Inside Track: Look Out: Here Comes the Affordable Care Act:

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  • Look Out: Here Comes the Affordable Care Act

    With implementation of the Affordable Care Act, lawyers must monitor how changes will impact their clients. In this article, Madison lawyer Gesina Seiler gives an overview of some of requirements that employers will need to comply with now and in the near future.

    Gesina M. Seiler

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    Look Out: Here Comes the Affordable Care Act

    Feb. 6, 2013 – Now that President Barack Obama has been reelected, there’s little likelihood that the Affordable Care Act, commonly referred to as “Obamacare,” will be scaled back or eliminated. The Affordable Care Act has many employers scratching their heads, wondering whether it applies to them and, if it does, how they will comply.

    No wonder, since the actual legislation itself consists of more than 2,400 pages and the majority of the regulations implementing it haven’t been published yet.

    Notices of rulemaking and requests for public comment regarding proposed regulations are being issued almost daily from the U.S. Office of Personnel Management (OPM), the U.S. Department of the Treasury, and the IRS, among other federal agencies.

    This article gives an overview of some of requirements that employers will need to comply with now and in the near future, while noting some gray areas. Lawyers should continue to monitor proposed regulations in order to properly advise clients on ACA requirements.

    Covered employers

    There are a number of new requirements in the ACA that a covered employer will need to monitor and comply with now, in the near future, and in the not-so-distant future. The first real challenge arises out of the term “covered employer.”

    For some provisions, all employers and health insurance plans are covered. For other provisions, companies must employ a certain number of employees (25, 50, 100, 200, or 250) working an average number of hours for a certain number of months.

    Another issue that further complicates the applicability of the ACA is whether a group or individual healthcare plan is grandfathered (meaning it was in effect on March 23, 2010). Certain provisions don’t apply to grandfathered plans.

    Informational Reporting

    “Information Reporting of Value of Employer-Sponsored Group Health Plans” must be reported on 2012 W-2 statements. The reports are mandatory for employers that filed 250 or more W-2 statements in the previous year. Employers, or their lawyers, should refer to IRS publications for specific coverage types that must be reported (see Notice 2012-9). 

    Summary of Benefits and Coverage 

    Beginning September 23, 2012, health insurers and self-insured group health plans must provide a summary of benefits and coverage to all individuals enrolling in medical coverage.

    The information must be provided to employers and individuals when they’re shopping for or enrolling in coverage, at each new plan year, and within seven business days of a request for a copy from their health insurance issuer or group health plan. The Center for Consumer Information and Insurance Oversight maintains a sample SBC on their website.

    Limits on Flexible Spending Accounts

    There is a $2,500 limit on flexible spending accounts (FSAs). This limit applies to employee salary reductions, but it also can apply to employer contributions under certain scenarios (e.g., if a cash option is available). The FSA limits were to be described in open enrollment materials in the fall of 2012 for plan year 2013. 

    Research Fund Fee 

    There is an annual fee to fund patient-centered outcomes research. The fee will be in effect for a limited number of years from 2012 to 2019. It doesn’t apply to health insurance policies if substantially all the coverage is of excepted benefits (e.g., accident- or disability-only plans or limited-scope dental or vision plans), employees are primarily working and residing outside the U.S., or the plan contains stop-loss and indemnity reinsurance policies.

    The fee is calculated by multiplying $1 by the average number of members covered under the healthcare plan for policy or plan years ending on or after Oct. 1, 2012, and multiplying $2 by the average number of members for healthcare plans ending after September 30, 2013.

    It then increases to 6.6 to seven percent per year until 2019. For self-funded plans, the plan sponsors are responsible for paying the fee. For insured plans, the health insurance issuers are responsible for paying the fee. 

    Medical Loss Ratio Rebate Requirements

    Beginning in August 2013, insurers must report plan costs for the purpose of calculating their medical loss ratio (the percentage of insurance premium dollars spent on reimbursement for clinical services and activities to improve healthcare quality).

    Large group insurers must spend at least 85 percent of premium dollars on claims and activities to improve healthcare quality. Individual and small group insurers (those with a total average of one to 50 employees based on the preceding calendar year, depending on the state’s definition) must spend at least 80 percent of premium dollars on claims and activities to improve healthcare quality. 

    Special considerations for small plans, new plans, mini-med plans, and expatriate plans are accounted for in the program. Rebates to subscribers, policyholders, or governmental entities that paid the premium must be paid by August 1 following the end of the reporting year. 

    Proposed rules for additional Medicare tax

    On December 5, 2012, the Treasury Department and the IRS issued proposed regulations relating to the additional hospital insurance tax on income above threshold amounts (the “additional Medicare tax”), as added by the ACA.

    Specifically, the proposed regulations provide guidance for employers and individuals relating to implementation of the additional Medicare tax. The document also contains proposed regulations relating to the requirement to file a tax return reporting the additional Medicare tax, the employer process for making adjustments of underpayments and overpayments of the additional Medicare tax, and the employer and employee processes for filing a claim for a refund for an overpayment of the additional Medicare tax.

    The threshold amounts for the additional Medicare tax of 0.9 percent are $250,000 for joint returns, $125,000 for married taxpayers filing separate returns, and $200,000 in any other case. The additional Medicare tax differs from the Medicare tax in that there is no employer portion to correspond to the amount owed by the employee.

    As with any change in the Tax Code, there are exceptions and provisions that may be applicable to employers and individuals alike, so you should be sure to consult your tax adviser. The Federal register’s website has proposed rule. Comments are due on or before March 5, 2013:

    • Send submissions to CC:PA:LPD:PR (REG-130074-11), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between 8:00 a.m. and 4:00 p.m. to CC:PA:LPD:PR (REG-130074-11), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, D.C.

    • Send comments electronically via the Federal eRulemaking Portal at (IRS REG-130074-11).

    • The public hearing will be held on April 4, 2013, in the auditorium at the Internal Revenue Building, 1111 Constitution Avenue NW, Washington, D.C. Requests to speak must be received by March 5, 2013.

    Gesina (Ena) Seiler, Marquette 2005, is a litigator and partner at Axley Brynelson LLP, Madison, with an active insurance defense and employment law practice.

    Proposed rule for MSPP

    Wisconsin has elected not to operate a state health insurance exchange. Therefore, the U.S. Department of Health and Human Services (HHS) will operate the state’s exchange.

    On December 5, 2012, the OPM issued a proposed rule to implement the Multi-State Plan Program (MSPP). Through contracts with the OPM, health insurance companies will offer at least two multistate plans (MSPs) on each of the affordable insurance exchanges.

    Under the law, an MSPP issuer may phase in the states in which it offers coverage over four years, but it must offer MSPs on exchanges in all states and the District of Columbia by the fourth year in which it participates in the MSPP. The OPM aims to administer the MSPP in a manner consistent with state insurance laws and informed by input from a broad array of stakeholders. The Federal Register’s website has the proposed rule.

    Bottom line 

    You will face challenges and uncertainty as you attempt to navigate this new law. Be sure to take action to comply with the immediate requirements of the ACA, closely monitor upcoming requirements, and make necessary adjustments as additional regulations are issued.

    This article was first published in the January 2013 issue of the Wisconsin Employment Law Letter, published by M. Lee Smith Publishers LLC. Reproduced here with permission.