Source: hr3590.com
After two years of implementing health reform’s “insurance mandates,” American businesses are now thinking about unraveling the arrangements they put in place to respond to it, in the waning days before the U.S. Supreme Court decides on the constitutionality of the individual mandate.
Health reform is going to pose compliance challenges for American businesses whether all, some or none of it has to be unraveled. And even if the unraveling might not be very costly in dollar terms, it will have nuisance value, particularly in the form of waiting for marching orders from the government, officials from the American Benefits Council said.
Business needs to know which obligations will remain and how quickly regulatory agencies will respond to issues and loose ends in the wake of the Court’s decision, ABC officials said in a June 20 press call.
Employers’ Top Reform Rules Facing Repeal or Other Impacts
- The rules on dependent care coverage until age 26. Employers might get the right to remove that coverage from plans.
- The tax exempt status of costs paid to cover dependents until age 27. Employers that want to cover dependents longer could be taxed for providing the benefit unless this provision is restored.
- Reporting on W-2 forms the value of health coverage. Plans are in the midst of doing this for the 2012 tax year, and need to know as early as possible if the requirement continues.
- Play or pay rules. Employers with 50+ employees must offer health coverage that is both affordable and has minimum value, starting in 2014. Employers are subject to substantial penalties if their coverage falls short and at least one worker buys coverage on an insurance exchange. ABC argued that if the individual mandate does not survive, this and other employer mandates should also be stricken. Congress intended the employer mandates to undergird the individual mandate, ABC said in a Jan. 30 amicus brief to the U.S. Supreme Court.
Option 1: The Law Stands
Significant compliance hurdles remain for business if the Court upholds the law entirely, including: (1) automatic enrollment of employees who don’t enroll themselves; and (2) requirements to inform employees about insurance exchanges and the differences between employer coverage and exchange coverage.
Also if the law is upheld, more guidance is needed on: (1) how to tally employee hours to determine whether employees should be counted as full-time workers; and (2) how a plan determines whether it meets the law’s minimum value test, said ABC Senior Counsel for Health Policy Kathryn Wilber.
Option 2: Mandate Falls But Nothing Else
If individuals were not forced to buy coverage, while the insurers still have to follow reform’s “pre-existing condition” “guaranteed issue” and “limits on ratings” rules, premiums on individual health insurance policies would skyrocket, according to ABC.
This could price out of the market early retirees and part-time workers who are not covered in an employer-sponsored group plan, the group said in a fact sheet.
Note: ABC’s amicus brief to the U.S. Supreme Court in this case argued that the employer mandate is not severable from the individual mandate, meaning that if the Court strikes the individual mandate, then reform’s requirements on employers also should fall. It argued that because the employer mandate exists to support the individual mandate, the purpose of the employer mandate would be altered and it could not operate as Congress intended.
Option 3: Mandate Falls, Some Insurance Reforms Invalidated
The fate of the health insurance exchanges would be uncertain without reform’s “insurance mandates,” because all policies sold on exchanges were supposed to meet those mandates, said ABC.
Also (similar to option 2), without forced purchases from individuals, individual policies would become a much worse fall-back option for early retirees and part-time workers, the group contended.
Option 4: Entire Law Stricken
ABC stated that if the entire law falls, one concern is that employers will have to start paying tax on the cost of keeping dependents on health plans until age 26.
Note: UnitedHealth, Humana and Aetna recently announced they would cover dependent care until age 26 and preventive care without cost-sharing — whether or not the Court invalidates those rules. Many health plans will choose not to rescind those standards as well. But the trouble is that dependent care to age 26 might no longer be tax protected.
Tax Break for Dependent Care
A tax break for dependent benefits to age 26 could be invalidated and plans and insurers that offer them voluntarily could be exposed to federal taxes.
It’s not the expense of the tax, but the uncertainty that would surround the issue, Paul W. Dennett, ABC’s senior vice president for health reform, said. He said ABC is calling for immediate clarification of:
- start dates for calculating the new tax;
- whether retroactive taxes will be charged for prior years’ coverage of older dependents; and
- whether a new tax break for older dependent care will be formulated.
W-2 Forms and SBCs
Plans are due this fall to start distributing Summaries of Benefits and Coverage and reporting amounts paid for health insurance to the IRS and printing them on W-2 forms. A clear decision will be needed on whether to follow through with those requirements. “Evaluating coverage costs and reporting them on W-2s takes time and resources, and we need to know whether the requirements are going to continue or not,” Wilber said. Restating income on W-2 forms impacts employee’s income reporting, as well as the employer’s, she remarked.
Value-driven Care and Quality Care
If the entire law is stricken, ABC urges Congress to go back and pass laws to: (1) reward health outcomes rather than volume of services; (2) allow “comparative effectiveness” studies to guide and coordinate care; (3) make more information available about providers and services; and (4) make prices more transparent, ABC President James Klein said.