on essential health benefits will be capped until plans starting on or after Jan. 1, 2014, when all limits will be barred.
- Once an employee is a covered participant, no plan can rescind his or her coverage, unless the person has committed fraud.
More “Most-Immediate” Healthcare Changes
Combs and Jones devoted considerable time during the BLR webinar to discussing the most-immediate changes looming in healthcare insurance for employers.
- As soon as final PPACA regulations are issued, employers with at least 200 employees must implement automatic enrollment of all new hires in the least expensive healthcare plan offered by the organization—unless an employee opts out or picks a different coverage level.
- Beginning Jan. 1, 2011, over-the-counter drugs other than insulin will not be reimbursable through flexible spending accounts (FSAs), health savings accounts, or health reimbursement accounts—unless a doctor writes the patient a prescription.
- Beginning Jan. 1, 2013, salary-reduction contributions to FSAs will be capped at $2,500, although they will be indexed to inflation.
- And, by 2014, employers must ask new employees to wait no more than 3 months before being covered under the organization’s healthcare plan.
The above changes apply to employers’ existing healthcare coverage plans. The following other measures in the law affect only new employer plans:
- For plan years starting on or after Sept. 23, 2010, new plans may not limit eligibility for coverage based on full-time employee’s wages or salary. Eligibility rules slanted in favor of higher-paid workers will be barred.
- No copayments or deductibles may be charged for preventive care, such as immunizations or screenings.
- For plan years beginning on or after Jan.1, 2014, health insurers, but not self-insured plans, must accept every employer and individual who applies for coverage during open enrollment.
- And beginning Jan. 1, 2011, the U.S. Department of Health and Human Services is expected to offer a public plan for long-term care, and employees must be allowed to pay for its protection through payroll deductions.
Report, Filing and Communication Requirements
Here is the information Combs and Jones presented in a section called “Health Plan Reports, Filings, and Communications.”
- For plan years starting on or after Sept. 23, 2010, employer plans must distribute notices of new, written, internal and external appeals processes. The processes offer impartial review, give participants access to their records, and offer them a hearing on appeal.
- For tax years beginning Jan. 1, 2011, employers must disclose the aggregate cost of their health coverage plan on each participant’s W-2 form. Combs and Jones suggest Internal Revenue Service wants to track these expenses.
- Starting March 23, 2013, all new and existing plans must provide applicants and participants with uniform explanations of coverage, using standard definitions of common insurance and medical terms. Explanations cannot be more than four pages (in 12-point type) and must offer a contact for questions. Given the amount of confusion that coverage plans already create for employees, Combs believes this requirement is a bare minimum, and that wise employers will do much more.
- By 2014, each state must establish an “American Health Benefit Exchange” that offers affordable insurance options to individuals and employers with no more than 100 workers. Employers must inform their employees of these exchanges, how to contact them, and (if the employer’s plan covers less than 60% of the cost of benefits), that employees may be eligible for premium subsidies.
- Starting Jan. 1, 2014, employers that offer group coverage must provide free choice vouchers to any employee whose income is less than 400% of the federal poverty level and whose premium for the employer’s plan exceeds 8% of their household income. The vouchers are to be used to buy coverage through an exchange.
- And starting in 2014, employers with more than 100 employees must file annual reports to Health and Human Services that say whether they offer a healthcare plan and if so, the waiting period for eligibility, the cost of the cheapest plan for each enrollment category, how much the employer pays toward the costs of each plan, the number of participants for each, and each participant’s name and address.
Credits, Subsidies, Penalties and Taxes
Finally, here’s what Combs and Jones shared about “Credits, Subsidies, Penalties, and Taxes” under the new law:
- Starting in 2010, employers with no more than 25 full-time employees and average annual wages not exceeding $50,000 may receive a sliding-scale tax credit of up to 35% of the employer’s premium costs for group coverage. In 2014, the maximum credit will rise to 50% of coverage obtained through an exchange, but the credit applies for only 2 consecutive years.
- By June 21, 2010, Health and Human Services must set up a reinsurance program to reimburse employers for up to 80% of the cost of providing health insurance to retirees between the ages of 55 and 64, including their spouses and dependents. This program will expire on Jan. 1, 2014, or when the $5 billion runs out, whichever is sooner.
- Starting with plan years on or after Jan. 1, 2014, employers of 50 or more with at least one worker who gets subsidized coverage through an exchange will pay a “free-rider penalty” of not over $2,000 times the number of full-time employees minus 30.