The legal underpinnings of the U.S. Supreme Court’s decision on healthcare reform are complex, but the bottom line is very clear for employers: Nothing has changed. The law that went into effect March 23, 2010 (the Affordable Care Act, or ACA), and has been in effect ever since, remains wholly intact.
In theory, that means employers shouldn’t have to do anything more than maintain business as usual, continuing their efforts to implement the law as its provisions become effective. But in reality, many employers have been sitting on the sidelines while waiting to see how the case would be resolved. Those employers may now find themselves playing catch-up.
In the short term, employers need to be preparing to comply with new measures that are coming into effect in the next few months — things like the uniform summary of benefits and coverage (SBC), the Patient-Centered Outcomes Research Institute (PCORI) trust-fund taxes, W-2 reporting, and the $2,500 cap on health flexible spending accounts (FSAs). If employers have put off understanding the SBC requirements, they’ll want to get up to speed soon to understand whether they will need to prepare an SBC and when they will need to begin distributing it. If employers have delayed implementing systems to collect the information needed to calculate and pay the PCORI tax or handle W-2 reporting, they’ll want to get those systems in place fairly quickly.
In the longer term, the Court’s ruling solidifies the need to plan for the wave of mandates and requirements that come into effect in 2014. In particular, employers will need to earnestly analyze the impact of the play-or-pay penalties, determining whether they are subject to the penalties or not and, if they are, whether they want to play or pay. For many employers, this will be much more complex than simply comparing the cost of providing healthcare coverage to the cost of the penalty. It is also likely that extension of the Internal Revenue Code Section 105(h) nondiscrimination rules to insured health plans will become applicable beginning in 2014, so employers will need to consider how that, along with the penalties, impacts plan designs.
All of this may well be complicated by other elements of healthcare reform that are not directly applicable to employers. The exchange system is a good example. It remains largely unclear at this point whether and how most states will be implementing the exchange requirements. Like employers, many states have delayed action on exchanges until the Court clarified the status of the law. This may leave them practically unable to develop robust exchanges by 2014, which could indirectly affect things like the premium tax credit, the affordability standards under penalty rules, and even the individual mandate. Any uncertainties regarding those pieces of the healthcare-reform puzzle are likely to trickle through the whole system.
So while the Court’s decision technically means it’s business as usual for employers, there’s really more to it than that. There will need to be a concerted refocusing on both short-term and long-term compliance and strategic planning for the full impact of the law as its centerpieces come online in the next two years. In short, there is still much work to be done, and the Court’s decision brings a new sense of urgency for that work.
Jason P. Lacey is a partner in the Wichita, Kansas, office of Foulston Siefkin LLP and a contributor to Benefits Compliance: Strategies for Plans, Programs & Policies and Kansas Employment Law Letter. He practices primarily in the areas of taxation, employee benefits, and executive compensation. He assists both taxable and tax-exempt employers with a wide variety of tax, employee benefit, and executive compensation matters, including design and administration of welfare benefit plans and qualified and nonqualified pension, retirement savings, and deferred compensation plans, and related compliance issues under the Internal Revenue Code, ERISA, HIPAA, COBRA, and state law.