HEALTH CARE REFORM: THE
SUPREME COURT HAS
SPOKEN; NOW WHAT?
Alice E. Helle
BrownWinick
666 Grand Avenue, Suite 2000
Des Moines, IA 50309-2510
Telephone: 515-242-2407
Facsimile: 515-323-8507
E-mail: helle@brownwinick.com
SUPREME COURT DECISION
• Issued June 28, 2012
– Individual mandate upheld
– Medicaid (Title XIX) expansion narrowed
INDIVIDUAL MANDATE
• Constitutional since the penalty for failure to maintain
health coverage is essentially a tax
• Mandate is effective 2014 (not an employer obligation)
MEDICAID EXPANSION
• Act expands Medicaid to larger group of low-income
people
• Court said Congress may expand coverage and require
states that accept funds to comply, but may not take
away existing Medicaid funding from states that don’t
provide for the expansion
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
•
Small Employer Tax Credits
•
Dependent Benefits for Adult Children (up to age 26)
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
•
No Lifetime Limits on Essential Health Benefits
•
Restricted Annual Limit on Essential Health Benefits
(no less than $750,000 for 2011)
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
•
100% Coverage Preventative Services and
immunizations – No Cost Sharing
o N/A to Grandfathered Plans (but grandfathered
plans may adopt)
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
•
Rescissions of Coverage Not Allowed Absent Fraud,
Misrepresentation or Nonpayment of Premiums
•
No Pre-Existing Condition Limitations for Children
Under Age 19
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
•
Internal and External Appeals Provisions
o
•
N/A to Grandfathered Plans
OTC Drugs Not Reimbursable by HSA/FSA/HRA
Absent a Prescription
o
Exception for Insulin
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT ARE
ALREADY IN EFFECT
•
Simple Cafeteria Plans
o Deemed to Satisfy Nondiscrimination
Requirements of IRC § 125
o Limited to Employers w/ Fewer than 100
Employees
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
•
Nondiscrimination Rules – IRC § 105(h)(2) – DELAYED
o
o
o
o
o
Previously applied only to self-insured health plans
Generally prohibit discrimination in favor of top 25% of
employees
Excise tax of $100/day/employee
N/A to Grandfathered Plans
Rules were to be effective for plan years beginning
after 9/23/10

Delayed indefinitely for regulations

Comment period expired in March of 2011
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
•
Reporting on Form 1099 – REPEALED
o
Would have greatly expanded 1099 reporting
requirements
•
Reporting on Form W-2 – DELAYED
o
Value of employer-provided health insurance to be
reported on Form W-2 (informational only)
o
Originally effective for 2011

Now effective for 2012 for employers who issue
250+ W-2s

Effective for 2013 for smaller employers
o
IRS recently issued Notice 2012-9
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
•
Automatic Enrollment – DELAYED
o
Employers w/ 200+ employees will be
required to automatically enroll new
employees
o
Delayed indefinitely for regulations
o
Not likely to take effect prior to 2014
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
•
Small Business Wellness Grants – DELAYED
o
o
o
o
Grants totaling $200 million over 5 years
Employers with fewer than 100 employees
and no existing wellness program eligible for
grants
Was to be available 2011
Delayed indefinably – Congress did not fund
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
•
CLASS1 Program – SUSPENDED
o
Voluntary long-term care insurance program for
working adults
o
Championed by Senator Kennedy
o
Would have provided up to $50/day for nursing home
care or home health care after years of paying
monthly premiums
o
No employer obligation, but employers permitted to
provide for participation by payroll deduction
_______________
1Community
Living Assistance Services and Supports
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
o Statute required program to be affordable,
self-sustainable and actuarially sound for at
least 75 years
 Administration analysts determined that basic
CLASS insurance plan might cost $235 - $391/mo
for $50/day benefit
 Program suspended due to concern that not
enough people would enroll to make it sustainable
KEY PROVISIONS OF THE
AFFORDABLE CARE ACT THAT HAVE
BEEN DELAYED OR ELIMINATED
• Free-Choice Vouchers – REPEALED
o Would have been effective in 2014 for employers of
50+ employees
PREVIEWS OF COMING ATTRACTIONS
•
Summary of Benefits and Coverage (SBC)
o Uniform summary of benefits in specified format

12-point font

No more than 4 duplexed pages

Must include a uniform glossary of terms

Must include at coverage examples illustrating the
plan’s coverage for normal delivery of a baby and for
management of type 2 diabetes
o Template provided by DOL – Copy is included in your
materials
o Also available at www.dol.gov/ebsa/pdf/SBCtemplate.pdf
o Purpose is to help participants better understand their
health coverage and other coverage options
o Effective for plan years beginning after September 23, 2012
PREVIEWS OF COMING ATTRACTIONS
•
Continued Phase-In of Annual Limit Rule – Essential
Health Benefits
o
09/23/11 - $1,250,000
o
09/23/12 - $2,000,000
o
2014 – no annual limits permitted
PREVIEWS OF COMING ATTRACTIONS
•
Limits on Health Flexible Spending Arrangements
(FSAs)
o Contributions limited to $2,500/year effective
2013
PREVIEWS OF COMING ATTRACTIONS
•
FICA Medicare Tax Rate Increase for Certain Employees
o Effective 2013
o
The Medicare tax rate is increased from 1.45% to 2.35%
for earnings over the threshold of $200,000 for an
individual or $250,000 for a married couple filing jointly
o
The employer’s portion of the tax is not affected
o
The employer will be responsible for collecting the
additional Medicare tax due from the employee
o
Employers are not responsible for determining a spouse’s
earnings
PREVIEWS OF COMING ATTRACTIONS
•
Plan Amendments – 2014
o No pre-existing condition limitations
o No waiting periods over 90 days
o No out-of-pocket limits greater than the limits for highdeductible health plans (currently $5,950/11,900)
 N/A to grandfathered plans
o Wellness program rewards based on satisfaction of health
standards can’t exceed 30% of the cost of employee-only
coverage (currently 20%)
• N/A to grandfathered plans
o Expanded coverage of clinical trials
 N/A to grandfathered plans
PREVIEWS OF COMING ATTRACTIONS
•
Exchange Notice
o
o
Notice deadline is March 31, 2013
Notice must inform employees of:

The existence of the exchanges

The services provided

How to contact the exchanges to request
assistance.

The availability of premium assistance if the
employer’s share of the cost of benefits is less than
60%
The circumstances under which the employee loses employer
contributions to the health plan and explaining that tax-free
employer contributions may be lost when an employee enrolls
in an exchange plan
PREVIEWS OF COMING ATTRACTIONS
• State Insurance Exchanges – 2014
o
“Marketplace” where individuals and small employers
(under 50 employees) may purchase health insurance
o
Must offer four levels of coverage with different benefit
levels and actuarial values
o
To participate, insurers must agree to charge the same
premium for each Qualified Health Plan regardless of
whether it is offered inside or outside the exchange
o
Plans must offer plans similar in scope to “typical”
employer-sponsored plans
PREVIEWS OF COMING ATTRACTIONS
•
Reporting Requirements – 2014
o Coverage – IRC § 6055

Plans providing “minimum essential coverage” to an
individual must file report with IRS with info re covered
persons

Plans must also provide statement to individuals who were
listed on report filed with IRS
o Additional Reporting – Large Employers – IRC § 6056

Applies to employers subject to § 4980H (50+ employees)

Must file report that includes info re premiums and
contributions
PREVIEWS OF COMING ATTRACTIONS
•
Individual Mandate – Effective 2014
o Individuals required to have health coverage or pay a penalty

2014 – greater of $95 or 1% of household income

2015 – greater of $325 or 2% of income

2016 - greater of $695 or 2.5% of income
o Subsidies


Premium assistance tax credits for individuals with income
between 100% and 400% of the federal poverty level
Cost-sharing subsidies for individuals with income up to
250% of the federal poverty level to reduce out-of-pocket
costs for plans purchased through an exchange
PREVIEWS OF COMING ATTRACTIONS
• Large Employer Mandate (50+)
o
Must offer “minimum essential coverage” or pay a tax
penalty
o
If employer does not offer coverage, penalty is $2,000
per employee, except that number of employees is
reduced by 30 in calculating the penalty
o
If the employer offers coverage but doesn’t meet
affordability and value tests, penalty is $3,000 for each
full-time employee who receives premium assistance
through an exchange
DETERMINING FULL-TIME EMPLOYEES
FOR PURPOSES OF
LARGE EMPLOYER MANDATE
• Statute defines “full-time employee” as an employee
who, on average, works at least 30 hours per week
• Notice 2012-58 issued in September
• Provides “safe harbor” method employers may use to
determine whether variable-hour employees or seasonal
employees are full-time employees
Website: www.brownwinick.com
Toll Free Phone Number: 1-888-282-3515
OFFICE LOCATIONS:
666 Grand Avenue, Suite 2000
Des Moines, Iowa 50309-2510
Telephone: (515) 242-2400
Facsimile: (515) 283-0231
616 Franklin Place
Pella, Iowa 50219
Telephone: (641) 628-4513
Facsimile: (641) 628-8494
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