Source: hr3590.com
When it comes to health reform’s new Summary of Benefits and Coverage, the feds will give some compliance leeway in cases where plan sponsors cannot fit data into the narrow spaces prescribed in the law, a prominent federal official told benefits attorneys in Washington, D.C.
Many in the industry say the health reform law was prescriptive to a fault on SBCs: dictating their page count, where information must go, how much space goes to each kind of information and even font size. The government maintains the format is important because it facilitates consumers doing uniform side-by-side comparisons.
However, to respect the nature of various employer plans, subregulatory guidance will probably follow the principle that getting all required information on your SBC is more important than making it fit exactly in the boxes and the page count prescribed in the law, Phyllis Borzi, head of the U.S. Department of Labor’s Employee Benefits Security Administration, said in an Oct. 11 conference session sponsored by the ABA Joint Committee on Employee Benefits. But posting all required information is important.
For example, if a plan sponsor exceeds four double-sided sheets (the law said the SBC had to fit on four pages, but guidance specified that both sides of the paper can be used) in their SBCs, or cannot fit a required element, like a coverage example, in an allotted space, it is more important to get in all the required information, she said. Minor overflows will be tolerated, especially in the first year, she added.
Perspective on Play-or-pay Penalty
Under IRS code rules on reform’s shared-responsibility provisions at IRC Section 4980H, large employers are likely to face smaller penalties when offering “unaffordable” coverage than they will if they completely fail to offer coverage.
No coverage. A penalty of $2,000 times the number of full-time employees is levied if the large employer offers no coverage and one or more employee enrolls in an exchange plan with a premium tax credit of cost-sharing reduction. This seems like a disproportional penalty if just one person gets the subsidy.
Minimum essential coverage is offered, but it is unaffordable. In this case, if an employee qualifies for a tax credit or subsidy and gets exchange coverage, the plan faces a $3,000 payment, but that amount is multiplied only by the number of employees who actually got the subsidized exchange coverage.
A benefits attorney told the Guide that to reduce exposure to penalties, all large employers should offer minimum essential coverage, even if they require the worker to pay the entire premium, because penalties in that case will be far less than not offering it at all.
Calculating Play-or-pay Obligations
Important guidance for employers concerns calculating their obligation under reform’s play-or-pay provisions. Several government officials described rules and guidance that will tell employers: (1) how to determine which workers are full-time; (2) how plans and state-based insurance exchanges will communicate with each other; and (3) how plans will prove they meet the law’s “minimum value” requirements.
Counting Full-timers
IRS Notice 2012-58 is the latest guidance designed to help employers count full time employees for obligations under health reform. Employers will identify workers who worked on average 30 hours a week by referring to look-back periods (standard measurement periods). These can be between three months and 12 months in length — and employers will determine how many hours on average each employee worked per week, using that uniform period for all, to determine which are FTEs, and must be offered health insurance.
Having employees divided between full time and part-time under reform’s rules is a necessity when calculating employer play-or-pay penalties. The rules are complicated, said Kevin Knopf, an attorney with the Treasury Department, but they are flexible in order to deal with situations where workers move between full- and part-time status, and when workers are variable-hour or seasonal.
Enrollment Within 90 Days
EBSA is working through issues on calculating the 90-day period for automatic enrollment, because a determination of full-time status may clash with time limits on auto-enrollment, Borzi said. For new hires who are reasonably expected to be full time, a good way to avoid headaches is just to make an offer of coverage on hire, attendees (who were benefits attorneys) said.
In Technical Release 2012-01, DOL suspended enforcement of the employer responsibility payments for group health plan sponsors that don’t cover an employee the first three months after his or her date of hire. Previous rules held that if an employer fails to make an offer of coverage within 90 days, a shared-responsibility payment can be assessed.
Rules on Plan–Exchange Reporting
EBSA is working on rules to govern the exchange of information between state-run insurance exchanges and plans (starting 2014) on: (1) which employer health plans offer coverage that has “minimum value”; and (2) which employees have used subsidies to purchase coverage on an exchange (both of which determine employer shared responsibility payments). Here again, the statute is unclear.
”This is not news: The statute is not a model of legislative crafting,” Borzi said. Regarding this new reporting requirement, she said: “The tiny bit of statutory language we have is conflicting [and] contradictory.”
Minimum Value
On April 26, 2012, Treasury and IRS issued Notice 2012-31, which provides information on determining whether an eligible employer-sponsored health plan provides minimum value. Starting in 2014, whether such a plan provides minimum value will be relevant to eligibility for the premium tax credit and application of the employer shared-responsibility payment.
The feds will provide three ways to demonstrate minimum value: (1) log into an online calculator, which will give you a determination based on your population, coverage and claims; (2) fill out a design-based checklist and submit it; or (3) hire an actuary and submit his or her report, Elizabeth Fowler, special assistant for health care policy from the National Economic Council said.