The Supreme Court ruled in June that health care reform is constitutional and upheld the Patient Protection Affordable Care Act (PPACA) in its entirety. As a result, health care reform will continue to be implemented as planned and provisions that are already in effect will continue, says Jessica Galardini, president and COO of JRG Advisors, the management company of ChamberChoice.
“The individual mandate requiring individuals to purchase health insurance or pay a penalty is the major component of the law. Because the court upheld that mandate, it did not need to decide whether other provisions of the law are constitutional,” says Galardini.
Smart Business spoke with Galardini about the impact of the PPACA on employers and the benefits that they offer to employees.
What does this ruling mean for employers?
All aspects of the law already implemented will remain in effect. These include the ability for adult children to remain on their parents’ coverage until age 26, no exclusions for children with pre-existing conditions and certain preventive services without cost sharing for nongrandfathered plans. A grandfathered plan is one that has been in existence continuously since before the act was passed and is not required to comply with select provisions of PPACA as long as it meets certain other requirements.
Provisions of the law not yet in effect will be implemented as planned. Although much attention has been paid to the big changes slated for 2014, there are numerous smaller requirements that employers need to be aware of and prepare for now.
For example, insurers have already started issuing rebates to employers with fully insured health plans who qualify due to medical loss ratio (MLR) rules. The MLR rules require insurance companies to spend a certain percentage of premium dollars on medical care and health care quality improvement rather than on administrative costs.
Rebates can be issued in the form of a premium credit, lump sum payment or premium ‘holiday’ during which premium is not required. Any portion of a rebate that is a plan asset must be used for the exclusive benefit of the plan’s participants and beneficiaries, for example, reducing participants’ premium payments.
What other changes do employers need to be aware of regarding benefits?
Effective September 23 of this year, insurers must provide a summary of benefits and coverage (SBC) to participants and beneficiaries. The SBC is to be a concise document with stringent criteria as to the number of pages and print font that provides information about the health benefits in a simple and easy-to-understand format. The SBC will need to be distributed to employees during open enrollment, with any material modifications to the plan throughout the year being communicated at least 60 days in advance.
Additionally, beginning with the 2012 tax year, employers that issue 250 or more W-2 forms must report the aggregate cost of employer-sponsored group health insurance on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are due in January 2013.
What changes are looming for 2013?
Changes scheduled for 2013 include limiting pretax contributions toward flexible spending accounts (FSAs) to $2,500. This limit will be indexed for cost-of-living adjustments for 2014 and later years.
Employers will also be required to provide all employees with written notice about health insurance exchanges and the consequences if an employee decides to forego employer-sponsored coverage and purchase a qualified health plan through an exchange.
Finally, employers will be required to withhold an additional 0.9 percent Medicare tax on an employee’s wages in excess of $200,000, or $250,000 for married couples filing jointly.
What is happening in 2014?
By all accounts, 2014 will be the most significant year. Annual dollar limits for health services will be eliminated, as will medical underwriting and exclusions for pre-existing conditions. Additionally, insurance exchanges will be enacted for individuals and small employers with fewer than 50 employees. This is a key component of health care reform law. Individuals will be required to have health insurance or pay a tax for not having it.
Businesses with 50 or more full-time employees must provide health insurance for employees or pay a tax for not doing so. And for states that choose not to set up their own exchanges, the federal government will do it for them. To date, Pennsylvania has not passed legislation authorizing its own exchange.
Although the Supreme Court upheld the health care reform law, the future remains somewhat uncertain. Opponents will continue to challenge the law and debate its constitutionality through the November 2012 elections, and the strength of the economy and the response of private insurance companies with innovative products and funding solutions will also impact private and public options for individuals and employers.
What is certain is that health care benefits, funding and delivery are changing. Employer and employee decisions are far more complex and require educated consideration. Work with your advisor to learn more about your options and to understand exactly what is required of your company to remain compliant with the law.
Jessica Galardini is president and COO of JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7231 or [email protected].
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