Although many of the provisions of health care reform remain uncertain, and others don’t go into effect until as late as 2018, employers need to begin planning now to ensure they are aware of all deadlines and can take steps to meet them.
“Health care reform will have a significant impact on employers, their health plans and related administration, both in the short term and for years to come,” says John Boss III, Executive Vice President and Health & Benefits Practice Leader at Aon Risk Services. “Much of the plan hasn’t been finalized, making it difficult for employers to make final decisions on certain issues. But employers need to understand the many changes that the health care reform law makes to their employee benefits program so they can begin to take the proper steps to comply.”
Smart Business spoke with Boss about how the coming changes may impact your benefits plan and the steps you can take to ease the transition.
What are some key changes in health care that employers should be aware of?
A major change is that health plans that provide for coverage of adult children will have to permit continued coverage of those children until age 26 if they are not eligible for other employer-sponsored health coverage. Employers will have to establish a process to add them to the plan with plan years beginning on or after Sept. 23, 2010. The full-time student requirements will no longer apply, and the law does not exclude married children. In addition, employers with more than 200 employees must establish procedures to automatically enroll employees into health insurance plans and provide opt-out rights. Automatic enrollment applies only to new hires, and waiting periods for new enrollees cannot exceed 90 days. Currently enrolled employees would remain enrolled unless they opt out.
Also, health plans may no longer impose lifetime maximums on the dollar value of benefits, effective for plan years beginning on Sept. 23, 2010, or later. Annual limits on the dollar value of benefits will also be prohibited beginning in 2014, subject to approval of the Secretary of Health and Human Services. Lifetime limits also cannot be imposed on the overall plan benefits.
Finally, plans must provide certain preventive care without participant cost-sharing requirements and may not impose pre-existing conditions exclusions for plan years beginning on or after Jan. 1, 2014.
There are many other changes to the way health care plans will be administered, but final guidance remains to be issued on them.
What can employers do to begin to prepare now to comply with the health care reform law?
Employers should inventory all health plans and arrangements and then determine which of those may be grandfathered plans. Grandfathered plans generally are any group or individual health plans that were already in existence on March 23, 2010, and those are exempt from insurance market reforms.
However, amending that plan including offering it to employees who were previously ineligible, or including new plan designs could potentially result in the loss of that grandfathered status. Employers must confirm which changes must be made to their plans as a result of the health care reform law and when, and assess the potential cost impact of compliance.
They must also evaluate the impact of the law on plan documents, wellness programs, new disclosure requirements, enrollment materials and third-party administration.
What are some key dates in the law that employers should be aware of?
Sept. 23, 2010, is the first key date, and before the first plan year beginning on or after that date, employers should perform a cost analysis of health program alternatives that comply with the new law and assess the applicable effective dates for grandfathered and nongrandfathered plans.
In addition, before the first plan year beginning on or after Sept. 23, they should:
- Perform nondiscrimination testing to ensure compliance with requirements.
- Redesign employee benefit programs to satisfy new plan design changes for all nongrandfathered plans.
- Develop an effective and compliant employee communications program.
- Determine how the provisions of the law are applicable to retiree plans and apply for the federal reinsurance program if they maintain a retiree health program. Under this program, Health and Human Services will establish a temporary reinsurance program to reimburse employers for a portion of their early retiree health program costs by June 21, continuing through Dec. 31, 2013, or earlier if the $5 billion funding limit is exhausted.
- Establish a procedure for reporting required health plan-related information to the applicable government agencies.
What are other important dates for compliance?
Before Jan. 1, 2011, employers must address accounting issues relating to the elimination of federal tax deductions for Medicare Part D subsidies beginning in 2013. They must also prohibit the reimbursement of over-the counter drugs through health savings accounts, health reimbursement accounts and other tax-free savings accounts, unless prescribed by a physician. By July 1, 2011, they must adopt a single set of electronic transaction standards for eligibility verification and claims status, and by Jan. 1, 2012, must revise wage reporting procedures to ensure that W-2 forms report nontaxable health benefits for wages paid in 2011 and beyond.
Though there are specific steps employers should be taking now to begin compliance, there is a lot to the law that has yet to be determined. By partnering with an outside adviser, employers can remain on top of what they need to do as the law continues to solidify.
John Boss III is Executive Vice President and Health & Benefits Practice leader at Aon Risk Services. Reach him at (317) 237-2411 or firstname.lastname@example.org.