2013 YEAR END UPDATE: HEALTH CARE REFORM (“PPACA”) LEGAL DEVELOPMENTS

1. In 2012 the USPTF updated its recommendation describing the preventive health services plans must provide for obesity under the “preventive care” requirements of PPACA. Non-grandfathered plans must provide preventive care without cost-sharing. Significantly, preventive care for obesity does not include weight-loss or weight-management medications or weight-loss surgeries.¹  The updated recommendation is effective for plan years beginning on or after June 30, 2013.
2. PPACA’s preventive care requirements also mandate that plans provide contraceptives without cost-sharing. The agencies have several times issued exceptions for religious objections to contraceptive coverage.²  In November 2013 the Supreme Court granted review of two cases addressing the issue.
3. The PPACA pay or play excise tax,³ originally to be effective in 2014, was at first delayed for multiemployer plans, and then in July 2013 was generally delayed until 2015.⁴  We expect final regulations (proposed regulations were issued in January 2013) soon.
4. Nonetheless, the shared responsibility tax, applicable to individuals without health coverage, applies beginning in 2014. The tax is the greater of $95 or a percentage of income (capped at the average bronze level plan cost) for 2014, and increases thereafter.⁵
5. For plan years beginning on or after January 1, 2014 PPACA prohibits plans from imposing a waiting period for health coverage that exceeds 90 days.⁶  Other conditions may apply, including cumulative hours of service requirements (up to 1,200).⁷
6. New PPACA fees include the Patient Centered Outcomes Research Institute Fee, equal to $1 per covered life for plan years ending before October 1, 2013 and $2 (indexed for inflation) for each plan year thereafter ending before October 1, 2019.⁸
7. New PPACA fees also include the Reinsurance Fee, an annual fee applicable for calendar years 2014-16. HHS has announced that the fee for 2014 will be $63 per covered life, the fee for 2015 is $44 per covered life, and HHS expects the fee to decrease for 2016.⁹
8. The PPACA requirement that employers subject to the Fair Labor Standards Act give notice of the availability of PPACA Exchange coverage was delayed to October 1, 2013. Then when the DOL announced it wouldn’t impose penalties for failure to comply,¹⁰ many lost interest in the requirement.
9. Government agencies confirmed in April 2013 that they will not impose penalties with respect to inadvertent violations of the PPACA Summary of Benefits and Coverage (“SBC”) requirements, so long as plan sponsors are working diligently and in good faith to comply. The relief extends through the second year of SBC applicability.¹¹
10. PPACA’s out-of-pocket maximum is effective for plan years beginning in 2014 ($6,350 for self-only coverage and $12,700 for family coverage, indexed after 2014).  ¹²  This maximum applies to major medical plan benefits,¹³ and is an annual cap on the deductible, copays, and coinsurance (combined) an individual must pay. If a plan’s prescription drug coverage has no out of pocket maximum (or has a maximum that complies with the above limits) and is administered separately from the plan’s major medical coverage, then only the major medical coverage must comply with the out of pocket maximum for 2014. ¹⁴  Read more here.
11. Massachusetts Connector cafeteria plans, that genre of cafeteria plans required by Massachusetts law and which allows employees to pay for Massachusetts Connector coverage with pre-tax employment dollars, are no longer allowed under PPACA.¹⁵  While the state agency that administers the cafeteria plan requirement is no longer enforcing the connector plan requirements, the Massachusetts state legislature has not yet acted to repeal them.
12. The government has effectively shut down any attempt by employers to offer pre-tax (generally through a cafeteria plan) or employer-funded (generally through an HRA) individual PPACA Exchange coverage.¹⁶  So an employee cannot receive both employer- or pre-tax paid Exchange coverage, as well as a subsidy from the government for purchasing Exchange coverage.
13. The government also issued guidance on when an HRA is considered “integrated” with a major medical plan so that the HRA does not have to independently satisfy PPACA’s mandates, including the prohibitions on annual limits and preventive care requirements. There are two different methods under which an HRA can be “integrated” with other coverage, depending on whether the other coverage provides “minimum value” under PPACA.¹⁷  Read more here.
14. Beginning in 2014 plans cannot impose dollar limits on essential health benefits (“EHB”).¹⁸  In February 2013 the government issued regulations, and identified state benchmark plans for determining EHBs.¹⁹  Large insurance carriers are interpreting the notice as effective for large self-funded plans beginning in 2014, and as permitting a plan to select any state’s benchmark plan to determine whether a plan benefit is an EHB.
15. In December 2013 the agencies issued proposed regulations that make it easier for EAPs and limited-scope dental or vision coverages to qualify as excepted benefits (which are generally exempt from PPACA’s requirements).²⁰  Until final regulations are issued (and through at least 2014), the agencies will treat EAPs and dental and vision coverage as excepted benefits if they satisfy the conditions of the proposed regulations.²¹  Read more here.
16. On September 6, 2013 the IRS issued two sets of proposed regulations covering annual Code Sections 6055 and 6056 reporting by insurers, plan sponsors, and employers.²²  The reports will be made to the IRS and to employees and cover whether the employee was covered by PPACA minimum essential coverage, and whether the employer offered such coverage (and the cost, etc.). Reports are required for calendar years beginning in 2015 (and due the beginning of 2016), and permitted beginning in 2014.⁴  Read more here.

From all of us here at MMPL, your employee benefits law firm.

Not intended as legal advice.

1. http://www.uspreventiveservicestaskforce.org/uspstf11/obeseadult/obesers.htm.
2. Regulations were finalized July 2, 2013, at 78 FR 39869.
3. In very general terms, the IRC 4980H penalties work as follows:  · No Offer Penalty: For any month during the year that the employer fails to offer employer-sponsored health plan coverage to at least 95% of its full-time employees and at least one full-time employee receives government-subsidized health coverage on an exchange, the employer is subject to an excise tax of $166.67 (1/12 of $2,000) times the employer’s number of full-time employees minus the first 30.  · Unaffordable/Inadequate Coverage Penalty: If the employer offers coverage sufficient to avoid the no offer penalty, but the coverage offered to a full-time employee for any month is either “unaffordable” (generally meaning that the employee must pay more than 9.5% of his income for self-only coverage) or “inadequate” (generally meaning that the plan’s actuarial value is less than 60%), the employer will be subject to an excise tax of $250 (1/12 of $3,000) for each month that such an employee receives government-subsidized health coverage on an exchange.
4. IRS Notice 2013-45.
5. Code Section 5000A.
6. PHSA § 2708.
7. Jointly issued IRS Notice 2012-59 and DOL Technical Release 2012-02.
8. The IRS has issued a Q/A on its website that touches on timing of payment, amount, and filing IRS Form 720.
9. HHS Notice of Benefit and Payment Parameters for 2014, 78 FR 15409 (Mar. 11, 2013); HHS Notice of Benefit and Payment Parameters for 2015, 78 FR 72321 (Dec. 2, 2013).
10. http://www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html. The DOL’s model notice, available at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf, was critiqued as difficult to complete and confusing for the reader. For additional background on the notice see DOL Technical Release ¶ 2013-02.
11.  See FAQs about the Affordable Care Act Implementation Part XIV, Q/A 5. An SBC was first required for open enrollment periods that began after September 23, 2012. Read more here.
12. PHSA § 2707(b).
13. Excluded are HIPAA-excepted benefits, such as dental or vision provided to employees under a separate policy.
14.  See FAQs about the ACA Implementation Part XII, Q/A 2.
15. IRC 125(f)(3), prohibiting employers from offering individual Exchange coverage as a “qualified benefit” under a cafeteria plan; see also DOL Technical Release 2013-03; IRS Notice 2013-54.
16. DOL Technical Release 2013-03; IRS Notice 2013-54.
17.  Id.
18. PHSA § 2711.
19. http://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html.
20. 78 FR 77632.
21. The proposed rules would also treat certain “wraparound” coverage as an excepted benefit. Wraparound coverage means employer-provided coverage that supplements Exchange coverage purchased by an employee who cannot afford the employer’s group health plan. The rules applicable to wraparound coverage cannot be relied upon until after final regulations are issued and take effect.
22. 78 FR 54986; 74 FR 54996.