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The 2012 Elections: Deal with it

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Maintenance of the status quo in Washington, D.C. (the re-election of Barack Obama, with a Republican majority in the House of Representatives and a Democratic majority in the Senate) means that implementation of the Patient Protection and Affordable Care Act (PPACA) likely will move forward largely as the law was passed in 2010.

Some have speculated that pressure to reduce the federal deficit may result in reduced funding for parts of the law, such as the premium credits available to individuals with lower incomes, but it is far too soon to tell how this factor may play out.

PPACA drafters left the task of working out many of the details to the the U.S. Department of Labor, the Internal Revenue Service and the U.S. Department of Health and Human Services (HHS).

Because PPACA leaves so many questions unanswered, employers and their benefits advisors can expect that an enormous number of regulations and other types of guidance will be issued between now and the end of 2013.

Of greatest interest to many employers is the employer shared responsibility (“play or pay”) requirement.

As of Jan. 1, 2014 employers who have 50 or more full-time or full-time equivalent employees must offer “minimum essential” (basic) medical coverage for their full-time (30 or more hours per week) employees or pay a penalty of $2,000 per full-time employee, excluding the first 30 employees.

Employers who offer coverage deemed not “affordable,” or who fail to provide “minimum value” must pay a penalty of $3,000 for each employee who receives a premium credit. (Coverage is not “affordable” if the employee’s cost of single coverage is more than 9.5 percent of income. Coverage does not provide minimum value if it is expected to pay less than 60 percent of anticipated claims.)

The health insurance exchanges are also scheduled to begin operation in January 2014. (While PPACA is a federal law, the health insurance exchanges were designed to be operated by the states.)

A number of states have delayed work on the exchanges pending the outcome of this election, while a few have affirmatively decided not to create a state exchange. If a state is unable or chooses not to create an exchange, the federal government will run the exchange on the state’s behalf.

According to the Kaiser Family Foundation, as of Sept. 27, 2012, California, Colorado, Connecticut, District of Columbia, Hawaii, Kentucky, Maryland, Massachusetts, Nevada, New York, Oregon, Rhode Island, Utah, Vermont, Washington and West Virginia had established state exchanges.

Arkansas, Delaware and Illinois were planning for a partnership exchange with the federal government.

Alaska, Florida, Louisiana, Maine, New Hampshire, South Carolina and South Dakota had decided not to create an exchange. That means HHS will run exchanges for the residents of those states.

The remaining states are studying their options, but they could well end up with a federally run exchange at least for 2014, because the deadline to submit the state’s plan for implementing an exchange is next week — Nov. 16.

It remains to be seen whether the federal government will be able to set up so many exchanges on behalf of the states by the 2014 target date.

Because employees may choose to obtain coverage through the exchange even if they have access to coverage through their employers, and the exchanges likely will request information from employers, even those employers who plan to continue their current coverage will want to have an understanding of the status of their state’s exchange.

In addition to deciding whether to “play” (continue providing health coverage) “pay” (pay penalties), employers (including those with fewer than 50 employees) have a number of compliance obligations that either already are in effect now or will take effect between now and 2014. These include: 

  • Expanding first dollar preventive care to include a number of women’s services, including contraception, unless the plan is grandfathered.
  • Distributing medical loss ratio (MLR) rebates, if any were received from the insurer.
  • Issuing of summaries of benefits and coverage (SBCs) to all enrollees.
  • Reducing the maximum flexible spending account (FSA) employee contribution to $2,500, if the employer sponsors a health FSA, beginning with the 2013 plan year.
  • Withholding an extra 0.9% FICA on those earning over $200,000 beginning in 2013.
  • Providing information on the cost of coverage on each employee’s 2012 W-2, if the employer issued 250 or more W-2’s in 2011.
  • Providing a notice about the upcoming exchanges to all eligible employees in March 2013.
  • Calculating and paying the Patient Centered Outcomes Fee in July 2013 if the plan is self-funded (insurers are responsible for calculating and paying the fee for insured plans, but will likely pass the cost on).
  • Working with the exchanges to identify those employees eligible for premium tax credits.
  • Removing annual limits on essential health benefits and pre-existing condition limitations for all individuals, beginning with the 2014 plan year.
  • Limiting eligibility waiting periods to 90 days, beginning with the 2014 plan year.
  • Reporting to the IRS on coverage offered and available (the first reports are actually due in 2015 based on 2014 benefits).

UBA has also developed a PPACA Decisions Executive Summary, which includes an overview of PPACA, decisions employers need to make regarding PPACA and additional obligations employers must fulfill between now and 2014.

To reflect the fact that PPACA applies different requirements to businesses of different sizes, my organization has developed support guides aimed small, midsize and large businesses.

Employers will have a desperate need for experienced advisors who can help them understand their options and obligations under PPACA. 

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