The Affordable Health Care Act

www.dinslaw.com

David Whaley, Esq.Dinsmore & Shohl LLP

Cincinnati513.977.8554

[email protected]

Health Care Reform

Key Provisions for Employers to Think About Now

© 2010 Dinsmore & Shohl LLP | www.dinslaw.com

Two Bills

Patient Protection and Affordable Care Act (Senate Bill)

Health Care and Education Affordability Reconciliation Act of 2010 (Reconciliation Bill)

Complicating factors

– No significant legislative history

– Much enforcement/rulemaking delegated to HHS

– Uncertainty: delayed effective dates and potential future changes


Key Concepts

Individual Provisions Employer Provisions Health Insurance Market


Key Effective Dates

Now

Plan Years beginning after 6 months from enactment (9/23/2010 – this is January 1, 2010 for calendar year plan years)

1/1/2011

24 months after enactment

2013*

2014*

Later**Various dates and questions exist whether these effective dates, and requirements will be modified by

subsequent legislation


Is your Plan “Grandfathered”?

Grandfathered plans are exempt from certain requirements

Was any individual enrolled on March 23, 2010?

Grandfather treatment lasts indefinitely

May enroll new participants

Are plan changes permissible?


Effective Now

Small Business Tax Credits

Retiree Reinsurance

Automatic enrollment


Small Business Tax Credit Available in 2010 – 2013 taxable years

– After 2013 only available if insurance is purchased through exchange

Available to an “eligible small employer”

– No more than 25 FTEs employed during the tax year

Phase out if FTEs >10

– Average wages of < $50,000

Phase out if exceed $25,000

– Pays premiums under a “qualifying arrangement”

Maximum credit is generally 35% of employer expenses

IRS Webpage: http://www.irs.gov/newsroom/article/0,,id=220809,00.html?portlet=6


Retiree Reinsurance

HHS to establish by 6/21/2010

Reimburses employers for early retiree health coverage

– Age 55 or older

– Not eligible for Medicare

– Includes dependents

Must implement HHS cost savings measures

Limited to $5 billion


Automatic Enrollment (grandfathered plans exempted)

Applies to employers with >200 employees

All full time employees must be automatically enrolled in coverage

Will be provided ability to opt out

Appears to be effective now (no effective date in bill)

Questions:

– Determining full time status

– Time period for opt out

– Return of employee contributions

– Changes to cafeteria plan rules


6 Months after Enactment (all plans)

Plan Years after September 23, 2010

– Extension of coverage to adult children

– Elimination of preexisting condition exclusions for under age 19

– Emergency care requirements

– Restriction on coverage rescissions

– No annual or lifetime limits


Coverage of Children and Dependents

If plan covers dependent children, then coverage must be provided for adult children to age 26

– Applies to married children

– For grandfathered plans, through 2013, requirement ends if individual is eligible for employer coverage

– Not required to provide coverage to spouse or dependents of child

– Did not change IRC Sec. 152 dependent definition

– Applies to married children, but not to spouses or dependents of children



Effect of change

– Elimination of student status requirement? Would avoid compliance with Michelle’s law

– May plan charge additional premium? Interim Final Regulations – clarify that you may not charge more for

this coverage

– Effect on COBRA - qualifying event includes “child ceasing to be a dependent child”

The Interim Final Regulations seem to indicate that ceasing to be an eligible employee after age 26 is a qualifying event entitling the child to COBRA of 36 months



IRS Notice 2010-38 issued on 4/27/2010

– Provided guidance on tax treatment of adult children

– Tax rules effective 3/30/2010

– Note: applies to children under age 27 (e.g can cover until last day of year when child turns 26)

“child” includes son, daughter, stepson or stepdaughter– Also includes child legally adopted or placed for adoption

– Includes “eligible foster child”



IRS Notice 2010-38– 105(b) exclusion from income applies to coverage of adult

children Includes children who are not dependents Age limit, residency and support tests of §152 don’t apply Also applies to FICA and FUTA Exclusion ends on 1st day of the year the child turns 27



IRS Notice 2010-38

– Cafeteria plan may allow employees to make election change

Plans may permit effective 3/30/2010

May adopt retroactive amendment by 12/31/2010


Coverage of Emergency Services (all plans) Emergency

– May apply deductible/co-payments

– No pre-authorization requirement

– No out-of-network charges


Restriction on Annual and Lifetime Limits (all plans) Lifetime limits

– What if former participant has already met limit?

Annual limit

– Applies only to “essential” benefits

– May impose “restricted” limits

“Restricted Annual Limits” permitted until 12/31/2013

Uncertainties

– Definition of “essential” and “restricted”

– Ability to apply limits to specific benefits

Out of network changes

Certain types of treatment (e.g., physical therapy)


6 Months after Enactment (non-grandfathered plans)

Insured plans subject to 105(h) discrimination requirements

Preventive care covered with no cost sharing

Designation of OB/GYN or pediatrician as primary care provider

Enhanced appeals procedure


Section 105(h) Nondiscrimination Rules (grandfather plans exempt)

Discriminatory plan

– Plan may not discriminate in favor of highly compensated individuals as to

Eligibility to participate, or

Benefits provided

Formerly applied only to self-insured plans


Coverage of Preventive Services (grandfather plans exempt)

Preventive

– Does not apply to grandfathered plans

– First dollar coverage required for Evidence based preventive care

Immunizations


Appeals Requirements (grandfather plans exempt)

Plans must establish an internal claims appeals process that– provides notice in a culturally and linguistically appropriate manner

– allows claimants to

review their file,

present evidence and testimony as part of the appeals process, and

receive continued coverage pending the outcome of the appeals process; and

– provides an external review process


January 1, 2011

Elimination of over the counter medicines from HSA, FSA and HRAs

Employers must report cost of health coverage on W-2

Provide information about CLASS program


No Reimbursement for Over-the-Counter Drugs

Effective 1/1/2011 (regardless of plan year)

– Reimbursement from FSA or HRA permitted for expenses incurred before 1/1/2011

– HSA distribution must occur before 1/1/2011

Applies to FSAs, HSAs and HRAs

Will require amendment to plan and SPD


W-2 Reporting

Employer must report total cost of health plan on 2011 Form W-2

Cost calculated under rules similar to COBRA costs

Not clear how to determine value of

– On-site medical clinics

– Screenings


CLASS Program

New government long term care insurance program

Payments begin 2011

Employers expected to automatically enroll employees

– Opt out available

Benefits available after 5 years of participation


24 Months after Enactment

60 day advance notice of changes to benefits

Summary of benefits provided to all participants

Reporting on quality of care and wellness initiatives

Insurer fee for comparative effectiveness research (9/30/12)


2013

FSA Contributions limited to $2500

Employers must provide notice about health insurance exchange and availability of credits


2014

Plan Design Changes

Individual Mandates

Individual Subsidies

Employer Penalties

Health Insurance Exchanges

Small Group Subsidies

Insurance Market Reforms

Insurance Company Fee


Later

Increases in individual penalty (2014 – 2018)

Large employers added to exchange (2017)

Tax on “Cadillac” plans (2018)


Labor Considerations: Reasonable Break Time for Nursing Mothers

- Amends the Fair Labor Standards Act

- Requires employers to provide nursing mothers, up to one year after the birth of the child, a reasonable break time each time the mother needs to express milk

- Area needs to be shielded from view with no intrusion by the public

-Does not preempt state law


Labor Considerations: Non-Discrimination Provisions

PPACA also amends the Fair Labor Standards Act to:

– prohibit discharging or discriminating against an employee because the employee received a federal tax credit or cost-sharing subsidy to purchase health insurance; or

– because he or she brings a complaint or testifies, etc. about a reasonable belief regarding a violation of PPACA

www.dinslaw.com

David A. Whaley, Esq.513.977.8554 | [email protected]

Date post:	20-Aug-2015
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The Affordable Health Care Act

News & Politics