• Health and Welfare: Upcoming Healthcare Reform Deadlines and Effective Dates
  • November 8, 2013 | Authors: Garrett Fenton; C. Frederick Oliphant
  • Law Firm: Miller & Chevalier Chartered - Washington Office
  • Although there has been a steady roll-out of health care reform guidance since the Patient Protection and Affordable Care Act ("PPACA") was enacted on March 23, 2010, the statute is rapidly approaching its most transformative phase with a number of substantive provisions that begin to take effect January 1, 2014. While some of these provisions have been delayed or do not directly impact employers -- including the recently-announced delay of the individual mandate penalty, by up to two months, in connection with individual health insurance coverage purchased through an Exchange -- there are a number of provisions of interest to employers that will be applicable after the end of this year. Below we summarize some of these important upcoming requirements, focusing on those that are of importance to employers/group health plan sponsors.

    • Employer Shared Responsibility (Pay or Play). Although originally scheduled to go into effect January 1, 2014, the IRS has delayed the employer mandate (and corresponding annual information reporting) provisions. The Pay or Play rules require "applicable large employers" to offer all full-time employees (and their children up to age 26) sufficiently "affordable" and "valuable" health coverage, or risk being assessed a penalty tax. The related IRS information reporting requirements imposed on employers are designed to assist the government in enforcing these rules. Pursuant to the IRS's announced delay, the Pay or Play and related IRS information reporting provisions are now scheduled to go into effect on January 1, 2015 (with the first information reports due in early 2016). Despite the delay, the implementation will be complicated and employers should not wait too long before making decisions regarding how best to prepare. An added complication is that future guidance on the Pay or Play rules and the information requirements could change the relevant landscape.

    • Prohibition against Excessive Waiting Periods. Many employer-sponsored group health plans currently do not impose any waiting periods, or if they do, such waiting periods do not extend beyond 90 days. But this is not always the case, particularly in certain industries with higher employee turnover rates (e.g., retail stores, restaurant chains, etc.). For plan years beginning on or after January 1, 2014, PPACA prohibits group health plans from applying any waiting periods that exceed 90 days. All calendar days count towards this 90 day period. If the 91st day following an employee's eligibility for coverage falls on a weekend or holiday, the plan may need to make the waiting period shorter than 90 days, for administrative convenience; the effective date of coverage may not, in any event, occur after the 91st day. Employers should review their plan documents closely to make sure they comply with this rule. For example, based on the current, proposed regulations, employers who impose a waiting period of three months (or more), or provide for coverage to be effective as of the first day of the month immediately following the completion of a 90-day waiting period, may violate this rule.

    • Wellness Programs. PPACA codified and amended the wellness program nondiscrimination regulations applicable under HIPAA, effective for plan years beginning on or after January 1, 2014. For example, the PPACA provisions increased the maximum incentive that an employer may offer under a "health contingent" wellness program from 20% to 30% of the total cost of coverage (with a permissible increase to 50% in connection with programs that aim to reduce tobacco use). Participation-only wellness programs continue to have no maximum incentive limit. The rules also clarified the distinctions between, and requirements for, participation-only and health-contingent wellness programs. Employers who offer (or would like to offer) wellness programs should consider whether to amend their programs to provide for an increased incentive, and whether they need to make any changes to comply with the updated rules.

    • Preexisting Conditions. PPACA prohibits group health plans and health insurance issuers, for plan years beginning on or after January 1, 2014, from denying or limiting coverage to any individual based on a preexisting condition. This prohibition has applied with respect to children under age 19 since the first plan or policy year beginning on or after September 23, 2010, and is now being expanded to all participants and beneficiaries. Employers thus should confirm that their plans have eliminated any preexisting condition exclusions or limitations that previously may have applied to any enrollees, regardless of their age.

    • Clinical Trial Coverage. Effective for plan years beginning on or after January 1, 2014, where an enrollee in a non-grandfathered group health plan is eligible to participate in an approved clinical trial for cancer or another life threatening disease or condition -- and either (1) the referring provider is a participating provider who has concluded that the enrollee's participation in the trial would be appropriate, or (2) the enrollee furnishes medical and scientific information establishing that participation in the trial would be appropriate -- the plan may not deny participation in the trial; deny, limit or impose additional conditions upon the coverage of routine patient costs for items and services furnished in connection with the trial; or discriminate against an enrollee based on his or her participation in the trial. The federal government has yet to issue any implementing regulations under these provisions and has indicated that such regulations may not be forthcoming in the immediate future. In the meantime, plans will be expected to adopt a "good faith, reasonable interpretation" of the statute.

    • Prohibition Against Annual Limits. Effective for plan years beginning on or after January 1, 2014, group health plans may not establish any annual dollar limits on essential health benefits ("EHB"). This prohibition has actually applied since the first plan or policy year beginning on or after September 23, 2010, but certain "restricted" annual dollar limits have been permissible in the meantime. In classifying which benefits are EHB, and therefore subject to this prohibition, self-funded and large fully-insured group health plans may refer to any state's designated "benchmark" plan. (A separate PPACA provision, effective for plan or policy years beginning on or after January 1, 2014, requires individual and small group health insurance coverage to cover all EHB, which are defined for each state by reference to a specified benchmark plan.) Moreover, the IRS has clarified that because employer-provided health reimbursement arrangements ("HRAs") constitute group health plans, and necessarily include dollar limits on benefits, they will violate these rules if they are offered on a "stand-alone" basis -- i.e., if they are not "integrated" with another group health plan -- unless they are otherwise exempt from the rules (for example, as a retiree-only HRA).

    If they have not done so already, employers should review their plans' designs, select a benchmark plan to be used in defining EHB, and confirm that no annual dollar limits are imposed on such EHB. Employers also should confirm that they do not offer any non-retiree-only, stand-alone HRAs. For example, an HRA under which an employer makes a specified dollar amount available for active employees to pay individual health insurance premiums -- a so-called "defined contribution health plan" approach -- would likely violate these provisions.

    • Reinsurance Fee. For calendar years 2014, 2015 and 2016, HHS will assess a transitional reinsurance program fee on employers that sponsor self-funded group health plans (and insurers of fully-insured group health plans and individual health insurance coverage). The amount of the fee is $63 per covered life in 2014, and is expected to decrease in 2015 and 2016. By no later than November 15 of each respective year, the self-funded plan (generally the employer, or a TPA on its behalf) must submit to HHS an annual enrollment count of the number of covered lives for the year, using one of several specified enrollee counting methodologies. Within 30 days of submission of the annual enrollment count, or by December 15, whichever is later, HHS will notify the employer of the total reinsurance contribution amount owed, based on that annual enrollment count. Within 30 days after the date of notification of contributions due for the applicable benefit year, the employer (or the TPA on its behalf) must remit the contributions to HHS.

    HHS will provide details on the process for submission of the reinsurance contributions in future guidance. Notably, HHS recently announced that it was intending to propose in future rulemaking to collect reinsurance contributions in two separate installments for each calendar year: one at the beginning of the following calendar year, and one at the end of the following calendar year. HHS also intends to propose to exempt from the fee entirely certain self-insured, self-administered plans -- which are not very common -- from the requirement to make reinsurance contributions for 2015 and 2016.

    • Cost-Sharing / Out-of-Pocket Limitations. For plan years beginning in 2014, PPACA limits the total annual cost-sharing (or "out-of-pocket maximum") imposed by group health plans to the annual cost-sharing limit applicable to high deductible health plans that are compatible with health savings accounts (subject to increase in future years). For 2014, the applicable cost-sharing limits are $6,350 for self-only coverage, and $12,700 for any other coverage tier. Employers should review their plans to confirm that they meet these cost-sharing requirements.

    • Annual Deductible Limits. For plan years beginning on or after January 1, 2014, a fully-insured, non-grandfathered small group health plan must not impose deductibles that exceed $2,000 for self-only coverage and $4,000 for any other tier of coverage (subject to specified increases after January 1, 2014). (A limited exception may apply if the health insurance issuer offering the small group coverage must impose a higher deductible in order for the coverage to provide an actuarial value that meets one of the specified "metal levels" of coverage, i.e., bronze (60% actuarial value), silver (70% actuarial value), gold (80% actuarial value) or platinum (90% actuarial value).)

    Although many employers have already established their plan designs for 2014, it would be a good idea to review those plan designs now to ensure that they are compliant with the various provisions taking effect next year.