As you know, the recently enacted health care reform provisions require changes to employer-sponsored health plans. Some changes are effective for the first plan year beginning on or after September 23, 2010 or January 1, 2011 for calendar year plans, so it's important to ensure you know all the facts. One of the key changes proposed for an employer whose health plan is not Grandfathered* includes compliance with new nondiscrimination rules and annual testing. However, on Dec. 22, 2010, the Internal Revenue Service (IRS) announced that the nondiscrimination testing requirements have been indefinitely delayed. Questions and Answer Guide About the Healthcare Reform Nondiscrimination Provision What is the health care reform nondiscrimination provision? The provision, found in PHS Act-2716, prohibits fully insured, group health plans from discriminating in favor of highly compensated individuals with respect to eligibility of benefits and is subject to annual testing requirements. The provision applies to fully insured, group health plans that are newly written or to employers that are not maintaining Grandfathered status on their first year plan after September 23, 2010. What is considered discriminatory? A health plan may be considered discriminatory if it has: 1. Different waiting periods for different classes of employees. For example, requiring a field employee to wait 90 days while an office employee only has to wait 30 days. 2. Different contribution amounts for different classes of employees -this means an employer cannot pay 100 percent of the owner's health insurance premiums and only 50 percent of everyone else's. 3. Carve-out health plans are no longer permissible under the new regulations -this means that a health plan that is only available to management is not allowed. What if my health plan is Grandfathered? If an employer renewed on or after Oct. 1, 2010 and chose grandfathered status for any of its plans to avoid nondiscrimination requirements, other alternatives may be available for the next plan year. Retroactive elections of Grandfathered plans are not permissible. How does this affect my business? The extension gives employers additional time to determine if changes in benefits or coverage are necessary to ensure compliance.
What are the consequences for not being in compliance? Currently an insured group health plan that fails to comply may be subject to: an excise tax of $100 for each day with respect to each individual to whom such failure relates, civil money penalty, or a civil action to compel employers to provide nondiscriminatory benefits. Why was this delayed? Citing the lack of clear guidance on how to apply nondiscrimination provision rules and the complexity of the many unresolved issues related to them, the implementation has been delayed until further notice. The IRS noted that it was virtually impossible to implement such measures without further administrative guidance. The IRS is also asking for public comment on a number of items to help better understand employer needs and concerns. What are items still being considered for discussion under this provision? There are many areas of the provision that the IRS is requesting the public to comment on to help determine the future inclusions of this testing. Comment is requested by March 11, 2011 and key discussion items include (but aren't limited to): 1. The basis on what determines/ constitutes benefits. 2. If the effective date will be moved to plan years beginning on or after Jan. 1, 2014. 3. If an employer sponsors an insured group health plan in distinct geographic locations, whether the application of the standards on a geographic basis is allowed. 4. Whether employers should be permitted to aggregate different, but substantially similar, coverage options. If so, what differences in deductible and copayments would be allowed. 5. If an employer provides coverage to a "highly compensated individual" on an after-tax basis should the tests be disregarded. When will more guidance be available? The nondiscrimination provisions should not be required until after the administrative guidance has been issued, which will most likely be in mid 2011- early 2012. What should employers be thinking about in the interim? This allows additional time to consider the employee benefits strategy employers may wish to employ until guidance is actually issued. | 
