While the future of health care reform in its entirety remains uncertain, many provisions of health care reform are already in place as a result of the Patient Protection and Affordable Care Act (PPACA). And there are things that businesses must be doing now to stay on the right side of the law.
As an employer, have you taken the necessary measures to ensure your business is compliant? If you haven’t, you could find yourself in trouble with the Department of Labor, says Ron Smuch, insurance and benefits analyst at JRG Advisors, the management arm of ChamberChoice.
“The DOL has begun exercising its investigative authority to enforce compliance with the health care reform law, requesting that health plan sponsors provide proof of compliance with PPACA’s mandates,” says Smuch.
Smart Business spoke with Smuch about the DOL’s audit requests related to PPACA compliance and what businesses need to know to stay on the right side of the law.
What areas has the DOL been looking into?
The DOL’s audit requests related to PPACA compliance have been divided into three categories — requests for grandfathered plans, requests for nongrandfathered plans and requests for all health plans.
A grandfathered plan is a group health plan that existed as of March 23, 2010 — the date PPACA was enacted — and that has not had certain prohibited changes made to it since that date. If a plan is grandfathered, it is exempt from certain health care requirements, such as providing preventive health services without cost sharing. However, if a plan makes changes — including changing providers, increasing co-insurance charges, significantly raising co-pays or deductibles, significantly lowering employer contributions, etc. — it loses its grandfathered status and must comply with additional health care reform requirements.
Regulations require a plan to disclose to participants (every time it distributes materials describing plan benefits) that the plan is grandfathered and, therefore, not subject to certain PPACA requirements. For grandfathered health plans, the DOL has been requesting records documenting the terms of the plan on March 23, 2010, and the participant notice of grandfathered status included in materials that describes the benefits provided under the plan.
If a plan has lost its grandfathered status, what must it do differently?
Plans that do not have a grandfathered status must comply with additional PPACA mandates, including providing coverage for preventive health services without cost sharing. For nongrandfathered health plans, DOL audits are requesting documents related to preventive health services for each plan year beginning on or after September 23, 2010, the plan’s internal claims and appeals procedures, contracts or agreements with third-party administrators, and documents relating to the plan’s emergency services benefits.
Some of PPACA’s mandates apply to all health plans, regardless of whether they have grandfathered status. For example, all plans must provide dependent coverage to age 26 and must comply with the PPACA’s restrictions on rescissions of coverage and on lifetime and annual limits on essential health benefits.
The DOL has been requesting the following information from both grandfathered and nongrandfathered health plans: a sample notice describing enrollment opportunities for children up to age 26; a list of participants who have had coverage rescinded and the reason(s) why; documents related to any lifetime limit that has been imposed under the plan since September 23, 2010; and documents related to any annual limit that has been imposed under the plan since September 23, 2010.
What else do employers need to demonstrate?
Employers should be prepared to further demonstrate their compliance by producing records of the steps they have taken to comply with PPACA requirements, including plan participation information, plan amendments or procedures that were adopted, and notices that were provided to those covered, such as the notice of grandfathered status or notice of enrollment for children up to age 26. Plans must also show that they cover out-of-network emergency services without requiring more cost sharing that would otherwise be required by covered participants using in-network emergency services.
If a plan’s PPACA compliance documents are maintained by a service provider, the employer should make sure the necessary documents are being retained and can be produced upon request. Your adviser can work as an intermediary with the insurance company/service provider to ensure compliance requirements are satisfied.
And if your company receives a PPACA audit request from the DOL, consult with your advisors immediately for more information on how to proceed.
What are the penalties for failing to comply?
Penalties are significant. Under PPACA, employers with more than 50 employees are required to provide coverage. Those that fail to do so will be assessed a fine of $2,000 per employee per year, minus the first 30 employees. So an employer with 50 employees that does not provide coverage would pay a penalty on 20 employees, or $40,000 a year.
An employer that offers coverage can also find itself in trouble. For example, an employer’s willful and intentional failure to comply with the Summary of Benefits and Costs requirement may result in a penalty of $1,000 per day per participant. And while the cost of providing coverage for employees is tax-deductible for employers, the cost of paying penalties is not.
Ron Smuch is an insurance and benefits analyst with JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7017 or email@example.com.
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