In the context of multiemployer plans, the application of various provisions of health care reform is murky. Below are five issues that are top of mind for multiemployer plans:
- Pay or Play Penalty.
The “pay or play” penalty applies to employers beginning in 2014. The recent January 3, 2013 proposed regulations (as clarified by the technical amendment) have reserved comment on how the penalty may apply for multiemployer plans after 2014. The pay or play regulations include transitional relief through 2014 and request comment on how these rules should apply to employers participating in multiemployer plans.
Under the transitional relief, an employer will not be subject to a pay or play penalty if:
- the employer is required by a collective bargaining agreement to make a contribution to a multiemployer plan on behalf of some or all of its employees who satisfy the plan’s eligibility conditions,
- coverage is offered to full-time employees (and their dependents), and
- such coverage is affordable and provides minimum value (the terms in this third requirement, “affordable” and “minimum value,” are both in the process of being defined by regulations).
Application of this rule to multiemployer plans is unclear. The 2014 pay or play transitional relief does not apply to waiting periods.
- Exchange Notice.
Although the notice has been delayed, it is unclear whether employees who receive health coverage under a collective bargaining agreement will even be able to get coverage through the exchanges.
- Application of New Fees.
Also for 2013, there are two new temporary fees that will need to be paid by multiemployer plans: reinsurance fees and PCORI fees.
The transitional reinsurance fee funds a program designed to stabilize premiums in the individual health insurance market during the first three years that state-based health insurance exchanges are in effect. Group health plans must pay the fee to fund the transitional reinsurance program. For 2013, HHS has proposed an annual contribution rate of $63 per individual covered for each group health plan. Of interest to multiemployer plans, the proposed regulations include a footnote that permits the transitional reinsurance fee to be paid from plan assets.
The Patient-Centered Outcomes Research Institute (PCORI or sometimes called PCOR) fee was discussed in our earlier post, but recent guidance has clarified this fee can be paid from multiemployer plan assets. The agencies’ FAQs (which are also discussed in prior posts about the delay of the exchange notice and the effect on HRAs) discuss who can pay for the PCORI fee. The agencies acknowledge that multiemployer fund sponsors do not have independent sources of funding the PCORI fee. Also, although the PCORI fee is technically an excise tax, it is unlike other excise taxes for which trustees may be independently liable. As a result, the PCORI fee can be paid from multiemployer plan assets.
- Collective Bargaining Contract Language.
Employers and unions continue to struggle with the annual cost increases associated with health plans. The problem is further complicated for employers and unions due to the lack of clarity in how health care reform applies to multiemployer plans. As bargaining negotiations start, both sides may want to consider adding flexibility, rather than rigid benefit levels and costs, to be able to react to future guidance. Employers may want to work with our labor management relations team to address health care reform in upcoming negotiations.