Include a Summary of Benefits and Coverage with open enrollment materials
For many months, it seemed that Health Care Reform was on a death watch. But now that the Supreme Court has validated the law, employers need to take immediate action to comply. Here’s a to-do list of what you should be working on now and in 2013.
Beginning this fall, employers must include in their open enrollment materials a Summary of Benefits and Coverage (SBC). This is a standardized summary, no longer than four double-sided pages, intended to make it easier for employees to compare coverage options. You will most likely receive this from your insurers or third-party administrators, but you may have to customize an SBC if you have a plan option that includes PBM, HRA or other benefits provided by a separate contractor. You must distribute the SBC by the first day of the open enrollment period.
Limit employee health FSA contributions to $2,500
For plan years beginning on or after January 1, 2013, annual employee contributions to Health Flexible Spending Accounts cannot exceed $2,500. Your enrollment materials must reflect this new limit and you must amend your Cafeteria Plans accordingly.
Get ready for W-2 reporting
All W-2s that employers issue, beginning with 2012 W-2s issued in January of 2013, must include in Box 12, under Code DD, the value of health plan benefits provided to each employee. Many employers are configuring their payroll systems to automatically capture this information.
Decide what to do with medical loss ratio rebates
Some employers have received a medical loss ratio rebate from their insurers. If your employees contribute to the cost of health plan coverage, then a part of these rebates may be considered plan assets that must be used for the exclusive benefit of your participants within three months in order to avoid ERISA trust requirements. Distributing these rebates to your employees will likely require tax, FICA and FUTA withholding, so instead, consider simply reducing employee contributions for a few months.
Cover women’s preventive care at no cost
For new plan years beginning on or after August 1, 2012, non-grandfathered health plans must cover women’s preventive services without cost-sharing by participants. Specifically, the plans must cover
screening for gestational diabetes;
human papillomavirus testing;
counseling for sexually transmitted infections;
counseling and screening for human immune-deficiency virus;
FDA-approved contraceptive methods and counseling;
breastfeeding support, supplies and counseling; and
screening and counseling for interpersonal and domestic violence.
Certain religious employers are exempt from the obligation to cover contraceptives. Also, nonprofit employers that do not fit the definition of a religious employer but that have not covered contraceptives because of religious beliefs have an extra year to comply while the federal government considers alternatives to potentially accommodate such employers.
Prepare to pay fees to fund clinical effectiveness research
Insurers and employers with self-insured health plans will have to begin paying a fee to fund the Patient-Centered Outcomes Research Institute, which will use the fees to support clinical effectiveness research. The fee kicks in during 2012 for plan years that end after September 30, 2012 and sunsets for plan years ending after September 30, 2019. For the first year, the fee will be $1 per average covered life, and then it ramps up to $2 per average covered life for subsequent years. Fees for 2012 must be submitted to the IRS by July 31, 2013, using Form 720.
Provide notice to employees that state exchanges will be available beginning in 2014
2014 will bring changes to the insurance market, including state insurance exchanges, penalties for individuals without insurance and employer play-or-pay requirements. Employers will have to provide a notice about the state insurance exchanges to existing employees by March 1, 2013, and to all new hires who begin on or after March 1, 2013.
Prepare for more reporting beginning in 2014
Individuals who are not eligible for affordable employer-sponsored coverage may qualify for subsidized coverage through a state’s insurance exchange. To help the IRS determine who is eligible for subsidized coverage, employers will have to start reporting information about an individual’s eligibility for coverage, dates of coverage, employee contributions and possibly other information.
Determine who should be eligible for health plan coverage in 2014
Beginning in 2014, an employer must offer health plan coverage to all full-time employees who work on average at least 30 hours per week, or pay an annualized penalty of $2,000 per full-time employee (reduced by 30). As you begin planning for 2014, you should consider whether you need to change the eligibility rules for your health plan. Also consider whether you have any workforce members from a temp or employee-leasing agency that may qualify as your common-law employees.
Determine whether employee contributions must be adjusted in 2014
Also beginning in 2014, employers must provide “affordable” health coverage to their employees. There are two components to affordability:
on an actuarial basis, the plan must pay at least 60% of the covered costs; and
an employee’s contribution for single coverage under at least one plan option cannot exceed 9.5% of his or her household income.
If the employer does not offer affordable coverage to an employee, the employee may qualify for subsidized coverage through the state’s insurance exchange, in which case the employer will have to pay an annualized penalty of $3,000 for that employee. Because you will not know an employee’s household income, as you plan for 2014 you will probably need to gauge affordability based on the employee’s W-2 taxable income.
Plan to meet additional coverage mandates for 2014
The following mandates apply beginning in 2014:
Pre-existing condition exclusions are completely prohibited.
Annual limits on essential health benefits will no longer be permitted.
Non-grandfathered health plans must provide coverage for routine costs and services provided in connection with a clinical trial.
For non-grandfathered plans, out-of-pocket maximums may not exceed high-deductible health plan limits (indexed, currently at $5,950 for self coverage and $11,900 for family coverage).
For non-grandfathered plans, deductibles may not exceed $2,000 for individual coverage and $4,000 for family coverage (indexed for years thereafter).
If you need assistance implementing Health Care Reform, please contact Norbert Kugele at firstname.lastname@example.org
or 616.752.2186, or any other member of the Warner Norcross & Judd Employee Benefits/Executive Compensation Practice Group.