Affordable Care Act Questions Answered

With several agencies sharing the task of issuing regulations and guidance regarding the Patient Protection and Affordable Care Act (PPACA), many questions are finally being answered about how the requirements of the 2010 law will actually be administered. On January 23, 2012, the Internal Revenue Service (IRS) issued Notice 2012-9, guidance for employers on reporting the cost of group health insurance to employees on Forms W-2.  In a question-and-answer format, the guidance addresses issues such as cost of coverage under an employee assistance program, cost of coverage under health reimbursement plans, and the application of after-tax benefits for employees.   The reporting requirement is applicable to Forms W-2 issued to workers at the conclusion of the 2012 tax year; however, employers who are required to file fewer than 250 2011 Forms W-2 will not be subject to the reporting requirement for 2012 Forms W-2. On February 9, the U.S. Department of Labor (DOL) issued a notice answering employers’ frequently asked questions regarding automatic enrollments, employer shared responsibility payments, and waiting periods under PPACA.  Topics covered include the status of future guidance on: automatic enrollments; using an employee’s W-2 wages as a safe harbor in determining the affordability of employer coverage; shared responsibility provisions; look-back/stability period safe harbors; determining whether a newly-hired employee is a full-time employee; coverage of part-time employees; and the 90-day waiting period. Additionally on February 2, DOL, along with the IRS and the Department of Health and Human Services (HHS), determined that health insurers must provide a standardized, easy-to-understand summary of benefits and coverage (SBC) for health plans as well as a uniform glossary of coverage terms for plan years beginning on or after September 23, 2012.  The final rule and related guidance was published in the Federal Register on February 14. According to the rule, employers are allowed to provide the SBC as part of a summary plan description or other summary document, rather than only as a stand-alone document.  They are also permitted to provide the documents electronically, as long as the standard Employee Retirement Income Security Act (ERISA) rules on electronic disclosure are met.  In addition to the SBC requirements, plan sponsors must make available to employees (upon request) a uniform glossary of commonly used health coverage and medical terms, such co-payment, deductible, and in-network. On March 12, HHS released another long-awaited final rule implementing the new health insurance exchanges established by PPACA.  The exchanges, set to become operational as of January 1, 2014, are designed to work as state-based virtual health insurance marketplaces where individuals and small businesses can evaluate and purchase health insurance.  The final rule establishes the minimum standards that states must meet to create and operate an exchange, sets forth individual and employer eligibility and enrollment standards for the exchange, outlines minimum standards that health insurance providers must meet to participate in an exchange, and creates an online application and enrollment process for consumers.   The rule also provides basic standards that must be met in order for employers to participate in the Small Business Health Options Program (SHOP), a program designed to enable small employers to enhance their purchasing power within the exchanges. In order to be eligible to participate in the SHOP, businesses must have fewer than 100 employees, although states can limit participation to businesses with up to 50 employees until 2016.  Beginning in 2017, states will be able to allow businesses with more than 100 employees to participate.  Employers with 25 or fewer employees who are paid an average of less than $50,000 per year will be eligible for a small business tax credit for up to 50% of the employer’s premium contributions toward employee coverage, provided the employers offer all full-time employees coverage and pay at least 50% of their health premiums.  The SHOP will allow employers to choose the level of coverage they will provide and offer employees a choice among all qualified health plans within that level of coverage.  According to the fact sheet, employers can offer coverage from multiple insurers but get a single bill and write a single check.  SHOP Exchanges can also allow employers to select a single plan to offer its employees. For additional information, guidance and fact sheets, visit the PPACA page of the DOL website, the IRS website, and the HHS website.