THE SALVATION ARMY SOUTHERN TERRITORY HUMAN RESOURCES CONFERENCEHEALTH CARE REFORMPaul W. Mourning, Esq. Pamela Landman, Esq. April 29, 2014
OVERVIEW • Overview • Individual Mandate. The Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (2010), as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152 (“Affordable Care Act”), requires most U.S. citizens and legal residents to maintain “minimum essential coverage” or pay a “shared responsibility payment.” “Minimum essential coverage” includes coverage under Medicare or Medicaid, health plans purchased through an American Health Benefit Exchange (“Exchange”), and eligible employer-sponsored health plans. Enrollment in health plans offered through the Exchanges began 10/1/13 with coverage effective 1/1/14. Open enrollment in the Federally operated Exchanges was extended through 4/15/14. • Employer Mandate (delayed until 1/1/15). An employer with more than 50 full-time employees will be subject to a “shared responsibility payment” if the employer either (1) fails to offer its full-time employees (and their dependents) the opportunity to enroll in an eligible employer-sponsored plan, or (2) offers a health plan that is not “affordable” or does not provide “minimum value.” The “pay or play” provision has been delayed until 2015. • Market Reforms. The Affordable Care Act imposes new requirements on health insurance plans purchased in the individual market and health insurance plans provided by employers, including prohibitions on (a) preexisting condition exclusions, (b) annual and lifetime limits, and (c) rescission of coverage.
CHALLENGES • Challenges to the Affordable Care Act • Litigation • On June 28, 2012, the Supreme Court upheld the constitutionality of the individual mandate to obtain minimum essential coverage of the Affordable Care Act in National Federation of Independent Business v. Sebelius, 132 S. Ct. 2566 (2012). The Supreme Court also ruled that States must have the opportunity to opt out of the Affordable Care Act’s Medicaid expansion. • Pending Litigation • Sissel v. U.S. Dept. Health & Human Services, No. 13-5202 (D.C. Cir. 2013). The Pacific Legal Foundation, a public interest legal organization, alleges that the method in which Congress enacted the Affordable Care Act violates the Origination Clause of the Constitution. • Pruitt v. Sebelius,No. 6:11-cv-00030-RAW (E.D. Okla. 2013). The Attorney General of Oklahoma contends that employers in States with Federally operated Exchanges are not subject to the penalty imposed on employers who do not offer employees health insurance because such penalty is triggered by an employee being eligible for a health insurance premium tax credit, and the Affordable Care Act does not authorize premium tax credits to individuals who purchase insurance through a Federally operated Exchange.
CHALLENGES (cont’d) • Halbig v. Sebelius, 14-5018 (D.C. Cir. 2012). Similar to Pruitt, individuals and employers allege that the Affordable Care Act only authorizes premium tax credits for individuals who have purchased health insurance from an Exchange operated by a State, not the Federal government, and seek a injunction barring the enforcement of the Internal Revenue Service (“IRS”) rule promulgated pursuant to the Affordable Care Act that would provide subsidies to residents of States with Federally operated Exchanges. • Hobby Lobby Stores, Inc. v. Sebelius, 870 F.Supp. 2d 1278 (W.D. Okla. 2012) cert. granted No. 13-354 (2013). One of over 40 lawsuits filed by churches, religious charities and universities, and secular business challenging the mandate to provide contraceptive coverage. Hobby Lobby, a private employer, contends that the contraceptives mandate violates both the free exercise clause of the First Amendment and the Religious Freedom Restoration Act. • Political • Ideological and Technological
GRANDFATHERED HEALTH PLANS • Application of Affordable Care Act to the Employee Health Plan as a “Grandfathered Health Plan” • Plan Years Starting On Or After 9/23/10 • Dependent coverage for adult children up to age 26.The Employee Health Plan was revised for the 2011 plan year to provide dependent coverage up to age 26. For plan years beginning before 1/1/14, “grandfathered health plans” could exclude an adult child under age 26 if the child is eligible to enroll in another employer-sponsored health plan. Effective 6/1/14 the Employee Health Plan will no longer exclude adult children under age 26 eligible to enroll in another employer-sponsored health plan. • Restriction on pre-existing condition limitations for children up to age 19. The Employee Health Plan was revised for the 2011 plan year to eliminate pre-existing condition limitations for both employees and their dependents who are under 19 years of age. • Reconstructive surgery following a mastectomy. The Employee Health Plan did not require amendment because it already covered cosmetic surgery qualifying as medically necessary reconstructive surgery following covered surgery.
GRANDFATHERED HEALTH PLANS (cont’d) • Prohibition on lifetime limits on “essential health benefits.” The Employee Health Plan was amended for the 2011 plan year to eliminate a lifetime limit. • Prohibition on annual limits on the dollar value of “essential health benefits” phased in for plan years starting on or after 9/23/10. Effective 6/1/14 the Employee Health Plan includes no annual limit. • Prohibition on rescinding coverage, except in cases of fraud or intentional misrepresentation.
GRANDFATHERED HEALTH PLANS (cont’d) • Taxable Years Beginning After 12/31/10 The Affordable Care Act required employers to calculate and report the aggregate cost of applicable employer-sponsored health coverage on employees’ IRS Form W-2 effective for the 2012 tax year. The IRS issued guidance creating an exemption from the Form W-2 reporting requirement applicable to a “self-insured group health plan that is not subject to any Federal continuation coverage requirements,” including self-insured “church plans.” The exemption will apply until further guidance is issued. Any revocation of the exemption will be effective no earlier than January 1 of the calendar year beginning at least six months after the issuance of such guidance.
GRANDFATHERED HEALTH PLANS (cont’d) • Plan Years and Open Enrollment Periods Beginning On Or After 3/23/12 Requirement to provide a “summary of benefits and coverage” (“SBC”) and “uniform glossary” to all applicants and enrollees beginning with open enrollment for the 2013 plan year. Enforcement suspended until open enrollment periods beginning on or after 9/23/12. The Southern Territory distributed the SBC to employees and their dependents eligible to enroll in the Employee Health Plan before the first day of the open enrollment period and subsequently to new employees. • Effective 3/1/13 The Affordable Care Act mandated that employers subject to the Fair Labor Standards Act of 1938 (“FLSA”) provide to each employee at the time of hiring, or, with respect to current employees, not later than 3/1/13, written notice of coverage. Suspended until the Department of Labor (“DOL”) promulgated applicable regulations. On 5/8/13, DOL issued the anticipated guidance requiring distribution of the notice beginning 10/1/13, along with a model notice for employers to use to satisfy the notice requirements. The Southern Territory distributed the notice before 10/1/13.
GRANDFATHERED HEALTH PLANS (cont’d) • Plan Years Ending After 9/30/12 Through 9/30/19 Fee imposed on health insurers andself-insured health plans to fund the Patient-Centered Outcomes Research Institute, a private nonprofit corporation established by the Affordable Care Act to research patient centered outcomes. $1.00 for the 2013 plan year and $2.00 for the 2014 through 2018 plan years multiplied by the average number of lives covered (employees and dependents) under the plan. The IRS promulgated a final rule on 12/6/12 requiring a self-insured “group health plan” to file a return reporting liability for the fee by July 31 of the calendar year following the last day of the plan year ending after 9/30/12 (7/31/14 for the Employee Health Plan 2012 plan year).
GRANDFATHERED HEALTH PLANS (cont’d) • Plan Years Beginning On Or After1/1/14 • Prohibition on pre-existing condition limitations for adults. The Employee Health Plan for the 2013 plan year included a pre-existing condition limitation for participants 19 years and older. Such limitation will be removed as of 6/1/14. • Automatic enrollment of new, full-time employees for employers subject to the FLSA (delayed). • Prohibition on any waiting periods “based solely on the lapse of a time” that exceeds 90 days. Currently, employees become eligible for coverage “on the first day of the calendar month following completion of the 90-day waiting period.” There is no waiting period for the Officers’ Health Care Provisions (“OHCP”). • For the 2014 plan year, coverage under the Employee Health Plan will begin on the first of the month on or after the completion of a 60-day waiting period. • Casual, temporary and seasonal employees who satisfy the waiting period are specifically excluded from coverageeffective 6/1/14.
GRANDFATHERED HEALTH PLANS (cont’d) • Removal of all annual limits applicable to “essential health benefits.”HHS declined to establish a single definition of “essential health benefits” (“EHB”). Instead there is a “EHB-benchmark plan” for each state. The Employee Health Plan and the OHCP impose annual limits on certain benefits deemed “essential” by the applicable benchmark plan. Effective 6/1/14 the Employee Health Plan eliminates annual limits applicable to: • Pediatric vision care, including eye glasses and lenses; • Pediatric dental care, including pediatric orthodontia; and • Glasses or contacts required after surgery or accident, regardless of age.
GRANDFATHERED HEALTH PLANS (cont’d) • Beginning 1/1/14 Through 12/31/16 All “health insurance issuers, and third party administrators on behalf of group health plans,” including grandfathered self-insured health plans, must pay a per-enrollee transitional reinsurance fee in 2014, 2015 and 2016. Under final rules released 3/11/13, the fee will be calculated based on a plan’s average number of “covered lives.” For 2014, the reinsurance fee applicable to self-insured group plans is estimated to be $63. The Southern Territory will be required to submit the average number of covered lives for the Employee Health Plan by November 15 of 2014, 2015 and 2016. • Plan Years After 12/31/17 Employers offering “Cadillac plans” will be subject to an excise tax equal to 40% of any “excess benefit,” defined to mean the sum of the excess of the “aggregate cost of the applicable employer-sponsored coverage of the employee” over an amount equal to one-twelfth of the “annual limitation.” The annual limitation for the 2018 tax year will be $10,200 for self-only coverage and $27,500 for multiple person coverage, with certain adjustments.
EMPLOYER SHARED RESPONSIBILITY PAYMENT • “Pay or Play,” Shared Responsibility or Employer Mandate (delayed until 1/1/15) • Requirement to offer “minimum essential coverage” to full-time employees that is affordable and of “minimum value.” Coverage provided by grandfathered plans and most employer-sponsored plans qualifies as minimum essential coverage. Assessments of $2,000 per full-time employee per year ($167.67 per employee per month) if any employee is eligible for a premium tax credit to purchase health insurance coverage through an Exchange. Even if an employer provides “minimum essential coverage,” an employer will be subject to an assessment of $3,000 per full-time employee who is eligible for a tax credit to purchase insurance through an Exchange. • For purposes of enabling the Treasury to collect payments under the assessable payment provision, the Affordable Care Act requires every applicable large employer and every employer that provides minimum essential coverage to file, for years beginning after 2013, a return indicating whether it offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan. • On 7/2/13, the Treasury announced that it would delay until 1/1/15 the enforcement of the assessable payment provision and related reporting requirements.