Articles and Newsletters

Client Alert from the Employee Benefits Group - November 2011

Update on Health Care Reform/Patient Protection and Affordable Care Act ("PPACA")

By Jeremy J. Sharp

Eighteen months after its passage in March 2010, the long-term fate of the Patient Protection and Affordable Care Act ("PPACA") is uncertain and remains in the hands of the U.S. Supreme Court, which is expected to rule upon the constitutionality of PPACA's individual mandate in mid-2012. What is certain, however, is that employers have a number of compliance concerns under PPACA that will go into effect in the next eighteen months, and expecting a reprieve from the Supreme Court is wishful thinking indeed.

Form W-2 Reporting

Depending upon their size, employers may have to begin reporting the value of health care coverage on Form W-2 for employees for the 2012 tax year. For employers that file at least 250 Forms W-2 for 2011, Forms W-2 issued to employees in January 2013 must include this information, and thus, employers must begin tracking it in January 2012. Employers will report the aggregate cost of applicable employer-sponsored coverage in Box 12 of Form W-2 using Code DD.

Employers that file less than 250 Forms W-2 for 2011 are exempt from the requirement to report the value of health care coverage until further guidance and in no event will be required to report this information until at least 2013, meaning there will be at least a one-year delay in the application of this requirement to smaller employers.

Expanded Summary of Benefits and Benefits

Effective March 23, 2012, employers will have to provide expanded summaries of benefits and coverage. These rules require certain specified information be included, from uniform definitions so that employees can compare different coverage offerings more easily, to cost-sharing provisions, to phone and internet contacts for additional information. Fortunately, these expanded summaries must be in 12-point font and cannot exceed four double-sided pages. Proposed rules were issued in August, and we are awaiting final guidance, which may change the requirements and/or March 2012 deadline for compliance.

Additional Requirements for Non-Grandfathered Plans

There are some additional compliance requirements under PPACA for non-grandfathered plans (NB: a grandfathered plan that is essentially the same as coverage offered effective March 23, 2010, and only changes within certain parameters - e.g., employer percentage of premiums cannot decrease by more than 5%). 

• Expanded preventive services without cost-sharing for women (generally, effective 1/1/2013 for calendar year plans):

  • contraceptive methods and counseling,
  • well-women visits,
  • screening for gestational diabetes,
  • HPV testing,
  • STD counseling,
  • HIV counseling and screening,
  • breastfeeding support/supplies/counseling,
  • domestic violence screening and counseling.

• Expanded requirements for Claims, Appeals, External Review (Effective 1/1/2012)

Of course, any plan that loses its grandfathered status during 2011 must ensure that it is in compliance with all applicable PPACA requirements by January 1, 2012.

Temporary Tax on All Group Health Plans

PPACA imposes upon self-funded plans a temporary tax for funding of Comparative Effectiveness Research. Essentially, tax is $1/participant per year in 2012, $2/participant per year 2013-2019. Comparative Effectiveness Research is comparison of existing health care interventions to determine which work best for which patients and which pose greatest benefits/harms - which treatment works best, for whom and under what circumstances.

Notice of Grandfathered Plan Status

For so long as it retains grandfathered plan status, a grandfathered plan must display prominently a consumer notice declaring the plan's grandfathered status in the materials communicating plan benefits to participants. The U.S. Department of Labor ("DOL") has provided model language for this notice.