Is Your Business Ready for Health Care Reform?

Is your business ready to health care reform?The Supreme Court has made their decision on the health care reform law by upholding the constitutionality of the Affordable Care Act and the individual mandate to purchase health insurance.  So what action do employers need to take now?


Employers need to be ready for these provisions now


Women’s Preventive Care  – August 1, 2012


  • New preventive benefits will be available to members of non-grandfathered plans when the plan takes effect or renews after August 1, 2012.
  • No cost sharing is required when the following services are provided by an in-network provider:  well-woman visits, screening for gestational diabetes, HPV testing, annual counseling and screening on STDs and HIV, all FDA approved contraceptives, sterilization procedures and counseling, lactation support and equipment rental, and screening and counseling for domestic violence.
  • Religious based, non profit employers were given an option to exclude contraception coverage from their benefit plan.


Medical Loss Ratio (MLR) Rebates – August 1, 2012

  • Under the Medical Loss Ratio rule beginning this year, individuals and small group market insurance plans will be required to spend 80% of the premiums on medical care and health care improvement.  Only the remaining 20% will be allowed towards administrative costs.  Large group market plans must spend at least 85% of premiums on medical care and health care improvement.  Insurers  not meeting these standards will be required to provide rebates to their consumers.
  • The rebates only apply to fully insured health plans.
  • Insurance carriers will provide a letter to the policyholder who is paying all or part of the premium explaining why they are receiving a rebate.   The first checks will be issued by August 1, 2012.
  • Employers have obligations under federal law as to how the rebate is distributed depending on what type of plan they have.   See our post: Medical Loss Ratio Rebate Overview for Employers for more information.


Summary of Benefits and Coverage (SBC) – September 23, 2012

  • This is the most urgent requirement for employers.  The SBC is a new plan document which will give consumers straightforward information about their health plan benefits and coverage.  It will also include a glossary of common insurance terms.
  • Plan sponsors will need to provide a SBC beginning on the first day of the first open enrollment period that begins on or after September 23, 2012.
  • For self-funded group health plans, the plan administrator will be providing the SBC to an employer who will then need to take care of SBC distribution. For fully-insured group health plans, the health insurance issuer will be providing the SBC to the plan administrator who will then take care of SBC distribution.
  • See our post: More Questions Answered about the Summary of Benefits and Coverage for additional information.


Health Care Flexible Spending Accounts (FSA) Limited to $2,500 – January 2013

  • The health care reform law imposes an annual $2,500 limit on the amount of salary reduction contributions that an employee can make to a health flexible spending account.  The limit applies to tax years beginning after December 31, 2012.
  • The plan document of a health FSA must be changed to reflect the $2,500 limit on or before December 31, 2014. 
  • See our post:  IRS Releases Guidance on $2,500 Health FSA Limit for more information.


W-2 Reporting of Health Coverage Costs – January 2013

  • Employers issuing more than 250 Forms W-2 must include the aggregate cost of their annual health plan coverage on employees’ W-2s.
  • There are some types of coverage which do not have to be reported: long-term care coverage, certain HIPPA “excepted benefits,” any coverage under a separate policy for treatment of the mouth or eye, coverage for a specified disease, FSA salary reductions, HSA and Archer MSA contributions.
  • The reporting requirement is for informational purposes only, the benefits are not taxable.
  • For more detailed information about the W-2 reporting requirement see our post: W-2 Reporting Requirements Update for Employers.


Employers need to be thinking about these requirements for 2014:


Employer Provided Coverage Mandate- January 2014

  • Starting in 2014, large employers (those with at  least 50 full-time employees or full-time equivalents) will be subject to a penalty if the group health coverage is not “affordable” and does not provide minimum value (minimum value means that a plan’s share of the total allowed costs of benefits is no less than 60%).
  • If an employer does not provide any group health insurance:  then the penalty will be $2,000 per employee per year.  The first 30 employees are exempt from the penalty.
  • If a group health plan does not provide minimum value and is unaffordable, then an employee will be able to get a premium tax credit and buy insurance through a state insurance exchange.
  • Here is the scenario if an employer provides unaffordable coverage:  There is an employee with a household income below 400 percent of the federal poverty level and the group health insurance plan’s share of the total cost of benefits is less than 60 percent or this employee has to pay more than 9.5% of family income for the employer coverage.

If this employee receives a premium tax credit through the state insurance exchange, then the employer must pay a penalty.  The penalty is $3,000 annually for each full-time employee receiving a tax credit up to a maximum of $2,000 times the number of full-time employees minus the first 30 employees.  The penalty is increased each year by the growth in insurance premiums.


Auto Enrollment Mandate – January 2014 (Implementation Delayed)

  • Employers with more than 200 full-time employees are required to automatically enroll new full-time employees in the employer’s health benefit plan.
  • Employees must opt out if they do not want health insurance coverage.
  • In February 2012, the Department of Labor stated that until such rules are finalized, employers are not required to comply with this provision.


While most of the significant provisions will not happen until 2014, employers need to sit down with their insurance agent to discuss the legal implications of all of the provisions and how they can be prepared for the changes coming ahead.  The full effects of the health care reform law on employers will not be known until the federal government releases all of the final set of regulations under the Affordable Care Act.  The outcome of the presidential election in November will have a big impact on the law and whether some of these regulations get changed or delayed.



The information contained in this Focus Benefits Flash is provided as general guidance only and is not intended to be legal or other professional advice.  The provisions with health care reform are constantly changing and guidelines may change as updates are issued by the federal government.




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