Smart Benefits: Obamacare Mandates: What Is And Isn’t Delayed

Monday, July 15, 2013

Amy Gallagher, GoLocalWorcester Business/Health Expert

On July 9, 2013, the Internal Revenue Service issued notice 2013-45, which confirms that the employer shared responsibility penalties (“pay or play”) and reporting requirements of the employer mandate under healthcare reform are delayed until 2015. But other provisions are not.

What’s required in 2014 versus 2015?

2014

Six healthcare reform requirements take effect:

1. Employee waiting periods for benefits cannot be more than 90 days

2. All pre-existing condition limitations on benefits must be removed

3. The out-of-pocket maximum on plan designs must not exceed $6,350 for individual coverage, and $12,700 for family coverage on non-grandfathered plans

4. New wellness requirements for incentives will still apply

5. Non-grandfathered small employer plans, whether offered through the state Exchanges or otherwise, must include essential health benefits (as defined by PPACA) that are equivalent to bronze, silver, gold or platinum levels, and deductibles, in most situations, cannot exceed $2,000 for individual plans and $4,000 for family plans

6. For small-insured plans, whether in or outside the Exchange, rating for premiums must follow modified community rating formulas that include age, tobacco use, family size, and geographic area. Guaranteed issue and guaranteed renewals (with some limitations) will apply.

Most of these requirements focus on shaping plan design. As employers go through the renewal process for months starting January 1, 2014, they should use these requirements as a framework for modifying plans, if necessary. Employers will also want to follow these requirements because there will be penalties of up to $100 per person per day for non-compliance.

But that’s not all.

Employers must follow six more requirements:

1. Employers must report and pay the new PCORI fee by July 31, 2013, for plans that ended October 1, 2012 through December 31, 2012

2. Insurers must still issue Medical Loss Ratio (MLR) rebates, if required

3. Employers must still distribute a Summary of Benefits and Coverage (SBC) as part of open enrollment. At this point, it’s unclear if employers will need to report essential benefits covered or minimum plan value as part of the SBC.

4. Employers must distribute the Exchange notice to employees by October 1, 2013. It’s expected that the content of this notice, which currently includes information needed for affordability and minimum values on plan design, will change. Until more guidance is provided, employers should consider holding off on distributing this notice.

5. Employers (250+ employees) must still report healthcare costs on an employee’s W-2. Currently, there is an exemption for employers with less than 250 employees and this is expected to continue for the 2013 W-2.

6. Insurers and plan sponsors must still pay the Transitional Reinsurance Fee, due January 15.

These requirements are intended to make employees aware of certain provisions of the new laws, raise awareness about the state Exchanges, and increase revenue to support healthcare reform.

2015

Six big requirements are delayed until 2015:

1. Employers right now do not have to determine whether they employ 50 or more full-time or full-time equivalent employees

2. Employers do not have to start using 30 hours as the definition for full-time and eligible for benefits

3. Employers do not have to start counting employees’ hours to determine if they average 30 or more hours per week

4. Employers do not have to decide if they offer essential coverage to at least 95% of their full-time employees

5. Employers do not need to calculate and determine if their plan design meets minimum essential value (60%)

6. Employers do not have to offer affordable plans (employee contribution cannot exceed more than 9.5% of pay towards the cost of an individual plan)

The delays extend the amount of time employers have to prepare for these requirements, especially in light of new guidance expected in September. But while these requirements are pushed back until 2015, employers will need to start counting and calculating using 2014 data.

Individual Mandate Still Applies

It’s important to note that the individual mandate still takes effect January 1, 2014, which means that employees who don’t have insurance must find coverage, either by taking the employer’s coverage or selecting a plan through the new state Exchanges, available January 1, 2014. The timing of this requirement will depend on whether the employer’s coverage renews in January, in sync with the start of the Exchanges, or at another time during the year.

If the individual does not take coverage, they’ll face a penalty at tax time.

What Employers Should Do Now

Employers need to pay close attention to new developments because the rollout of healthcare reform has proven unpredictable. The provisions of the law are sometimes unclear and there’s constantly evolving guidance, some of which is also unclear. In those cases, employers have been told to make “reasonable assumptions,” which leaves ample room for interpretation.

With reporting requirements and penalties for noncompliance, employers need to get it right.

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.