Employer mandates hinge on fate of health reform

Even as they wait for the Supreme Court to rule on health care reform, employers are still on the hook to fulfill requirements that are effective as early as this fall.

The court is expected to release its decision before the end of June. Its ruling will decide the fate of a giant health care reform package that was signed by President Obama in March 2010.

It’s been two years, and employers have already had to comply with a number of demands, including expanding coverage to young dependents up to age 26 and modifying health plans in order to maintain grandfathered status.

This year, even with a looming court decision, employers are still in the thick of compliance.

“There are several things that plan sponsors should have already been planning to take care of,” said Lee Doble (right), national team leader for Regulatory Compliance within Frank Crystal’s Employee Benefits Services practice. “One is the W-2 reporting of income values. That’s for employers that had over 250 W-2’s last year. The other thing that should be getting their most immediate attention is the Summary of Benefits and Coverage.”

The Summary of Benefits and Coverage, or SBC, is an explanation of health plan benefits issued by insurance carriers. Employers must ensure the four-page document is delivered to all participating beneficiaries as well as prospective participants. The effective date for providing the SBC is Sept. 23, but as a recent ADP poll found, half or more of small and midsized companies are not prepared.

Then, by Jan. 1, employers will need to focus their attention on the next phase of health reform requirements: addressing the change in the maximum benefit for flexible spending accounts, which will be capped at no more than $2,500.

After that, Doble says, the next most immediate thing would be to consider whether their plans meet the affordability test that is still in pending regulation. “They’ll have to look at that in the context of, is the plan affordable and will it avoid penalties for people who choose to buy coverage through the health care exchange with subsidies? The term for this has been 'pay or play': Are [employers] going to pay the $2,000 penalty and not have a plan at all, or play, therefore provide a plan and then have to avoid the $3,000 penalty if the plan is not affordable?”

That’s going to occupy a lot of time and effort for employers, Doble says. People will not be eligible for a premium tax credit under health care reform unless their share of premium exceeds 9.5 percent of income. If they qualify for a tax credit, in 2014 they’ll be allowed to go shop for an insurance policy in a state-run health insurance exchange, a key offering of Obama’s health reform package.

“The mathematical models will be interesting because the 9.5 percentage point for single coverage is on a figure that can change from employee to employee based on 401(k) contributions or if they’re using pre-tax contributions for transit or flexible spending accounts or anything else that isn’t part of health insurance,” Doble noted. “Penalties are going to be retroactive so you won’t really know until 2015 if you missed the mark in 2014.”

If the whole health reform bill is tossed by the Supreme Court, Doble says this is going to be an opportunity for huge plan changes. A recent survey by the International Foundation of Employee Benefit Plans found that while employers are convinced the individual mandate is likely to be overturned, they’re hoping some provisions would be reinstated if the entire law is repealed. Those include wellness incentives, required elimination of pre-existing condition exclusions, and required coverage of adult children up to age 26.

The same survey did not suggest employers were altogether against health care reform, but that more than half believe the only positive financial outcome is if the president's version of health care reform was eliminated and readdressed.

“The more that we study the existing bill, the more headaches that are popping out of the woodwork that just haven’t been considered yet,” Doble said.


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