By Dwayne O. Littauer
The two health care reform bills in Congress would provide some relief to employers. But the relief is less than many employers had sought.
Here are some items that employers would find helpful.
Employer Penalty. An important relief to employers would be the repeal of the Affordable Care Act (ACA) employer shared responsibility penalty retroactively to January 1, 2016. These rules apply to employers with 50 or more full-time or full-time equivalent employees. To avoid $2,000 or $3,000 penalties per full-time employee, these rules have required many employers to offer health coverage to new groups of employees and adopt complex look-back measurement rules to determine full-time employee status. They impose deadlines to offer coverage, which must meet affordability requirements. As a result, many employers added new low-level coverage tiers.
Cadillac Tax. The 40% tax on high cost health coverage would not be repealed. Instead it would be delayed until 2026. The cost of coverage would include not only the group health plan but also health flexible spending account (FSA) contributions, whether made by the employer or by the employee through pre-tax deferrals, employer contributions to health savings accounts (“HSAs”), on-site clinics, or specified disease, hospital indemnity, or fixed indemnity insurance if paid on a pre-tax basis. Regulation guidance will be needed on determining the cost of self-funded coverage.
HSA Contribution Limit. The 2017 HSA contribution limit is $3,400 for those with individual coverage and $6,700 for those with family coverage. Both bills would increase the limits to be the same as the out-of-pocket maximum limits for high deductible health plans, which are indexed for inflation (for 2018 they will be $6,650 for individual coverage and $13,300 for family coverage).
Health FSA Limit. The limit on contributions to a health FSA (currently $2,600) would be lifted. This would be effective in 2017 under the House bill and in 2018 under the Senate version.
Over-the-Counter Drugs. The ACA limited health plan reimbursement of medicines and drugs only to insulin and prescribed drugs. Over-the-counter medicines could not be paid without a prescription. Both bills would allow plans, such as HSAs and health FSAs, to pay for over-the-counter drugs without a prescription beginning in 2017.
Medicare Tax. The 0.9 percent additional Medicare payroll tax for high income individuals would be repealed, but not until in 2023.
Employers will be disappointed to find that many ACA provisions would remain unchanged.
Employer Reporting. Even though the employer shared responsibility penalty would be repealed, Forms 1094-C and 1095-C reporting would remain in place. Many employers have found these forms, including their complicated offer and exemption codes, to be unduly burdensome. Rejected form and data errors have been particularly vexing.
Form W-2 reporting on health coverage would remain in place. While the Senate bill would make no change, the House bill would actually make it more burdensome by requiring employers to indicate the months in which an employee was eligible for coverage.
PCORI Tax. The Tax on Insured and Self-Funded Plans to Fund Patient Centered Outcome Research (PCORI) fees of $2 per covered life (adjusted for inflation) would remain in place until 2019.
Grandfathered Plans. No change would be made to the grandfathered plan rules. These rules impose complicated cost and coverage change limitations in order for a plan to remain grandfathered. They also limit increases in employee cost sharing.
Plans would still have an incentive to remain grandfathered to be exempt from several ACA requirements. These include the non-discrimination rules for fully-insured plans, which have allowed management-only plans to remain in place. These rules have been suspended pending issuance of regulations. Non-grandfathered plans must cover clinical trials, which are often non-network and can be very expensive. Grandfathered plans need not provide a broad preventive coverage with no cost sharing. The requirement to cover a variety of contraceptive coverage methods has been controversial. Grandfathered plans are not subject to the ACA claim and appeal rules, which are more favorable to claimants and require offering external appeals.
Market Reforms. The proposed legislation would not change the prohibitions against annual or lifetime dollar limits on essential health benefits. Children would be allowed to remain covered until age 26 without regard to student status, marital status, or whether they are financially dependent on their parents. The prohibitions against preexisting condition limits and certain rescissions of coverage would remain in place. The 90-day maximum waiting period would not be changed. No change would be made to the requirement concerning coverage of and cost sharing for non-network emergency services, allowing covered persons to designate a primary medical provider and pediatrician, and access to obstetric and gynecological providers.
Preexisting Condition Limits. Plans would still be prohibited from imposing preexisting condition exclusions.
Summary of Benefits and Coverage. The requirement for an eight-page summary of benefits and coverage (SBC) would not change. This includes the requirement to give 60 days’ advance notice of a mid-year plan change that would affect the terms of an SBC.
Section 1557 Nondiscrimination Rules. No change would be made to the Section 1557 nondiscrimination requirements. These apply, among other things, to health care providers who receive reimbursements from Medicaid or Medicare Part A. Covered entities must meet nondiscrimination requirements, which regulations interpreted as requiring the employer’s group health plan to cover transgender surgery in some cases. It includes requirements for a long and a short notice. The long notice must be posted on the covered entity’s website and include taglines for the 15 largest languages in the state. The rules requires establishment of a grievance procedure.
Conclusion. The legislative process is still ongoing. The bills described above could be changed further. It is possible that neither bill will be enacted. The parties might confect a joint bill. The overhaul process could cease entirely. The ACA might survive and be subject to incremental changes over time.