HEALTHCARE REFORM
AROUND THE CORNER AND IN THE NEWS

INSIGHTS
After passage of the Affordable Care Act (ACA) in March 2010, employers and plan sponsors scrambled to understand the implementation timeline and swiftly turned their attention to the initial mandates contained in the Act.  Through September 2011, fully insured and self-funded plans have extended coverage to young adult dependents up to age 26, removed lifetime limits on essential benefits, began to cover required preventive services with no member cost sharing and wrestled with the concept of grandfathered plans and what benefit that status might offer. 

While the initial ACA frenzy has calmed (somewhat), healthcare reform continues to proceed, but not without a few diversions along the way.  Some portions of the law have already been repealed such as the enhanced 1099 reporting requirement.  We will highlight what plan sponsors can expect in 2012 and review recent developments including the administration’s decision regarding the long term care insurance program (CLASS Act) and the status of the ACA court challenges. 

IMPLICATIONS
Next year will include its share of changes brought about by the ACA.  Employers and plan sponsors will face new W-2 and benefit plan reporting requirements and there will be a new fee imposed on fully insured and self-funded plans to help finance the Patient Centered Outcomes Research Fund.

W-2 Reporting Requirements
Employers will need to have procedures in place to capture and report the cost of healthcare coverage for each participating employee on their 2012 W-2 statement.  Interim guidance issued earlier this year eased the overall compliance burden and granted exemptions to smaller employers (those who issue less than 250 W-2’s in 2011) and employers who contribute to a multiemployer plan.

In general, only annual medical plan costs will need to be reported on the W‐2 statement as the interim rules allow employers to disregard amounts contributed to stand‐alone dental and vision plans and health reimbursement arrangements (HRA).  Amounts contributed to health savings accounts (HSAs), accident or disability insurance, coverage for a specific disease or illness, hospital indemnity or other fixed‐indemnity plans, salary reduction elections to a healthcare flexible spending account (unless optional employer flex credits are offered) are also excluded from the determination.  More details about the W-2 Reporting Requirements can be found in our April edition.

The Uniform Summary of Benefits and Coverage (SBC)
Beginning March 23, 2012, all fully insured and self-funded plans will be required to provide a summary of benefit plan information in a manner prescribed by law and implementing regulations.  Under the ACA, a penalty of $1,000 per failure can be imposed for willfully failing to provide the information.  Additional IRS and DOL penalties may also be levied.  Key provisions include:

• The SBC requirement does not apply to excepted benefits such as dental and vision coverage.
• The plan sponsor is responsible to distribute the SBC to plan participants; however, the plan sponsor may contract with the carrier or third-party administrator to perform this service.
• The SBC generally must be provided at least 30 days prior to renewal (to the plan sponsor) and automatically be provided to an individual for the plan in which the member is enrolled.
• The plan sponsor may provide a single notice for all members of a common residence.
• The SBC may be issued following DOL electronic distribution rules.

The public has begun to comment on the SBC requirements and many have expressed concern that, due to the late issuance of the proposed regulations (five months late), more time is needed to effectively implement this new reporting requirement.  Some have suggested that the draft template and format are not well suited for larger employers and those who sponsor self-funded plans.  In addition, public comments suggest that a more user-friendly electronic delivery method should be considered.  Final rules are expected later this year.  More details about the Summary of Benefits and Coverage can be found in our August edition.

Employers To Help Fund The Patient-Centered Outcomes Research Fund
The Patient-Centered Outcomes Research Fund has been established to evaluate outcomes and the effectiveness of health care services in order to identify and recommend the best course of action to treat and prevent disease.  The ACA imposes a fee on self-funded and fully insured plans to help support this effort.  For plan or policy years that end after September 30, 2012 (stated another way – plan or policy years that begin after October 1, 2011) the fee is equal to the product of $1 multiplied by the average number of lives covered under the plan.  The annual fee will increase to $2 the following year, can be increased in the future and is scheduled to end in September 2019.  We await guidance on how and when the fee is payable and how to calculate “average number of lives”.

Wellness Reporting
By March 2012 The Department of Health and Human Services (HHS) must develop wellness reporting requirements for insurers and group health plan sponsors.  Insurers will be required to report on such activities as case management, care coordination, chronic disease management, preventing hospital readmissions, and improving patient safety.  Employers may need to provide details regarding efforts to implement wellness and health promotion activities in the workplace.  Plan sponsors will provide annual reports to HHS and to plan participants at open enrollment.  HHS has the authority to impose penalties for noncompliance.  Guidance has not been provided at this time.

CLASS Dismissed
Implementation of the Community Living Assistance Services and Supports (CLASS) program included in the ACA will not proceed at this time.   CLASS was intended to provide a minimum $50 lifetime daily benefit to individuals having difficulty with activities of daily living such as eating, bathing, and dressing.  Enrollees would be required to pay premiums for at least five years before becoming eligible to receive benefits.  The law would encourage employers to enroll individuals in the CLASS program and collect premiums through payroll deduction.

The Secretary of HHS recently announced that “we have not identified a way to make CLASS work,” and so HHS would “suspend work” on implementing it   As required by law, the CLASS program would have to be financially sound for 75 years and not rely on taxpayer money to pay benefits.  Some early monthly premium estimates ($235 - $400) have led to the conclusion that healthy individuals would shy away from the program leaving a covered population consisting of those more likely to need lifetime benefits, which puts more upward pressure on potential premiums.

While implementation is technically on hold, Republicans in Congress hope to pass legislation to officially repeal the CLASS Act.

The Road To The Supreme Court
Since it was signed into law, numerous ACA legal challenges have been brought by individuals, states, and a variety of business groups.  The central issue is whether Congress has the authority under the Constitution’s commerce clause to require all Americans to buy health insurance or pay a penalty.  Opponents argue that Congress cannot regulate inactivity (such as a decision not to purchase health insurance) as commerce.  The expansion of state Medicaid programs and the employer mandate may also be considered by the Court. 

At the present time, five appeals courts have ruled (with opposing conclusions) on ACA challenges and two more await appeals court rulings.  The Department of Justice has requested that the Supreme Court hear the Florida appeal (includes 26 states) which brings the number of cases pending before the Supreme Court to six.  The Supreme Court justices plan to hold a closed-door conference November 10 to consider whether to grant review and an announcement could come by November 14.  The Court would hear oral arguments most likely in March and issue a ruling by the end of June.  The timing will no doubt play a role in the 2012 elections and presidential race.

ADDITIONAL INFORMATION
For specific questions concerning information contained in this INSIGHTS & IMPLICATIONS, please contact your Chernoff Diamond consultant. 

Information contained in this INSIGHTS & IMPLICATIONS is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulation.

Chernoff Diamond & Co., LLC provides comprehensive consulting and administrative services with respect to all forms of employee benefits, risk management, qualified and non-qualified retirement plans, private client services, and compensation and human resources.

For additional information about our services, please contact us at 516.683.6100 or .(JavaScript must be enabled to view this email address).