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HEALTH CARE REFORM: THE SUPREME COURT HAS SPOKEN; NOW WHAT?
Alice E. HelleBrownWinick
666 Grand Avenue, Suite 2000Des Moines, IA 50309-2510
Telephone: 515-242-2407Facsimile: 515-323-8507
E-mail: [email protected]
SUPREME COURT DECISION
• Issued June 28, 2012
– Individual mandate upheld
– Medicaid (Title XIX) expansion narrowed
INDIVIDUAL MANDATE
• Constitutional since the penalty for failure to maintain health coverage is essentially a tax
• Mandate is effective 2014 (not an employer obligation)
MEDICAID EXPANSION
• Act expands Medicaid to larger group of low-income people
• Court said Congress may expand coverage and require states that accept funds to comply, but may not take away existing Medicaid funding from states that don’t provide for the expansion
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
• Small Employer Tax Credits
• Dependent Benefits for Adult Children (up to age 26)
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
• No Lifetime Limits on Essential Health Benefits
• Restricted Annual Limit on Essential Health Benefits (no less than $750,000 for 2011)
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
• 100% Coverage Preventative Services and immunizations – No Cost Sharing
o N/A to Grandfathered Plans (but grandfathered plans may adopt)
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
• Rescissions of Coverage Not Allowed Absent Fraud, Misrepresentation or Nonpayment of Premiums
• No Pre-Existing Condition Limitations for Children Under Age 19
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
• Internal and External Appeals Provisions
o N/A to Grandfathered Plans
• OTC Drugs Not Reimbursable by HSA/FSA/HRA Absent a Prescription
o Exception for Insulin
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
• Simple Cafeteria Plans
o Deemed to Satisfy Nondiscrimination Requirements of IRC § 125
o Limited to Employers w/ Fewer than 100 Employees
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
• Nondiscrimination Rules – IRC § 105(h)(2) – DELAYEDo
Previously applied only to self-insured health plans
o Generally prohibit discrimination in favor of top 25% of employees
o Excise tax of $100/day/employeeo N/A to Grandfathered Planso Rules were to be effective for plan years beginning
after 9/23/10 Delayed indefinitely for regulations Comment period expired in March of 2011
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED• Reporting on Form 1099 – REPEALED
o Would have greatly expanded 1099 reporting requirements
• Reporting on Form W-2 – DELAYEDo Value of employer-provided health insurance to be
reported on Form W-2 (informational only)o Originally effective for 2011
Now effective for 2012 for employers who issue 250+ W-2s
Effective for 2013 for smaller employerso IRS recently issued Notice 2012-9
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
• Automatic Enrollment – DELAYED
o Employers w/ 200+ employees will be required to automatically enroll new employees
o Delayed indefinitely for regulations
o Not likely to take effect prior to 2014
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
• Small Business Wellness Grants – DELAYED
o Grants totaling $200 million over 5 years o Employers with fewer than 100 employees
and no existing wellness program eligible for grants
o Was to be available 2011o Delayed indefinably – Congress did not fund
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
• CLASS1 Program – SUSPENDEDoVoluntary long-term care insurance program for
working adultsoChampioned by Senator KennedyoWould have provided up to $50/day for nursing home
care or home health care after years of paying monthly premiums
oNo employer obligation, but employers permitted to provide for participation by payroll deduction
_______________1Community Living Assistance Services and Supports
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
o Statute required program to be affordable, self-sustainable and actuarially sound for at least 75 years Administration analysts determined that basic
CLASS insurance plan might cost $235 - $391/mo for $50/day benefit
Program suspended due to concern that not enough people would enroll to make it sustainable
KEY PROVISIONS OF THE AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
• Free-Choice Vouchers – REPEALEDo Would have been effective in 2014 for employers of
50+ employees
PREVIEWS OF COMING ATTRACTIONS
• Summary of Benefits and Coverage (SBC)o Uniform summary of benefits in specified format
12-point font No more than 4 duplexed pages Must include a uniform glossary of terms Must include at coverage examples illustrating the
plan’s coverage for normal delivery of a baby and for management of type 2 diabetes
o Template provided by DOL – Copy is included in your materials
o Also available at www.dol.gov/ebsa/pdf/SBCtemplate.pdfo Purpose is to help participants better understand their
health coverage and other coverage optionso Effective for plan years beginning after September 23, 2012
PREVIEWS OF COMING ATTRACTIONS
• Continued Phase-In of Annual Limit Rule – Essential Health Benefits
o 09/23/11 - $1,250,000
o 09/23/12 - $2,000,000
o 2014 – no annual limits permitted
PREVIEWS OF COMING ATTRACTIONS
• Limits on Health Flexible Spending Arrangements (FSAs)
o Contributions limited to $2,500/year effective 2013
PREVIEWS OF COMING ATTRACTIONS• FICA Medicare Tax Rate Increase for Certain Employees
o Effective 2013
o The Medicare tax rate is increased from 1.45% to 2.35% for earnings over the threshold of $200,000 for an individual or $250,000 for a married couple filing jointly
o The employer’s portion of the tax is not affected
o The employer will be responsible for collecting the additional Medicare tax due from the employee
o Employers are not responsible for determining a spouse’s earnings
PREVIEWS OF COMING ATTRACTIONS
• Plan Amendments – 2014
o No pre-existing condition limitationso No waiting periods over 90 dayso No out-of-pocket limits greater than the limits for high-
deductible health plans (currently $5,950/11,900) N/A to grandfathered plans
o Wellness program rewards based on satisfaction of health standards can’t exceed 30% of the cost of employee-only coverage (currently 20%) • N/A to grandfathered plans
o Expanded coverage of clinical trials N/A to grandfathered plans
PREVIEWS OF COMING ATTRACTIONS• Exchange Notice
o Notice deadline is March 31, 2013o Notice must inform employees of:
The existence of the exchanges The services provided How to contact the exchanges to request
assistance. The availability of premium assistance if the
employer’s share of the cost of benefits is less than 60%
The circumstances under which the employee loses employer contributions to the health plan and explaining that tax-free employer contributions may be lost when an employee enrolls in an exchange plan
PREVIEWS OF COMING ATTRACTIONS
• State Insurance Exchanges – 2014
o “Marketplace” where individuals and small employers (under 50 employees) may purchase health insurance
o Must offer four levels of coverage with different benefit levels and actuarial values
o To participate, insurers must agree to charge the same premium for each Qualified Health Plan regardless of whether it is offered inside or outside the exchange
o Plans must offer plans similar in scope to “typical” employer-sponsored plans
PREVIEWS OF COMING ATTRACTIONS
• Reporting Requirements – 2014
o Coverage – IRC § 6055
Plans providing “minimum essential coverage” to an individual must file report with IRS with info re covered persons
Plans must also provide statement to individuals who were listed on report filed with IRS
o Additional Reporting – Large Employers – IRC § 6056
Applies to employers subject to § 4980H (50+ employees)
Must file report that includes info re premiums and contributions
PREVIEWS OF COMING ATTRACTIONS
• Individual Mandate – Effective 2014
o Individuals required to have health coverage or pay a penalty 2014 – greater of $95 or 1% of household income 2015 – greater of $325 or 2% of income 2016 - greater of $695 or 2.5% of income
o Subsidies
Premium assistance tax credits for individuals with income between 100% and 400% of the federal poverty level
Cost-sharing subsidies for individuals with income up to 250% of the federal poverty level to reduce out-of-pocket costs for plans purchased through an exchange
PREVIEWS OF COMING ATTRACTIONS
• Large Employer Mandate (50+)
o Must offer “minimum essential coverage” or pay a tax penalty
o If employer does not offer coverage, penalty is $2,000 per employee, except that number of employees is reduced by 30 in calculating the penalty
o If the employer offers coverage but doesn’t meet affordability and value tests, penalty is $3,000 for each full-time employee who receives premium assistance through an exchange
DETERMINING FULL-TIME EMPLOYEES FOR PURPOSES OF
LARGE EMPLOYER MANDATE
• Statute defines “full-time employee” as an employee who, on average, works at least 30 hours per week
• Notice 2012-58 issued in September
• Provides “safe harbor” method employers may use to determine whether variable-hour employees or seasonal employees are full-time employees
Website: www.brownwinick.comToll Free Phone Number: 1-888-282-3515
OFFICE LOCATIONS:
666 Grand Avenue, Suite 2000Des Moines, Iowa 50309-2510
Telephone: (515) 242-2400Facsimile: (515) 283-0231
616 Franklin PlacePella, Iowa 50219
Telephone: (641) 628-4513Facsimile: (641) 628-8494
DISCLAIMER: No oral or written statement made by BrownWinick attorneys should be interpreted by the recipient as suggesting a need to obtain legal counsel from BrownWinick or any other firm, nor as suggesting a need to take legal action. Do not attempt to solve individual problems upon the basis of general information provided by any BrownWinick attorney, as slight changes in fact situations may cause a material change in legal result.
