Navigating Health Care Reform – What’s Next?
July 27, 2012
Implications for Employers – Compliance with SBC Requirements and More
The U.S. Supreme Court has spoken and the Patient Protection and Affordable Care Act of 2010 as amended by the Health Care and Education Reconciliation Act of 2010 (together “Health Care Reform”) remains the law of the land. On June 28, 2012, the Supreme Court ruled that Health Care Reform is constitutional. In a 5 to 4 decision, Chief Justice John Roberts wrote that Health Care Reform is constitutional as an exercise of Congress’ power to tax. Therefore, the changes made by Health Care Reform to the Employee Retirement Income Security Act of 1974 (ERISA), Internal Revenue Code of 1986 (Code), and other statutes remain in force.
For now, the Supreme Court’s decision is final word on the specific challenges presented and employers must continue to navigate the challenging waters of Health Care Reform. Media outlets, political candidates, health care industry representatives, social commentators and people everywhere continue to debate what Health Care Reform means, but employers and group health plan sponsors need to take definite steps now to make sure they are complying with various Health Care Reform requirements. Below we outline some specific implications for employers and how Workforce Now Comprehensive Services is here to assist. Please note that some of the ADP solutions described below may not apply to you depending on your current services and technology. As always, please consult your Relationship Manager, Service Delivery Manager or HR Business Partner for additional information.
Compliance Priorities That Require Attention Now
Summary of Benefits and Coverage. Employers sponsoring group health plans now need to focus on ensuring compliance with the summary of benefits and coverage (SBC) requirements. Group health plans need to provide participants and applicants a SBC during upcoming open enrollment periods. (The SBCs must be distributed to individuals who enroll or re-enroll through an open enrollment period beginning on the first day of the first open enrollment period that begins on or after September 23, 2012.) For enrollments other than during an open enrollment period (e.g., newly eligible employees), the SBC must be provided beginning on the first day of the first plan year that begins on or after September 23, 2012 (January 1, 2013 for calendar year plans). For self-insured benefits, the employer is responsible for preparing the SBC content. For fully insured benefits, the insurance company is responsible for preparing the SBC content. If you have a fully-insured plan, check with your insurance carrier or broker to make certain they are preparing the SBC.
The federal agencies have issued a template, instructions and a uniform glossary that may be used to fulfill the SBC requirements for plan coverage prior to January 1, 2014. SBCs must conform to specific formatting requirements and be presented in a culturally and linguistically appropriate manner. Employers that are negotiating collective bargaining agreements now must take into account the near- and long-term effects of Health Care Reform requirements.
Under the SBC rules, employers with group health plans can provide the SBC electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan. SBCs also may be provided electronically to participants and beneficiaries who request an SBC online. In either case, the individual must have the opportunity to receive a paper copy upon request.
Employers using online enrollment for their group health plans should take advantage of providing SBCs through their online enrollment system.
ADP Support. Clients who have purchased and implemented HRB or the Workforce Now (WFN) HR & Benefits module as part of their services can use the enrollment functionality in order to distribute the SBCs to their employees electronically in connection with their online enrollment. These clients have the ability to either post the SBCs for their group health plans on the module’s online enrollment section or insert a hyperlink with the URL that will take the employee to the location of the stored SBC. After posting, individuals will be able to review and print their SBCs in connection with their online enrollment.
Additional Tax Reporting. Employers must prepare for the reporting changes on the Form W-2, supplement information already reported on the annual Form 5500 reports, and pay a per plan participant fee to the government for research purposes.
Forms W-2 for 2012.Employers must issue to each employee Forms W-2 for 2012 that include the cost of group health coverage.
ADP Support.Clients who have purchased and implemented HRB or the WFN HR & Benefits module and the WFN Payroll module will be able to feed the costs of coverage that client has loaded into HRB or the WFN HR & Benefits module to the WFN Payroll module. Clients will then need to add any costs of coverage that are not captured within HRB or the WFN HR & Benefits module in order to arrive at the total cost of coverage that must be captured on the Form W-2.Your service team will be able to walk you through the WFN feature/functionality that supports this new requirement and advise you as to training available. We will continue to provide regular updates regarding this reporting requirement as the deadline nears via newsletters and client training.
Patient-Centered Outcome Research Fee.Plan sponsors of self-insured health plans and health insurance issuers of insured health plans will start paying fees to help fund the Patient-Centered Outcomes Research Trust Fund. The Fund supports the Patient-Centered Outcomes Research Institute which conducts research on comparative effectiveness of clinical treatments. For self-insured health plans, the fees are paid by the plan sponsor. For insured health plans, the fees are paid by the issuer. For a self-insured health plan that operates on a calendar plan year, the plan sponsor must pay the 2012 fee no later than July 31, 2013.
ADP Support. Clients who have purchased and implemented HRB or the WFN HR & Benefits module as part of their services will have access to a report (this will be available in mid-August 2012) in the module that helps them determine the amount of the fee that is due and audit the information that is provided to them by their plan administrator.
Benefit Dollar Limitations.Employer group health plans are prohibited from imposing lifetime or annual limits (annual limits are first restricted and later prohibited starting in 2014) on the dollar value of benefits that are considered essential health benefits.
Waiting Periods. For plan years beginning on or after January 1, 2014, a group health plan or group health insurance issuer cannot apply any waiting period that exceeds 90 days for employees eligible to participate in the group health plan.Pre-Existing Condition Limitations.No pre-existing condition limitations are allowed for individuals enrolled in a group health plan who are under 19 years of age. Effective for plan years beginning on or after January 1, 2014, no limitations will be allowed.
Patient Rights. Health Care Reform already requires plans to provide coverage for children up to age 26, provide specific preventive care benefits on a first-dollar basis, and supplement the claim procedures already required under ERISA.
Tax Treatment. Eliminated are the Code’s tax-free reimbursements for over-the-counter medicines. For health care flexible spending account plans with plan years beginning on or after January 1, 2013, the Code caps employee contributions at $2,500.
Retiree Drug Costs. Beginning next year, the employer tax deduction for retiree prescription drug benefit costs for employers receiving a related subsidy is eliminated.
Compliance Priorities for 2014 and Beyond
Here is a summary of other key Health Care Reform provisions affecting employers:- Play or Pay. Each employer with 50 or more full-time employees will have to either (a) provide at least a specified minimum level of health coverage that its employees can afford or (b) pay a penalty beginning in 2014.
- Automatic Enrollment. After the automatic enrollment regulations are issued, employers with more than 200 full-time employees are required to automatically enroll new full-time employees in group health plans beginning on the date described in the regulations.
- Non-discrimination. Insured group health plans are barred from discrimination in favor of highly-compensated individuals regarding coverage and benefits. (The Internal Revenue Service has not yet issued implementing regulations for this prohibition to become effective.)
Product Impact
On April 14, 2012, ADP upgraded the HR, Benefits & Talent module. Highlights of this upgrade include the following Heath Care Reform enhancements:
- Grandfathered Health Plan Indicator
- Primary Care Physician – Last Date of Change Field
- Simple Cafeteria Plan Indicator
- Group Health Insurance Costs – Form W-2
Although Health Care Reform will continue to evolve, ADP will continue to inform you of such changes and remains committed to helping you meet your compliance challenges with ease. For additional information about these or any other compliance issues, please contact your ADP Relationship Manager, HR Business Partner, or Service Delivery Manager.
Don’t forget to check under Tools and Resources for updates on Health Care Reform. Click here to be taken directly to ADP’s Eye on Washington for information on Health Care Reform, including recorded webinars on different aspects of Health Care Reform.
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