"Play or Pay" Requirements Delayed; Other Health Insurance Mandates Continue in Effect
July 15, 2013
In an earlier bulletin, we discussed the pending “play or pay” requirements for employers that were scheduled to begin in 2014. Essentially, these rules impose penalties upon large employers (generally 50 or more employees) who do not provide health insurance coverage for their full-time employees (generally 30 or more hours per week) and their dependents which meet certain minimum value and affordability standards. So that the IRS can determine if penalties apply, the law required employers to provide extensive information reporting relating to their plans and plan coverages.
On July 2, 2013, the Department of the Treasury announced a one year delay to the “play or pay” employer mandate and the information reporting requirements. The Treasury had not yet published any formal guidance concerning the reporting requirements. It had indicated that it will attempt to simplify the reporting process. Since the reporting rules have been delayed, it would have been virtually impossible to determine which employers owed penalties and the amount of those penalties. This announcement was formalized on July 9 in IRS Notice 2013-45.
This delay will give employers more time to understand the “play or pay” mandate, and make decisions about their health insurance programs.
Other aspects of the Affordable Care Act have not been delayed, including the individual mandate. Valerie Jarrett, senior advisor to President Obama, specifically noted that the administration is “full steam ahead” for the Exchanges, or “Marketplaces,” opening on October 1. On July 5, the Department of Health and Human Services released rules that will reduce the burdens on such Exchanges. States setting up their own Exchanges, such as Connecticut and Massachusetts, will only be required to perform random checks on income eligibility in 2014 in some cases where income cannot be verified against other data including tax records. Income levels determine the eligibility of individuals for coverage through the Exchange and for subsidies, such as premium tax credits. In addition, such states do not have to begin random sampling of enrollees’ employer-insurance status until 2015.
Given these recent developments, it is certainly possible that other changes and delays could occur, and we urge plan sponsors to keep abreast of new developments in this area. We will be following any new developments. Plan sponsors should focus on other parts of the Affordable Care Act that, unless modified, will impact them and their plans for 2014. Below we summarize many of those aspects of the Affordable Care Act that are currently effective for 2013 or will become effective shortly or in 2014:
Patient-Centered Outcomes Research Institute (“PCORI”) Fee. This fee is paid by Plan sponsors maintaining self-insured plans and by insurers for insured plans, in each case unless an exception exists. The fee is paid to the IRS and calculated per average covered life ($1 for the first year, increased to $2 for the second, with additional increases for inflation for subsequent years). It applies to Plan Years ending on or after October 1, 2012. For calendar year plans, the first filing and payment is due on July 31, 2013, based upon the numbers applicable for the 2012 Plan Year. On the other hand, a plan with a July 1 - June 30 Plan Year is not required to file until July 31, 2014. IRS Form 720 (as revised) is used for this purpose. The fees will be used to fund the Patient-Centered Outcomes Research Institute, to support clinical effectiveness research. Given the July 31, 2013 deadline applicable to calendar year plans and certain other plans, this fee payment must be addressed immediately. Please contact us if you need assistance in complying with this requirement or in determining if an exception exists.
Notice of Exchange Availability. All employers must notify employees of the Exchange by October 1, 2013. Model notices are available on the U.S. Department of Labor website. For more information, consult our bulletin on the subject here.
Summary of Benefits Coverage. Plans and issuers were generally required to provide a summary of benefits and coverage beginning September 23, 2012. This requirement continues to apply.
Reinsurance Fees. Insurance companies and self-funded group health plans must pay fees to a transitional reinsurance program for 2014-2016. These fees will help stabilize premiums for coverage in the individual market. For 2014, the fee is $63 per year multiplied by the number of covered lives. Certain types of coverage are excluded, such as HRAs that are integrated with medical coverage, HSAs and FSAs. This fee is in addition to the PCORI fee described earlier.
Waiting Periods. Effective for Plan Years beginning on or after January 1, 2014, a health plan cannot impose a waiting period that exceeds 90 days (three months is not the equivalent of 90 days). A waiting period is the period of time that passes before coverage of an employee or dependent otherwise eligible to enroll becomes effective. Other conditions on eligibility were permitted as long as they were not designed to avoid compliance with the 90 day waiting limit rule. Review your plan to be sure that this rule is met.
Pre-Existing Condition Exclusion. Effective for Plan Years beginning on or after January 1, 2014, health plans are prohibited from imposing any pre-existing condition exclusion on any plan enrollee (such pre-existing conditions were eliminated for enrollees under age 19 for Plan Years beginning on or after September 23, 2010).
Dependent Coverage. Effective for Plan Years beginning on or after September 23, 2010, health plans providing dependent coverage to children were required to make coverage available to adult children until age 26. For Plan Years beginning prior to January 1, 2014, however, grandfathered plans were not required to cover adult children under age 26 if they were eligible for other employer-sponsored health coverage. Grandfathered plans must make such coverage available beginning with the 2014 Plan Year, even if other employer-sponsored health coverage is available to the adult child.
Annual Limits. Effective for Plan Years beginning on or after January 1, 2014, health plans are prohibited from imposing annual limits on essential health benefits. For Plan Years beginning before January 1, 2014, restricted annual limits were allowed.
Cost-Sharing Limits. Beginning with the 2014 Plan Year, non-grandfathered health plans are subject to limits on cost sharing or out-of-pocket costs. Such out-of-pocket costs may not exceed the amount applicable to coverage related to high deductible health plans ($6,350 for individual, $12,700 for family). It is uncertain at this time precisely how this provision will be interpreted, e.g., how will out-of-network coverage be treated.
Essential Health Benefits. Beginning in 2014, non-grandfathered insured plans in the small group market must cover all of the essential benefits categories under the Affordable Care Act. Non-grandfathered insured plans in the small group market will also be subject to the deductible limits of $2,000 (single coverage) and $4,000 (family coverage).
Clinical Trial Participants. Beginning with the 2014 Plan Year, non-grandfathered plans cannot terminate coverage if an individual chooses to participate in a clinical trial for cancer or other life-threatening diseases, or deny coverage for routine care that would otherwise be provided just because the individual is enrolled in a clinical trial.
Wellness Programs. At the current time, the reward under a health-contingent wellness program is limited to 20 percent of the cost of coverage. For 2014 Plan Years, the maximum allowable reward is increased to 30 percent, or 50 percent for programs designed to prevent or reduce tobacco use. Proposed regulations have been issued, and it is important to review those proposed regulations if you maintain or are considering offering a wellness program.
W-2 Reporting. Employers that issued at least 250 Forms W-2 for 2012 are required to report on such forms issued in January 2013 the cost of group health insurance coverage, regardless of who paid the premium. This requirement remains in effect for 2013 (for W-2s issued in January 2014). At this time, the 250 Forms W-2 threshold (for 2012) appears to still apply since the IRS has not reduced or eliminated the threshold.
Additional Medicare Tax. The additional Medicare tax, which applies beginning in 2013, requires employers to withhold such tax of 0.9 percent of wages in excess of $200,000. The tax only applies to the employee portion; the employer is not liable for a similar amount (no “match”).
HIPAA Compliance. Group health plans are required to comply by September 23, 2013 with additional requirements under HIPAA. For more information, consult our bulletin on the subject here.
Medical Loss Ratio Rebates. Many employers sponsoring fully insured plans received these rebates in 2012, and will be receiving them in 2013 as well. Under the Affordable Care Act, an insurer that uses less than 85 percent (80 percent for smaller employers) of the premium dollars it receives to provide medical care must rebate the difference to employers or apply it to reduce health insurance premiums. Employers receiving such rebate checks should follow the guidance in DOL Technical Release 2011-04 in utilizing the rebate checks.
Medical FSA Contributions. Beginning with the 2013 Plan Year, medical FSA salary reduction contributions are limited to $2,500. Plan amendments reflecting this are required by December 31, 2014.