This summer, the U.S. Supreme Court upheld the individual mandate under the Affordable Care Act (to see our National eAuthority on the ruling, click here). So what does this mean for employers? The most important thing employers must do is to act based on the assumption that health care reform is here to stay. This is not to say that things won’t change as we’ll likely see more litigation on the Affordable Care Act and since the November elections could impact the future of the Act. However, with all the compliance items that employers will need to consider under the Act, employers must take action now.
There are a number of items that employers must consider immediately and for the long term. Key items that must be addressed in the near future (i.e., 2012 and 2013 compliance issues) include the following:
- Summary of Benefits and Coverage. As discussed in our recent eAlert, employers whose open enrollment begins on or after September 23, 2012 need to issue a Summary of Benefits and Coverage (SBC) as part of that open enrollment. Employers should be working with their providers/advisors on this material now.
- W-2 Reporting. Employers must report the cost of employer-sponsored health coverage on Form W-2 beginning with the 2012 taxable year. If employers have set up their systems to properly report the cost of health care coverage, they should take action to make sure that they can comply with this requirement.
- Health FSA $2,500 limit. Beginning with the 2013 plan year, the maximum amount an individual may contribute to a health flexible spending account will be $2,500 (please see our recent eAlert for more details). Although a plan amendment is not necessary by the end of 2012, employers must properly communicate the new limit to employees and update administrative systems if this new limit impacts their plans.
- Exchange Notice. Generally, employers subject to the Fair Labor Standards Act must issue a “Notice of Exchange” to employees. This Notice provides information about the Exchanges and the consequences of the employee’s elected coverage under an Exchange and not under the employer’s health plan. This notice requirement is effective as of March 1, 2013.
- Medicare Part D Subsidy. Generally beginning January 1, 2013, Medicare Part D tax subsidies will no longer be deductible by employers. As such, employers may want to consider plan design for retiree prescription drug plans.
In addition to the above, employers should review their plan documents and summary plan descriptions to make sure they contain all the applicable 2010-2012 updates to comply with health care reform.
Planning for health care reform compliance really must focus on 2014. There are a number of coverage requirements with which plans must comply starting in 2014. The key issue for employers is that the “pay or play” requirement for both individuals and employers begins in 2014. Although employers are still 18 months away from the pay or play requirement, planning must begin now. Employers need to ask themselves the following question: Are we subject to the “pay or play” requirement? If the answer is “yes,” then employers must consider whether they comply with the “play” requirements or whether they will “pay” the penalty tax. The two key “play” items here are whether the coverage is (1) “minimum essential coverage” and (2) affordable. In the event that an employer wants to satisfy the play requirements, but does not offer the required coverage at the required cost, plan design will need to be addressed. If the answer to the above question is “we may or may not since we’re just above/below the 50 full-time employee standard,” then employers need to think about their 2013 employment numbers and plan accordingly.
Beyond 2014, one of the key issues for employers to consider is the “Cadillac Tax.” While this tax doesn’t come into play until 2018, employers need to be planning now to determine if action is necessary to prevent the tax from applying or how to deal with the tax in 2018.
While there are still unknowns regarding health care reform, employers have to continue working on reform compliance under the assumption that the Act will “live.” Whether it be acting now or planning for 2014 (or 2018), employers need to work with their providers and advisors to make sure that they are taking the proper steps to comply with the Act.