Two Key Health Reform Components Delayed
The Treasury Department announced on July 2, 2013 that implementation of two key components of the Affordable Care Act (the "ACA" or "Health Reform") would be delayed, and followed that informal announcement with issuance of Notice 2013-45. The only provisions that will be delayed are:
- Information reporting by employers and insurers to the IRS and to full-time employees as to whether they provide qualifying health coverage; and
- Assessment of shared responsibility payments (also known as "Pay or Play").
Now, both of these ACA components will go into effect in 2015 rather than 2014. Notice 2013-45 can be found here.
Other Health Reform Requirements Will Still be Effective in 2014
While this is a welcome delay for employers, the reporting and Pay or Play delay does not mean employers no longer have Health Reform compliance challenges for 2014. Other rules were not delayed. Here is the list of Health Reform mandates for employer plans:
- Employers will still experience cost increases related to new taxes on plans and health insurers, so will need to address 2014 design and cost-sharing with these costs in mind. For more information, click here to see our Legal Update on "New Fees Imposed under the Affordable Care Act."
- Employers will still be required to provide notices after October 1, 2013 to new hires and those eligible for COBRA regarding the insurance exchanges. Click here to see our Legal Update on "Model Notices Related to Health Insurance Exchanges—Employer Obligations."
- Employers must be sure their non-grandfathered plans continue to cover preventive services, as the list of these services changes from time to time, without cost sharing, and if emergency services are covered, they must be covered out-of network on the same basis as in-network.
Also for non-grandfathered plans, beginning in 2014:
- coverage may not be denied to participants who enroll in clinical trials, nor may additional conditions be imposed on these participants, and
- for small employer plans, the plan's annual deductible must be no more than $2,000 for single and $4,000 for family coverage (these amounts are indexed annually for inflation) and, for all plans, the out-of-pocket limit may be no more than $6,350 for single and $12,700 for family coverage (also indexed annually for inflation); for this purpose, a "small employer" is an employer with no more than 100 employees in the preceding calendar year.
- For 2014, a number of coverage requirements must be in place for all plans (grandfathered and non-grandfathered): plans must eliminate all pre-existing condition exclusions, may not impose lifetime limits, and must cover "essential health benefits" with no annual limits.
- Mini-Med waivers expire in 2014 and will not be renewed.
- Employers must issue the annual Summary of Benefits and Coverage for 2014, and observe the 60-day advance notice required before making mid-plan-year changes to plan features listed in it.
- No plan may require an eligibility waiting period in excess of 90 days beginning in 2014, so all plans will either need to enroll participants mid-month based on their anniversary of hire, or enroll at the beginning of the month prior to that 90th day.
- All plans must offer coverage for dependents in 2014, even if the employer does not pay any more toward multiple party coverage then it does toward single.
Two other mandates—nondiscrimination rules and automatic enrollment for employers with over 200 employees—continue to be delayed until guidance is issued, and are not expected to be effective in 2014.
What's the Risk of Noncompliance?
Any employer that does not follow Health Reform's design mandates is potentially subject to Department of Labor audit to enforce the rules. Audits have increased lately, and the new Health Reform rules have been their primary focus.
ACA also amended the Fair Labor Standards Act to provide a private right of action to an individual who believes he was discharged or otherwise discriminated against in compensation or other terms or conditions of employment by an employer, either because he received a tax subsidy under ACA or after the individual raised questions about or reported violations of Title I the ACA (basically, the design mandates listed above). Compensatory and special damages are allowed in these "whistleblower" actions.
Finally, private sector group health plans and church plans with more than 50 employees have a risk of large tax penalties for noncompliance. There is an excise tax on plan sponsors of $100/day per affected individual (up to 10% of total health cost for the year, or $500,000, if less), and self-reporting on Form 8928 is required; the tax will be higher if IRS issues notice of examination before you report. For state and local governmental plans, the Department of Health and Human Services has authority to assess a similar penalty.