Increasing Compliance Obligations Facing Employers in 2013 and 2014, Culminating in “Pay or Play Penalty”
Employers face increasing compliance obligations over the coming year under various federal laws, including the Affordable Care Act (“ACA”), commonly known as the health reform law, and the privacy and security provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). Like individuals, who are able to enroll in exchanges in October as they become subject to the individual mandate in 2014, employers’ role in health reform finally culminates in 2014 with the application of the “pay or play” penalty.
This newsletter provides a short summary of some of the many ongoing and new obligations facing employers, presented in the order in which they should be addressed. Each of the following short summaries links to a longer discussion about the particular topic. Space does not allow us to address every issue, so we welcome you to contact a member of the Trenam Kemker employee benefits group for additional information about any of these issues.
Current and Ongoing
Summaries of Benefits and Coverage (SBCs) with New Provisions
SBCs provide, in a short “at-a-glance” format, basic information about the benefits provided under health plans. Employers, either directly or through their insurers/administrators, must provide them to health plan participants, including newly-issued required language.
Ensure Plan Documents are Amended to Reflect FSA $2,500 Contribution Limit
Contributions to health flexible spending accounts (FSAs) are limited to $2,500 per year effective for plan years beginning on or after January 1, 2013. Section 125 (also called cafeteria plan) documents, as well as health FSA plan documents and summary plan descriptions should be amended to reflect this change if not yet completed.
Preparation for DOL Audits of ACA and ERISA Plan Document Compliance
Department of Labor audits of welfare plans have increased in the wake of ACA. Plan sponsors should ensure they have ERISA-compliant and up-to-date plan documents and summary plan descriptions (SPDs), as well as documentation of compliance with ACA-specific requirements, such as evidence of grandfathered status.
First Patient-Centered Outcome Research Fee Report and Fee Due
The Patient-Centered Outcome Research Fee was established by the ACA to fund studies for determining which treatment options provide the best clinical outcomes. Both insured and self-insured plans are required to pay a fee, which is $1 times the number of covered lives (i.e., employees, dependents, and COBRA beneficiaries) under the plan, with the first report coming due by July 31, 2013.
Employers Have Fiduciary Responsibility to Ensure Proper Handling of MLR Rebates
Insurance companies are required to spend a minimum percentage of premiums received on claims and certain other clinical activities. If it falls below 85% (in the large group market, 80% in the small group market), insurers are required to issue rebates of the amount over that required percentage. Employers who receive these rebate payments should ensure they are handled appropriately, given that a portion of the rebate will in many instances be “plan assets” and subject to ERISA’s trust and fiduciary obligation principles. In many cases, this will require that at least a portion of the rebates be passed through to plan participants.
Compliance with HIPAA Privacy Final Rules Required
The Office for Civil Rights of the Department of Health and Human Services (“OCR”), which enforces the Privacy and Security Rules, issued final rules, compliance with which is generally required by September 23, 2013. Group health plans will need to evaluate business associate relationships, revise notices of privacy practices, and update policies and procedures to comply with the new requirements under this set of final rules.
Notices to Employees of Coverage Under Exchanges Required
Employers are required by the ACA to provide employee notices of the availability of coverage under the exchanges, while letting the employees know that tax credits may be available to them for obtaining coverage there. Model notices have been provided, for this purpose, which will also specify whether the employer provides coverage and whether that coverage meets the minimum essential coverage and affordability requirements.
Prohibition on Waiting Periods in Excess of 90 Days
Plans, including grandfathered plans, will be prohibited from imposing a waiting period that is in excess of 90 days. This will include any period of time that must pass before an individual who is otherwise eligible is allowed to enroll.
Cost-Sharing and Plan Design Limitations
Several limitations from the ACA phase-in during 2014, effective for plan years beginning on or after January 1, 2014. These include the prohibition on preexisting condition exclusions or limitations with respect to all individuals, and limits on out-of-pocket maximums.
Employer “Pay or Play” Penalty Begins
The employer “shared responsibility” (or “pay or play”) provision of the ACA goes into effect in 2014. Beginning in 2014, an employer with 50 or more employees will have to pay a penalty if that employer either: (1) does not offer at least minimal essential coverage, or (2) does offer minimal essential coverage, but that coverage does not meet both minimum affordability and minimum value standards.