eni’s HR experts are mindful that changes in the Health Care Reform Law may impact your business. Therefore, we have provided some information below to explain and help your company adapt to changes for 2013 and beyond.
The Patient Protection and Affordable Care Act (PPACA) impacts businesses in several ways from the types of benefits offered under insurance plans, to the ways employers conduct their businesses. Some provisions are already in effect and more will be implemented over the next several years.
Some of the key mandates are listed below:
The Patient Protection and Affordable Care Act requires employers to report the cost of health care coverage under an employer sponsored group health plan on an employee’s W-2 form.
The Form W-2 Reporting provision is intended to help employees better understand the benefit they receive through their employers, and at the same time gain awareness of the true cost to obtain health coverage.
Businesses filing 250 or more Forms W-2 in the previous tax year are required to comply with the provision. The provision is currently optional for businesses filing fewer than 250 Forms W-2 in the previous tax year.
The provision is effective beginning with 2012 Forms W-2 that are issued in January 2013, and will apply until further guidance is issued.
The IRS has confirmed that the health care amounts reported on the W-2 are strictly informational and not taxable to the employee. In addition, Forms W-2
do not need to be issued to individuals who would not otherwise receive a Form W-2, such as COBRA recipients and retirees.
Beginning January 1, 2013 employee contributions to medical FSA's will be limited to the lesser of a $2,500 cap for a taxable year or the company maximum. The maximum will be adjusted annually for inflation beginning in 2014.
The $2,500 limit is effective for plan years starting January 1, and not the taxpayer’s tax year. Employers with fiscal year health care FSAs may keep higher reimbursement limits in effect through the end of their 2012-2013 plan year.
Employers may adopt retroactive amendments to impose the $2,500 limit before Dec. 31, 2014.
The $2,500 limit applies only to salary reduction contributions under a health care FSA and does does not limit the amount permitted for reimbursement under an FSA for dependent care assistance or adoption care assistance. Nor does it apply to salary reduction or any other contributions to a health savings account (HSA) or to amounts made available by an employer under a health reimbursement arrangement (HRA).
Prior to the 2010 health care reform, the Internal Revenue Code prohibited only self-funded plans from discriminating in favor of highly compensated employees with regard to health benefits. However, the PPACA changed this requirement to include all group health plans, including non-grandfathered, fully insured plans. This provision was scheduled to be effective the first plan year after September 23, 2010, but has since been delayed pending the release of regulations or other administrative guidance. Grandfathered plans have until 2014 to comply.
Many fully insured employers have traditionally offered more generous benefits to executive employees as part of their total compensation package. These practices include having a separate plan for senior managers, having shorter waiting periods for eligibility and having lower employee contributions for senior managers. As a result of the health care reform act, employers subject to the new nondiscrimination provisions will generally no longer be able to implement such practices and must refrain from discriminating in favor of highly compensated employees with regard to health benefits.
On the other hand, the PPACA does allow employers to charge lower-earning employees less than the employer charges higher-earning employees. As an example, an employee who earns $30,000 can be charged a $30 premium while a similarly situated employee earning $50,000 can be charged a $50 premium without the plan being considered discriminatory.
One new requirement that will be in effect on January 1 for calendar-year non-grandfathered group health plans is the coverage of certain women’s preventive services without cost-sharing. The coverage requirement is effective for plan years beginning on or after Aug. 1, 2012, and does not apply to grandfathered group health plans.
The guidelines on women’s preventive services require plans to provide coverage for the following types of preventive services without co-payments or other cost-sharing:
• Well-woman visits—Annually, with additional visits as necessary.
• Screening for gestational diabetes—Between weeks 24-28 of gestation, and at the first prenatal visit for high-risk women.
• Testing for HPV—Every three years beginning at age 30.
• Counseling for sexually transmitted infections—Annually.
• Counseling and screening for HIV—Annually.
• FDA-approved contraceptive methods, sterilization procedures, and counseling—Annually, subject to certain religious-employer exemptions.
• Breastfeeding support, supplies and counseling—With each birth.
• Screening and counseling for interpersonal and domestic violence—Annually.
The requirement to cover the preventive services without cost-sharing does not apply to services that are performed out-of-network.
In addition, the agencies have given plans allowance to use “reasonable medical management techniques” to determine the frequency, method, treatment, or setting for the preventive services, to the extent that those items are not covered in the preventive-services guidelines.
New Medicare taxes on high earners, imposed under the PPACA, mean big changes in wage withholding, executive compensation and personal financial planning for these employees.
For taxable years beginning after Dec. 31, 2012, employers will be required to withhold additional amounts from the wages of high-earning employees. The Medicare tax rate will increase by .9 percent (from 1.45 percent to 2.35 percent) on wages over $200,000 for single filers, wages over $250,000 for joint filers, and wages over $125,000 for persons who are married but filing separately.
Summary of Benefits and Coverage
On Feb. 9, 2012, three federal agencies issued a final rule under the Patient Protection and Affordable Care Act that will require U.S. health insurers and group health plans to provide concise and comprehensible information about health plan benefits and coverage to current and potential health plan participants, for plan years beginning after the fall 2012 open enrollment season.
Specifically, the final rule mandates that consumers have access to two key documents that will help them understand and evaluate their health insurance choices:
• A Summary of Benefits and Coverage (SBC). Twelve content elements must be included in the SBC, including a description of cost-sharing requirements such as deductibles, co-insurance and co-payments, and information regarding any exceptions, reductions or limitations under the coverage.
• A Uniform Glossary of terms used commonly in health insurance coverage, such as “deductible” and “co-payment.”
Effective January 1, 2014, most US citizens and legal residents must purchase health insurance or pay a tax.
The Patient Protection and Affordable Care Act (PPACA) requires that each state establish a health insurance exchange for individuals and small businesses by 2014, or the federal government will establish one for them. Exchanges will basically function as a health insurance marketplace for individuals and small businesses. For 2014 and 2015, states can decide whether to include businesses with 100 or fewer or 50 or fewer employees in their exchange. In 2016, all businesses with 100 or fewer employees must be able to purchase insurance through these exchanges. The exchanges have the option of including employers with more than 100 employees beginning in 2017.
For more information on Health Care Reform visit www.irs.gov
This article is designed to provide general information and is not a substitute for legal advice