Employers may need to prepare for an avalanche of paperwork if the U.S. Senate’s Patient Protection and Affordable Care Act (H.R. 3590) passes Congress in its current form (or a similar form). The comprehensive 2,074-page health care reform bill, if passed, would impose many additional burdens on employers.
Changes to Health Plans
Employers would be required to change several things about their current health plans under the U.S. Senate bill. More specifically, among other things, they would have to amend their plans to:
- eliminate lifetime limits and unreasonable annual limits on the value of benefits;
- provide coverage for certain preventive health care services (without imposing cost-sharing requirements);
- ensure their plans don’t contain preexisting-condition exclusions or any other provisions that would discriminate based on an employee’s health status;
- offer dependent coverage to unmarried dependent young adults up to age 26 (if the plan covers dependent children); and
- eliminate provisions that would provide for rescission of coverage for reasons other than fraud or intentional misrepresentation.
Employers would also have to eliminate waiting periods that exceed 90 days.
Under the bill, employers with more than 200 full-time employees that offer health benefit plans would have to automatically enroll new full-time employees and continue to enroll current employees in one of the plans they offer. They would have to provide adequate notice regarding the automatic enrollment requirement to employees and give them the opportunity to opt out.
Employers would also have to provide information to new hires about the new exchanges created by the legislation.
Health Insurance Reporting
The legislation would place new reporting requirements on employers. Specifically, an employer would have to report the value of each employee’s health coverage provided by the employer on the employee’s annual Form W-2. If an employee receives coverage under multiple plans (e.g., a major medical plan, a dental plan, a vision plan, and contributions to savings plans), the employer would disclose the aggregate value of all the plans.
Additionally, employers with 50 or more full-time employees would have to provide certain information on a return each year, including whether they offer coverage to full-time employees, their coverage waiting periods, the number of full-time employees they had each month, and information on their full-time employees.
Calculating Taxes and Penalties
Employers may have to pay taxes or penalties if their benefits are too good or if they aren’t good enough. Unless your benefits fall in the middle, you may have to deal with more administrative headaches. If an employer with at least 50 full-time employees has even one employee that receives a federal subsidy to buy health insurance through the new exchanges, the employer would have to pay a fine for each of its full-time employees. Therefore, employers would have to determine how many of their employees would receive subsidies in order to calculate how much they would owe the government in fines.
Alternatively, the bill would also create a tax on employer-sponsored high-end “Cadillac” coverage. The tax would be 40 percent of the “excess benefit” of plans that exceed the thresholds of $8,500 for individual coverage and $23,000 for family coverage. Mercer, a global consulting firm, estimates that the health coverage offered by one in five employers would exceed the thresholds and would therefore be subject to the “Cadillac” tax.
Although the coverage providers are responsible for paying the “Cadillac” tax, employers would have to calculate the tax, determine how much of the tax each coverage provider is responsible for paying, and inform the coverage providers about their share of the cost. Employers would also have to make sure the coverage providers pay the taxes because if the providers don’t pay the correct amount, employers will be penalized.
Under the bill, employers would also have to:
- change health flexible spending arrangements under cafeteria plans to limit employee salary reductions to $2,500 for a taxable year;
- consider altering retiree drug coverage since the bill would eliminate the deduction for expenses allocable to the Medicare Part D subsidy; and
- alter flexible spending plans to show that over-the-counter drugs will no longer be reimbursed without a doctor’s prescription.
What’s Next in the Health Care Reform Saga?
The bill is currently being debated on the Senate floor, and some predict the Senate will hold a final vote on the legislation before Christmas. If the Senate passes a health care reform bill, it would have to be reconciled with the House legislation. If an identical bill were approved in both chambers, it would go to the president to be signed into law.
Keep up with the latest legal changes affecting employer benefits and trends in employee benefits with the Benefits Complete Compliance and with changes in federal employment laws in the Federal Employment Law Insider.