The requirements for employer-sponsored group health plans under the Affordable Care Act continue to change, but guidance issued by the U.S. Departments of Health and Human Services, Labor, and the Treasury can help you comply. Below are five commonly asked health care reform questions and answers for employers.
Please note that the answers to these FAQs are subject to change based on new government requirements or directives. If you have any questions regarding your obligations with respect to health care reform, you should consult with a knowledgeable employment law attorney and your carrier for specific guidance.
Dependent Coverage of Children to Age 26
Q. What plans are required to extend dependent coverage up to age 26?
A. The Affordable Care Act requires plans and issuers that offer dependent coverage to make that coverage available until a child reaches age 26. Both married and unmarried children qualify. This rule applies to all plans in the individual market and to new employer plans. It also applies to existing employer plans unless the adult child has another offer of employer-based coverage (such as through his or her job). Beginning in 2014, children up to age 26 can stay on their parent's employer plan even if they have another offer of coverage through an employer.
Maintaining Grandfather Status
Q. Our company sponsors a group health plan that has been in effect since March 23, 2010. We are considering whether we could make various changes to the plan without losing grandfather status.
A. Certain changes (measured from March 23, 2010) are considered to change a health plan so significantly that they may cause a group health plan to lose grandfather status, including:
- Elimination of all or substantial benefits to diagnose or treat a particular condition.
- Increase in a percentage cost-sharing requirement (e.g., raising an individual's coinsurance requirement from 20% to 25%).
- Increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
- Increase in a co-payment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation).
- Decrease in an employer's contribution rate towards the cost of coverage by more than 5 percentage points.
- Imposition of annual limits on the dollar value of all benefits below specified amounts.
New Over-the-Counter Drug Requirements
Q. How have the rules changed for reimbursing the cost of over-the-counter medicines from health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs)?
A. The Affordable Care Act established a new uniform standard for medical expenses. Effective January 1, 2011, distributions from health FSAs and HRAs are allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription. This new rule does not apply to reimbursements for the cost of insulin, which will continue to be permitted, even if purchased without a prescription. A similar rule went into effect for health savings accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs).
Reporting Employer-Sponsored Health Coverage on Form W-2
Q. When will employers have to start reporting the value of health care coverage on the Form W-2?
A. No employer is required to report the cost of health coverage on any Forms W-2 required to be provided to employees prior to January 2013. For Forms W-2 filed for the 2011 calendar year (provided to employees in January 2012), reporting this value is optional. While some employers will be required to report the value of health benefits on the Forms W-2 provided to employees in January 2013, transition relief is available for certain employers--including those filing fewer than 250 Forms W-2--until future guidance is issued.
Small Business Health Care Tax Credit
Q. Which employers are eligible for the small business tax credit?
A. Small employers that provide health care coverage to their employees and meet certain requirements are generally eligible for a federal income tax credit for health insurance premiums they pay for certain employees. In order to be a qualified employer:
- The employer must have fewer than 25 full-time equivalent employees (FTEs) for the tax year,
- The average annual wages of its employees for the year must be less than $50,000 per FTE, and
- The employer must pay the premiums under a "qualifying arrangement."
You can read more about the Affordable Care Act in the HR360 section on Health Care Reform. For additional questions and answers relating to specific provisions of the Affordable Care Act, please click on the following links:
Health Care Reform Developments: Important Court Decision, Tax Regulations, Exchange Eligibility Standards
Employee Benefits Law Update
Source: John Barlament - Partner Quarles & Brady
On Friday, August 12, several important developments occurred for employers as they continue to implement the health care reform requirements found in the Patient Protection and Affordable Care Act (ACA).
1. Appeals Court Strikes Down Individual Mandate.
- An Atlanta-based appeals court became the first appeals court to strike down a portion of the ACA.
- The appeals court ruled that the ACA should not be voided in its entirety. Rather, only the individual mandate section of the ACA should be stricken.
- For employers, this means that the majority of the ACA requirements, such as coverage of children until age 26, no annual or lifetime limits, and coverage of preventive health services, all remain in effect and continue to apply.
2. Premium Tax Credits.
- The Internal Revenue Service (IRS) released proposed regulations on premium tax credits that will be available to individuals in the "exchanges" beginning in 2014.
- The ACA provides that coverage is "affordable" if the employee's required contribution is less than or equal to 9.5 percent of the employee's "household income." The regulations clarify that the 9.5 percent test is based on the cost of "self-only" coverage and not the cost of family coverage.
- Proposed "safe harbor" of "household income" would allow an employer to avoid the "play or pay" penalty if the employee portion of the self-only premium for the employer's lowest cost plan does not exceed 9.5 percent of the employee's current W-2 wages from the employer.
3. Exchange Eligibility Standards.
- The U.S. Department of Health and Human Services (HHS) issued regulations on how exchanges will determine an individual's eligibility for Medicaid, CHIP, or other state based, low-income coverage.
- Effect on employers: an exchange will need to "interact" with employers to determine whether an individual seeking exchange coverage receives, or could have received, coverage through an employer-sponsored health plan (and whether that plan provided "minimum essential coverage," as noted above).
- By 2014, the Small Business Health Options Program (SHOP) will allow small employers (large employers may participate in 2017) to purchase exchange coverage for employees.
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