Healthcare Reform Update: The Top Five Questions Employees Will Be Asking on October 1

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Practice Group.

As previously reported on this blog, employers are required to provide a notice to employees regarding coverage options under the new Health Insurance Marketplaces created by the Affordable Care Act that are scheduled to be up and running on October 1. The notice must be provided by October 1 to all employees, part-time and full-time, regardless of whether they have health coverage through their employer. New hires must receive the notice within 14 days of hire. 

Employers were understandably confused when, on September 11, the DOL posted an FAQ on its website advising that employers would not be fined under the Fair Labor Standards Act for failing to distribute the notice, yet some DOL officials were quick to point out that penalties and other adverse consequences for non-compliance could follow under ERISA and other statutes. In light of this uncertainty, employers are wise to comply and provide the notice by October 1.

The U.S. Department of Labor ("DOL") has published sample notices at http://www.dol.gov/ebsa/healthreform/. The specific language in the DOL notices need not be used, however, so long as certain key points are included. Given the complexity of the topic, the DOL sample notices are likely to raise more questions than they answer. Many employers are tailoring the notice in a manner that they feel will be more understandable to their employees. Other employers are preparing supplemental handouts and scheduling employee group meetings to address the many questions that will likely arise. Much is uncertain about how the roll out of the Health Insurance Marketplaces will go on October 1; however, one thing is for certain: employees are likely to have many questions and misunderstandings regarding their options under the Affordable Care Act. 

Based on questions and feedback we've been hearing from clients, here is our list of the "top five" questions you may hear from employees once the required notices are distributed (and suggested responses):

  1. "Why am I receiving this notice?" You have probably heard news reports about "Obamacare" (aka "Healthcare Reform" or the "Affordable Care Act"). Under the law, employers must notify all employees of their ability to purchase their own coverage under new "Health Insurance Marketplaces" that will be open on October 1, 2013. The new Marketplaces do not impact your eligibility for coverage under the Company's health plan.
     
  2. "Can I get coverage on the Health Insurance Marketplace if I find a plan there that's cheaper than my employer's plan?" Nearly anyone will be able to purchase coverage on the Marketplace; however, employees who are likely to find this advantageous are those who either do not have employer-provided coverage available to them or who pay a lot (more than 9.5% of income) for their coverage.
     
  3. "Will I qualify for a tax subsidy if I purchase coverage on the Health Insurance Marketplace?" Employees who have affordable, minimum value coverage available to them through their employer will not qualify for a tax subsidy. If you are not eligible for coverage from an employer (or you pay more than 9.5% of your income to purchase coverage through your employer) you may qualify for a subsidy and you should explore your coverage options on the Marketplace.
     
  4. "Is the health coverage I have through my employer 'affordable' and of 'minimum value'?" There are no short answers to these questions. However, as a rule of thumb, coverage through an employer is "affordable" if an employee does not pay more than 9.5% of his or her income for self-only coverage, and the coverage is "minimum value" if the plan's share of the total allowed benefit costs covered by the plan is no less than 60% of those costs.
     
  5. "Haven't the individual mandate penalties been delayed until 2015?" No. Certain "shared responsibility" penalties that apply to large employers have been delayed until 2015; however, the individual mandate is scheduled to take effect on January 1, 2014. Individuals who do not obtain coverage may be subject to an annual penalty equivalent to the greater of $95 or 1% of their household income. The penalty amount will increase in subsequent years.

Employers are likely to receive more questions from employees regarding health coverage than ever before in the months following October 1, 2013. Of course, employees can always be referred to the feds for additional information (www.HealthCare.gov or 1-800-318-2596).  If we can assist you with any questions you may have regarding compliance with the Affordable Care Act, please contact any member of our Labor and Employment Practice Group.

PPACA Presentation - Countdown to 2014: PPACA Compliance Opportunities for Employers

As we discussed with attendees at our most recent health care reform compliance seminar in June, we wanted to make the presentation available to the readers of our blog.  You can access the PowerPoint, “Countdown to 2014: PPACA Compliance Priorities for Employers,” by clicking here

Readers of this blog will note that we recently reported on a one-year delay in the effective date for PPACA's employer shared responsibility requirements.  Please keep in mind that the PowerPoint presentation was created prior to the announcement of the change in effective date for the shared responsibility provisions; however, other information and other effective dates referenced in the presentation remain accurate.  For future PPACA developments, stay tuned to this blog at http://www.palaborandemploymentblog.com/tags/ppaca/.

Questions regarding specific PPACA compliance issues and our upcoming PPACA presentations may be addressed to any member of McNees Wallace & Nurick's Labor and Employment Law and Employee Benefits Practice Groups

PPACA Update: Employer Shared Responsibility Mandate Delayed Until 2015

Many employers received a welcome, though temporary, reprieve yesterday, when the U.S. Department of the Treasury (“Department”) announced a one-year delay in the effective date of one of the key requirements of the Patient Protection and Affordable Care Act (“PPACA”) – the employer “shared responsibility” requirements (a.k.a. “pay or play”).  PPACA’s shared responsibility requirements were scheduled to become effective January 1, 2014, which has left countless employers scrambling to navigate complex regulations to determine what steps are necessary to comply with the mandate and avoid penalties.  (Click here to read our previously-published Employer Alert detailing the shared responsibility provisions and regulations issued to date.) 

The announced delay was prompted by the Department’s recognition that new employer and insurer coverage reporting requirements under PPACA are complex and that businesses need additional time to implement these requirements effectively.  Specifically, PPACA will require information reporting by insurers, self-insuring employers, and other parties that provide health coverage, as well as by certain employers with respect to the health coverage offered to their full-time employees.  The delayed implementation of these requirements is intended to allow the Department time to review and (hopefully) simplify the new reporting requirements and to allow additional time to adapt health coverage and reporting systems while employers move towards compliance with the shared responsibility requirements.

 

The Department’s announcement effectively pushes the deadline for compliance with the shared responsibility rules to January 1, 2015 – including the assessment of shared responsibility payments or penalties.  Importantly, other key 2014 requirements under PPACA, including the implementation of Health Care Exchanges and the so-called individual mandate, as well as the Patient Centered Outcomes Research Institute (PCORI) and transitional reinsurance program fees, remain unchanged.  

 

The Department is expected to issue formal guidance within the next week regarding transitional matters relating to its announcement, as well as proposed rules later this summer implementing the reporting provisions under PPACA.  We will provide additional updates on our blog as they become available.  

 

For more information on the most recent developments under PPACA, click here to view McNees’ recent Healthcare Reform White Paper: Countdown to 2014.  Questions regarding this white paper and specific PPACA compliance issues may be addressed to any member of McNees Wallace & Nurick’s Labor and Employment Law and Employee Benefits Practice Groups.

Health Care Reform Update: Countdown to 2014

Although the Patient Protection and Affordable Care Act (“PPACA” or the “Act”) is now over three years old, the Act’s core requirements will not take effect until 2014. The last half of 2013 should be a “wild ride” as the federal agencies charged with implementing the Act scramble to prepare for 2014 and employers weigh their compliance options.

Recently, Eric N. Athey, Esq. and Kelley E. Kaufman, Esq., attorneys in McNees Wallace & Nurick LLC's Labor and Employment Law Group, prepared a white paper entitled: "Health Care Reform Update: Countdown to 2014.” The White Paper is part of our ongoing PPACA series that is intended to keep clients abreast of recent developments and things to watch for as we count down to 2014. This installment addresses:  

  • PCORI Fees: July 2013 Filing Deadline
  • Compliance Loopholes, Shortcuts and Silver Bullets
  • Update on Required Notice of Health Care Exchanges
  • Final Wellness Program Regulations

The entire white paper is available here  and a pdf version is available here.

PPACA Update: Employers' Deadline to Provide Notice of Health Care Exchanges Postponed

Late last week, the Departments of Labor, Treasury, and Health and Human Services issued a new Frequently Asked Question (“FAQ”) page addressing implementation questions under the Patient Protection and Affordable Care Act (“PPACA”).  Of particular note in the latest FAQ is the Departments’ announcement is the delayed effective date for the written notice of Exchange requirements under PPACA. Originally, PPACA required employers to issue specific written notices regarding the existence of Exchanges to new and current employees effective March 1, 2013. This deadline has now been delayed until late summer or fall of 2013. Additional guidance, which may include model notice language, likely will be forthcoming. 

Stay tuned – and look for future PPACA updates on this blog. Additionally, if you have any questions regarding PPACA requirements, please do not hesitate to contact any member of our Labor & Employment Practice Group.

IRS Proposed Regulations On PPACA'S Shared Responsibility Provisions Full of New Year Surprises (Some Good For Employers - Some Not)

Recently, Eric N. Athey, Esq. and Kelley E. Kaufman, Esq., attorneys in McNees Wallace & Nurick LLC's Labor and Employment Law Group, prepared a White Paper entitled: "IRS Proposed Regulations On PPACA'S Shared Responsibility Provisions Full of New Year Surprises (Some Good For Employers - Some Not)". 

On December 28, 2012, the Internal Revenue Service (“IRS”) issued long-awaited proposed regulations regarding the “shared responsibility” penalty provisions of the Patient Protection and Affordable Care Act (“PPACA”). In addition to consolidating prior IRS guidance on the subject, the proposed regulations also contain some surprising interpretations of PPACA’s penalty provisions. Employers will likely be pleased by some of these interpretations and disappointed with others.

Click to view the entire white paper

 

Healthcare Reform Update: IRS Regulations Address Full-Time Status of Nine-Month Education Employees

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Practice Group.

The Patient Protection and Affordable Care Act ("PPACA") requires "large employers" (i.e., those regularly employing 50 or more full-time equivalents) to provide "affordable" health coverage of "minimum value" to "full-time employees" and their dependents. The term "full-time employee" is defined to include those who are employed "an average of at least 30 hours of service per week." Effective January 1, 2014, large employers who fail to provide such coverage to all of their full-time employees and dependents may be subject to "shared responsibility" monetary penalties. These penalties will be triggered whenever a full-time employee (or his or her dependent) of a large employer qualifies for and uses a tax subsidy or credit to purchase coverage on a health care exchange.

School districts, colleges and other educational organizations preparing to comply with PPACA should begin by analyzing whether all of their "full-time employees" (as defined in the law) are offered coverage that is affordable and of minimum value. A common question raised by schools and colleges is whether summer break periods may be counted when calculating whether a 9-month (or 10-month) employee is employed an average of 30 hours per week. Until recently, the answer appeared to be yes. However, proposed regulations issued by the Internal Revenue Service ("IRS") on December 28, 2012 state otherwise.

The new proposed regulations provide that employers may use "initial measurement periods" and "standard measurement periods" of up to 12 months in duration for purposes of calculating whether new and ongoing employees are employed for an average of at least 30 hours of service per week. However, the regulations further state that "educational organizations" may not account for "employment break periods" of at least four consecutive weeks in duration when making calculations as to average hours of service. 

The proposed regulations permit educational organizations to take either of two approaches with respect to employment break periods (e.g., summer break periods) when making determinations as to average hours of service: 1) the employment break period may be excluded when calculating average hours during the measurement period; or 2) the employee may be credited with hours of service during the employment break period at a rate equal to his or her average hours of service during non-break periods. When calculating average hours of service, no more than 501 hours of service during employment break periods are required to be excluded (or credited) by an educational organization per employee each calendar year.

Notably, shorter break periods of less than four consecutive weeks may be factored into average hour of service determinations. However, the proposed regulations make it clear that "hours of service" are not limited to hours actually worked.  The new regulations define an "hour of service" to include "each hour for which an employee is paid, or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence…." For this reason, shorter breaks will be treated as "hours of service" to the extent they are paid.

The proposed regulations contain a number of other clarifications regarding PPACA's shared responsibility provisions; however, the "employment break period" requirements will surely be of greatest interest to educational organizations. Additional information regarding the new regulations will be posted on our blog at www.palaborandemploymentblog.com. Although the proposed regulations are not yet final, the IRS has indicated that employers may rely upon them until additional guidance is issued. The IRS has invited public comments to the new proposed regulations. Comments may be submitted in written or electronic form on or before March 18, 2013. 

Health Care Reform Update - Five Compliance Issues Employers Should Focus on Now

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Law Group. A version of this post appeared in an Employer Alert published by McNees Wallace & Nurick LLC's Labor and Employment Group in October 2012. The Employer Alert can be accessed here.

The Patient Protection and Affordable Care Act (“PPACA”), otherwise known as Health Care Reform, is now 2 ½ years old. It narrowly survived its first major legal challenge with the Supreme Court’s decision in July. PPACA survived its second big hurdle with the re-election of President Obama earlier this month. While many of PPACA’s biggest requirements do not take effect until 2014, employers and health plans must be mindful of the flurry of compliance requirements that will soon take effect under the Act. Here is a quick look at the PPACA compliance issues that employers and health plans should be focused on now:

Is Your Health Plan Ready to Disclose SBCs?

This new disclosure requirement takes effect for open enrollment periods beginning on or after September 23, 2012 (or plan years beginning on or after that date). In a nutshell, insurers must now provide four-page summaries of benefits and coverage (“SBCs”) to group health plans (“GHPs”) within 7 days after a plan applies for coverage with the insurer. GHPs must, in turn, SBCs to plan participants without charge as part of any written application materials that are distributed for enrollment. Individuals also have the right to request an SBC at any time and must receive it within 7 days of the request. A sample SBC is available on the U.S. Department of Labor’s (“DOL”) website at www.dol.gov/ebsa. Additionally, a 60-day advance notice requirement now applies to “material modifications” affecting the content of an SBC; however, special disclosure rules apply in plan renewal situations. Willful failures to comply with these disclosure requirements may trigger a fine of up to $1000 per violation; however, the DOL has indicated that the agency’s focus will be primarily on compliance assistance, not enforcement, as employers work to comply with this new requirement in the coming months.

Is Your Company Prepared for W-2 Reporting of Health Coverage?

W-2 forms for 2012 (to be issued in early 2013) must report the aggregate cost of applicable employer-sponsored group health plan coverage – this includes both employer and employee cost shares. Employers filing fewer than 250 W-2 forms for the preceding calendar year are currently exempt from this requirement. Ancillary benefits such as long-term care, HIPAA excepted benefits (i.e., certain dental and vision plans), disability and accident benefits, workers’ compensation, fixed indemnity insurance and coverage for a specific illness or disease are excluded from the value to be reported. Similarly, the IRS has issued guidance allowing employers to exclude reporting of contributions to consumer-directed health plans such as HRAs and FSAs in most instances. The value of coverage under an Employee Assistance Program (“EAP”) may also be excluded if the coverage does not qualify as a COBRA benefit. The IRS has issued guidance (Notice 2012-9) approving three methods for calculating the value of coverage: 1) the COBRA applicable premium method (COBRA premium less the 2% administrative charge); 2) the premium charged method (for insured plans); and 3) the modified COBRA method (when an employer subsidizes the COBRA premium).

Which of Your Employees Qualify as “Full-time” Under PPACA?

PPACA defines a full-time employee as one who is employed on average at least 30 hours per week. This definition is significant for several reasons under the Act. First, only employers who employ 50 or more full-time equivalent employees are subject to the “shared responsibility” penalties that take effect in 2014. Secondly, the shared responsibility penalties are only triggered if an employer has a full-time employee who is certified to receive a premium tax credit or cost-sharing reduction due to the employer’s failure to provide affordable coverage that meets minimum value requirements. Finally, the 90-day maximum waiting period for coverage that takes effect in 2014 only applies to full-time employees.

 Since so much under PPACA turns on an employee’s “full-time” status, it is critical for employers to understand which of their employees fall under this classification. Employers do not always know whether an employee will regularly work 30 hours per week at the time of hire – particularly in the case of seasonal and variable hour employees. On August 31, 2012, the IRS issued Notice 2012-58 to clarify how these situations should be handled. In brief, an employer may use an “initial measurement period” of between 3 to 12 months to determine whether a newly hired seasonal or variable hour employee has worked an average of 30 hours per week. Upon making this determination, the new employee’s coverage status remains in effect for the duration of a “stability period.” A new employee’s initial stability period may not be more than one month longer than the initial measurement period. Under the guidance, an “ongoing employee’s” full-time status is thereafter subject to redetermination under similar measurement rules. Of course, if an employee is expected to regularly work full-time when hired, the 90-day maximum waiting period that takes effect in 2014 applies.

 Is Your Coverage “Affordable” and of “Minimum Value”?

The “shared responsibility” penalties apply to employers with over 50 employees that either do not offer health coverage or offer coverage that is either not “affordable” or does not provide “minimum value” under PPACA. Although these penalties are not scheduled to take effect until 2014, it may take some time for employers to weigh their options and plan accordingly. Coverage that costs an employee over 9.5% of his or her gross household income is not considered affordable under PPACA. One question that remains unanswered at this point is how an employer is to determine an employee’s gross household income since that amount will presumably include income from dependents as well as non-wage income. The DOL has announced that coverage costing an employee no more than 9.5% of his or her wage earnings will fall under an affordability “safe harbor.” This may lead some employers to set employee health care contributions as a percentage of their earnings rather than as a percentage of the premium cost or fixed amount.

 In order for a plan to be of “minimum value”, it must offer “minimum essential coverage” and the plan must pay at least 60% of covered expenses. The federal agencies have yet to issue comprehensive guidance on these key concepts; however, as employers consider changes to their health plans, they must keep minimum essential benefits, minimum value and affordability in mind.

 Will Your Health FSA Be Ready for 2013 Changes?

Effective for plan years beginning in 2013, health FSA plans may only reimburse up to $2500 in qualifying expenses per participating employee. Employers offering health FSA plans will have until December 31, 2014 to amend their plans to reflect this new limit. This change, in combination with PPACA’s already-effective prohibition on reimbursement for non-prescribed over-the-counter medications, will likely steer more employers away from health FSAs and toward other types of consumer-directed health plans, such as HRAs and HSAs.

 PPACA compliance has become a time-consuming responsibility for many HR and benefits professionals. Companies that are ready to tackle these five issues will be well-positioned to take on the major changes that are scheduled to take effect in 2014.