| By Dave Foxall
Benefits Management: A Primer on Health Care Reform
The Patient Protection and Affordable Care Act, referred to as the PPACA (which was closely followed by the amending Health Care & Education Reconciliation Act), may well be the most controversial legislation of recent years. Marking the biggest change to healthcare since the introduction of Medicare and Medicaid in 1965, the broad intent (at least at its simplest level) is to widen access to health benefits. While we can’t eschew all of the political implications that are obviously part and parcel with this latest health care reform, in summary the legislation aims to incentivize/encourage employer offerings of health benefits plans; overhaul healthcare provisions and costs in the U.S.; and reach into the realms of private and public health insurance services. That said, the provision subject to the most debate mandates that each individual (with some exceptions, mostly based on means/income) must maintain a minimum level of health coverage or pay a penalty. Yet, upon its passage into law, the PPACA was challenged as unconstitutional by no fewer than 28 states who filed individual and/or joint actions looking to overturn parts of the Act. While these acts certainly proved that deep issues with the new law existed at the state level (thereby calling into question the legislation’s tenure ability), it wasn’t until recent judicial action that some semblance of what these means for businesses moving forward could be ascertained.
National Federation of Independent Business v. Sibelius
With a final decision on June 28, 2012, the main focus of the case was on the so-called “individual mandate” and whether a penalty for individuals without health coverage was an unconstitutional tax. Granted, the case was not directly concerned with employers’ benefits plan administration (and by extension employee healthcare), but one of the possible outcomes of this case was that the whole PPACA could have been declared unconstitutional—a fact that had just about everyone holding their breath before acting on the provisions of the legislation. In the end, the opinion of the court (which was notably not unanimous among the Justices), upheld the constitutional nature of the PPACA—stating that the “individual mandate” was in line with Congress’ power to tax and spend. In essence then, according to law firm Pillsbury, all of the previously-implemented health insurance reforms (plus resulting changes to the Internal Revenue Code) remain in place, including:
- Retroactive rescission of coverage is prohibited (except in cases of fraud or intentional misrepresentation);
- Dollar limits for essential health benefits are likewise prohibited
- Pre-existing conditions are no longer grounds for exclusion from coverage (at this stage this only applies to children under the age of 19 but from 2014 will be extended to adults);
- The imposition of copayments, coinsurance fees and deductibles for recommended preventive services are prohibited on non-grandfathered plans; likewise, new internal and external claims procedures apply to such plans;
- Flexible spending accounts (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs) cannot be used to purchase over-the-counter medicines; and
- Employers with 25 or fewer full-time employees and average wages of $50,000 or less are eligible for a small business tax credit.
What Next for Health Care Reform?
Of note, the Supreme Court’s opinion that the individual mandate is a tax (albeit a constitutional one) will likely result in further attempts to repeal the PPACA via the legislative process. Until that happens though, the provisions of the PPACA will continue. As such, there are certain events which are relevant to employers in 2013 that need to be recognized. For instance, as Mercer points out, organizations should be cognizant of:
- $2,500 per plan year health FSA contribution cap (plan years on or after January 1, 2013);
- Comparative effectiveness group health plan fees begin;
- Annual dollar limits on essential health benefits cannot be lower than $2 million;
- Employers notify employees about exchanges;
- Medical device manufacturers' fees start;
- Higher Medicare payroll tax on wages exceeding $200,000/individual; $250,000/couples;
- Change in Medicare retiree drug subsidy tax treatment takes effect; and
- Exchanges initial open enrollment period to begin
However, bringing the issues down to a level of less “technical” detail (and an arguably more practical direction), it’s fair to say that the broad advice to employers remains constant:
- Bearing in mind the size and likely needs of your business and workforce, remember that health insurance exchanges will be in place by 2014 to facilitate the individual mandate. You need to understand how these exchanges will operate as well as issues such as subsidy criteria.
- There are new reporting and disclosure requirements (including the value of health coverage on employees’ W-2s) which will involve changes to your benefits administration systems and processes.
- Your plan documents and contracts must be up to date and reflect any necessary changes implemented by your service providers in response to the reforms. Providing accurate information to employees is critical.
The Latest on Health Care Reform
Whether the ruling from the Supreme Court is welcome or not may well depend on political affiliation. Either way though, the one thing it does offer is a degree of resolution (threats of repeal aside for the time being). Put simply, not all employers may like the reforms but at least they know they’re going ahead; a fact that does bring a degree of clarity to the immediate future and allows decisions on strategy to be made. As noted though in countless analyses, one of the unique consequences of this increasingly complicated compliance landscape is that more and more companies are considering a move towards outsourcing benefits administration to external service providers. As such, as the regulatory complexity (such as that found in the PPACA) increases, expect more and more companies weighing out the delegation of responsibility to emerge. After all, if you’re a company that is facing in-house expertise shortages in the wake of these added legislative hurdles, the option to outsource may have well just become a lot more attractive.
Categories: Benefits Administration
Tags: Healthcare Reform Act
Author: Dave Foxall