Are Your Health Plans on the Right Track for PPACA Compliance?

By Kristi R. Gauthier, Esq.
Clark Hill PLC

November 2012 – As any employer sponsoring a group health plan knows, the Patient Protection and Affordable Care Act (“PPACA”) significantly impacts the way group health plans operate going forward. While many of the changes under PPACA are already in effect, there are still many important changes looming around the corner in the years to come.

Many of these changes will have a profound impact on employer-sponsored group health plans, such as the employer mandates that take effect in 2014. Although some uncertainty over PPACA remains due to the upcoming 2012 elections, as of right now PPACA remains the law of the land and employers should take heed and prepare themselves, and their health plans, for the fast approaching PPACA deadlines.

Below is a summary of just some of the most important upcoming PPACA deadlines impacting employers and employer-sponsored group health plans in 2012 and beyond.

2012
•    W-2 Reporting:  Employers who filed at least 250 Form W-2s for the preceding calendar year must report the cost of employer-sponsored health care on employees’ W-2s.

•    Summary of Benefits and Coverage (“SBC”) and Uniform Glossary:  Plan sponsors must prepare and distribute a SBC and Uniform Glossary beginning with the first open enrollment period or plan year beginning on or after September 23, 2012.

2013
•    Health FSA Employee Contribution Cap:  Effective with the first plan year beginning on or after January 1, 2013, the employee maximum contribution amount under a health FSA plan is limited to $2,500.  Plan documents must be formally amended, if necessary, to reflect this change no later than December 31, 2014.

•    Medicare FICA Tax Increases: Effective for taxable years beginning after January 1, 2013, PPACA provides for an increase in the Medicare payroll tax by 0.9 percent on wages in excess of $200,000 for single filers, and $250,000 for joint filers.  Employers must withhold the employee’s share, but PPACA does not increase the employer’s share of FICA Medicare tax.

•    Notice of Exchange Option:  Effective March 1, 2013, and in accordance with agency guidance to be issued, employers must provide notice to employees of the existence of state exchanges, information regarding premium tax credits and cost-sharing reductions through the exchanges, and options and implications of obtaining health care through an exchange.

•    Comparative Clinical Effectiveness Research Fees:  Effective July 31, 2013, certain health insurance issuers and self-funded health plans will be required to pay a temporary annual fee of $2.00 ($1.00 during the first year the provision is applicable), indexed for inflation starting in 2014, times the average number of covered lives under the health plan for the year to the IRS on Form 720.  The fees will be used to fund the Patient-Centered Outcomes Research Institute.  The fee must be paid on the July 31st following the plan year (for example, July 31, 2013 for the 2012 plan year) and is scheduled to end for plan years ending after September 30, 2019.

2014
•    Employer Shared Responsibility Penalties:  Large employers (those with 50 or more full-time equivalent employees) must provide health coverage that meets affordability and minimum value requirements or face penalties if one or more of its full-time employees obtains a premium credit and obtains coverage on a State insurance exchange.

•    Wellness Programs:  The reward/incentive limit under a wellness program increases to 30 percent effective January 1, 2014.

•    Pre-existing Condition Exclusions:  Effective for plan years beginning on or after January 1, 2014, pre-existing condition exclusions are no longer allowed in group health plans.

•    Waiting Periods:  Effective for plan years beginning on or after January 1, 2014, group health plans may not impose waiting periods in excess of 90 days.

•    Annual Limits:  Effective for plan years beginning on or after January 1, 2014, group health plans may no longer include annual limits on essential health benefits for participants.

2018
•    “Cadillac Plan” Tax:  Effective January 1, 2018, employers sponsoring a health plan with an aggregate value of $10,200 for individual coverage and $27,500 for family coverage (indexed annually) will be assessed an excise tax based upon the excess value of coverage and the number of participants in the plan.

Provisions with Unknown Effective Dates
•    Automatic Enrollment:  Employers with more than 200 full-time employees who sponsor a group health plan will be required to automatically enroll full-time employees in health coverage.  The original effective date for this provision was January 1, 2014, but the Department of Labor has postponed compliance until further guidance is issued.

•    Insured Plan Nondiscrimination Testing:  Insured health plans will be subject to similar nondiscrimination rules as self-insured plans, which generally prohibit discrimination in favor of highly compensated employees.  The Internal Revenue Service has delayed implementation of these rules until further guidance is issued.

*This article is not intended to give legal advice. It is comprised of general information.  Employers facing specific issues should seek the assistance of legal counsel.

Kristi R. Gauthier is a senior attorney in Clark Hill’s Birmingham office and concentrates her practice in Employee Benefits Law. Kristi has represented clients in a wide variety of employee benefits issues involving health and welfare benefits, as well as retirement plans. Kristi is admitted to practice in the State of Michigan, the U.S. District Court for the Eastern District of Michigan, and the U.S. Sixth Circuit Court of Appeals. She also is active in the legal community with memberships in the American Bar Association, the State Bar of Michigan, and the Oakland County Bar Association where she is a member of the Employee Benefits Committee. Kristi also serves as a member of the Clark Hill Diversity and Inclusion Committee. Kristi has lectured on various employee benefits issues, including ERISA compliance, healthcare reform, COBRA, section 125 plans, 403(b) plans and IRS plan correction programs. Kristi is also a co-author of the ABA publication ERISA Survey of Federal Circuits. Kristi was named a “Rising Star” by Michigan Super Lawyers in 2011.