By Dean Spina
Adding benefits for employees enabled employers to provide additional compensation at a time of government wage freezes in the 1940's. For larger employers, what began as an employee benefit will soon become a health care mandate or an additional tax burden when several federal laws go into effect on January 1, 2014.
Health care "reform" has a significant impact on employers and is a critical aspect of employment law at the fundamental and advanced levels.
The Patient Protection and Affordable Care Act ("PPACA"), adopted in March 2010, ushered in health care "reform" focused on increasing access to health care. Among PPACA's reforms are prohibitions on lifetime and annual limits on health care benefits, limits on cost sharing, limits on factors that can be used to establish premium rates, limits on allowable return for insurance companies, and elimination of pre-existing conditions as a bar to health insurance coverage.
To balance the expected increase in claims from covering individuals with pre-existing conditions, PPACA creates individual "shared responsibility." Beginning January 1, 2014, individuals are required to be covered by a health care plan or face paying a tax. In 2012 the United States Supreme Court upheld the shared responsibility provision under the federal government's taxing power. By requiring individuals to be covered for health care costs, PPACA seeks to have more healthy individuals (who will most likely not use covered services) pay premiums for health care.
The availability of health insurance under PPACA is facilitated by the creation of health insurance exchanges to be established in each state. Each state was expected to establish an exchange with federal funding available through 2014. However, a majority of states have elected, in whole or in part, to leave the establishment of exchanges to the federal government.
Each state exchange is to have insurance available that meets certain requirements thus enabling individuals to easily compare alternatives and choose coverage right for that individual and members of his or her family. Insurers choose whether to participate in an exchange.
Exchanges are to be established by October 1, 2013, with health insurance coverage to be available January 1, 2014. The progress on establishing exchanges varies from state to state. The insurance plans that will be available will vary from state to state but the plans for the individual market will provide "essential health benefits." Exchanges will be interfacing with federal databases of individual income tax information to facilitate the availability of federal financial support for lower income individuals.
EMPLOYERS & HEALTH CARE REFORM
Under PPACA the role of employers in providing access to health care moves from a free choice fringe benefit to dealing with mandates, multiple fees and taxes, multiple federal agencies charged with enforcement that are issuing thousands of pages of guidance and regulations, countless hours needed for compliance and reliance on a team of professionals (e.g., accountants, attorneys and insurance brokers).
Employers are able to avoid some, but not all, of the PPACA reforms by maintaining a substantially unchanged "grandfathered" health plan.
However, most employers are grappling with the PPACA reforms. Implementation of PPACA reforms is complicated by the status of rule making and the application of PPACA's reforms to diverse employment situations such as reliance on seasonal workers, independent contractors, and use of staffing agencies.
Agency rule making covering such a complex and overarching area as health care has occasionally been delayed, causing statutory deadlines to be missed. Guidance in implementation of PPACA's impact on employers comes in various forms, including the language of the statute, FAQ's, notices, technical releases, rulings, proposed rules and final rules.
PPACA accomplishes most of its reforms by amending numerous existing laws, such as the Social Security Act (SSA), Fair Labor Standards Act (FLSA), Public Health Service Act (PHSA), Employee Retirement Income Security Act (ERISA), and Health Insurance Portability and Accountability Act (HIPAA) and the Internal Revenue Code (IRC). Thus, a massive body of law must be dealt with in understanding health care reform.
The exchanges are also to enable smaller employers to access health insurance. A "small employer" that is able to obtain health insurance through an exchange is an employer with no more than 50 or 100 employees (depending on state by state election). Health insurance for the small employer market will provide "essential health benefits."
A large employer (defined below) faces a mandate of providing health coverage ("play") or the application of new non-deductible taxes ("pay"). A large employer is one with 50 or more full-time and full-time equivalent employees. A full-time employee is one that averages 30 or more hours of service in a week. This play or pay aspect of health care reform is imposed under the rubric of "employer shared responsibility."
Health coverage for a large employer does not have to provide "essential health benefits." However, the health coverage provided to employees of a large employer must be affordable and it must provide a minimum value. Affordability is defined as requiring employee contribution (for employee only coverage) that is not more than 9.5% of household income. Implementing this limitation is difficult because employers will rarely have access to employees' household income information.
Among other employer related impacts from health care reform, PPACA restricts waiting periods for health coverage to no more than 90 days, adds required notices and reporting, alters wellness program rules, mandates standards for appeals and external review, and adds a whistleblower provision.
In the weeks ahead, employers will learn the impact of health care reform on the cost of providing health benefit plans to employees and family members. Once the cost becomes known, employers will be faced with critical decision making prior to the January 1, 2014, effective date of many of the health care reforms. Are you ready?
If you have questions regarding the upcoming Health Care reform laws please contact Dean A. Spina.
Categories: Health Law