Your Guide toHealth CareReform ProvisionsSince the Patient Protection and Affordable Care Act (PPACA) was enacted inMarch 2010, businesses have been impacted by federal health care reform inmany ways. Some of the impacts involved new requirements that are now fullyimplemented, while others are still being finalized. This document is designedto provide the information you need, as an employer, so you can prepare forthe impacts that will most directly affect your business.This guide includes an overview of the major requirements, along withrecommendations on how to prepare and respond. You’ll also find a high-levelsummary of the impact to voluntary benefits and a quick-reference guide thatyou can save for reference. Colonial Life created this document to help you understand current and future requirements. We also want to show you areas in which the services we provide can help you and your employees. We hope you look to us for help with your benefits program, in this and many other ways.
U.S. Supreme Court Decision on Health Care ReformOn June 28, 2012, the U.S. Supreme Court issued its ruling on the constitutionality of two provisions of PPACA:If the individual mandate requires all Americans to have The requirement that states expand Medicaid to cover health insurance coverage or pay a penalty tax. more individuals or lose all of their federal Medicaid funds.The Court ruled that, even though Congress does not have the The Supreme Court held that Congress does have the authority toauthority under the U.S. Constitution’s Commerce Clause to require offer additional federal funds to states that decide to increase thean individual to purchase health insurance, Congress does have the number of their citizens who are covered under Medicaid. However,authority under its taxing power to require Americans who do not Congress cannot require states to forfeit all Medicaid funds if theyhave health insurance to pay a penalty tax. decide not to expand Medicaid to new groupings of individuals.Because the Court determined that Congress did have the authority The Court held that the federal government could withhold the newto require an individual to purchase health insurance, it was not federal funds for expanded Medicaid eligibility from states that refusenecessary to determine if other provisions of the law could be severed the expansion. However, it could not withhold any existing federalfrom the mandate. Therefore, the portions of the law related to health funding for Medicaid.insurance were upheld.Colonial Life’s Products Are Not Impacted by Market ReformsColonial Life’s products are supplemental, and are offered in addition to qualified health insurance, so they’re notdirectly affected by the market reform provisions of the health care reform law.Colonial Life products are exempt from: l Loss ratio requirementsl Health plan design changes l Coverage for dependents to age 26l Coverage requirements, including requirements for l Waiting period limits covering preventive services l Guaranteed issue (no pre-existing condition) requirementsl Restrictions on limits l Summary of Benefits and Coverage document requirementsImportant Considerations for Voluntary BenefitsHealth Insurance Exchanges to each employee beginning in 2012 and report that costColonial Life products will not be offered in the health on the employee’s W-2 form. Note that this reporting is forinsurance exchanges, which are to begin operating in each informational purposes only and will not affect the employee’sstate on January 1, 2014. taxable income. Certain exceptions to this reporting apply, so be sure to consult your tax advisor.What does this mean to you? A common and centralizedexchange will provide standardized health insurance for Exemption from the Excise Tax – All currentlymany employees and employers. Voluntary benefits will marketed Colonial Life insurance products, when paid for onbecome more important than ever to cover the needs of your an after-tax basis, are exempted from the excise tax.employees, and attract and retain quality employees. Pre-Tax – All accident and disability products are exempt fromW-2 Forms – Employer Reporting Requirements the excise tax, regardless of how these benefits are paid for. However, certain supplemental health products, when paidA new reporting requirement for W-2 forms will require using pre-tax dollars, may be subject to the excise tax. Consultemployers to include the cost of all “ applicable employer- your tax advisor for more information.sponsored coverage” on their employees’ W-2 forms,beginning in 2012. “Applicable employer-sponsored coverage” What does this mean to you? You will be required toincludes coverage under insured or self-funded health plans determine the amount of the tax due on any applicableprovided by the employer. This includes certain voluntary employer-sponsored coverage for each employee and reportplans when the premiums are paid with pre-tax contributions that amount to the coverage provider. Providers are requiredby the employees or are paid by the employer. to pay their applicable portion of the tax.What does this mean to you? You must calculate the cost ofany applicable employer-sponsored coverage that is provided 2
Requirements in Place — to Act OnThe following requirements are already in place. They are new rules and may have a direct impact on your businessor your benefits program. Some are changes that your employees should be made aware of.Small Employer Health Insurance Credit W-2 Forms – Employer ReportingA tax credit is available to certain small businesses that of Health Coverage Costsprovide health insurance to their employees. From 2010 to In 2012, employers who file more than 250 W-2 forms must2014, the value of the credit is up to 35% (if tax-exempt, 25%) disclose the value of their employer-provided health benefitsof the employer’s contribution. for each employee on the employee’s annual W-2 form. TheTo be eligible for the credit, the employer must: IRS will issue guidance in the future that may expand the requirement to affect more employers.●● Have fewer than 25 full-time equivalent employees (FTEs) for the taxable year. What do you need to do? Ensure you have a means to provide these cost values on your employees’ W-2 forms for either the●● Have average annual employee wages that amount to less 2012 tax year or future years, depending on the number of than $50,000 per FTE. employees.●● Maintain a “qualifying arrangement.” Under this arrangement, the employer pays the premiums for each Summary of Benefits and employee enrolled in health insurance coverage offered Coverage Documents by the employer. The premium amounts paid by the Beginning with the first open enrollment period on or after employer are equal to a uniform percentage that is not September 23, 2012, health insurers and group health plans are less than 50 percent of the premium cost of the coverage. required to provide a summary of the provisions of their plan,What do you need to do? Apply for the credit if you are to applicants and enrollees, following the format specified byeligible. Consult with your tax advisor for more information. the U.S. Department of Health and Human Services (HHS). This requirement will be enforced with a substantial fee for each daySimple Cafeteria Plan of non-compliance.Eligible small employers will be able to establish new simple What do you need to do? Ensure your employees receive acafeteria plans. Under the new law, these plans will be copy of each Summary of Benefits and Coverage, asconsidered as meeting the nondiscrimination requirements required and appropriate.as long as the plan sponsor meets certain eligibility,participation and minimum contribution requirements.For purposes of this rule, a small employer is one that hasemployed 100 or fewer employees during either of the How Colonial Lifepreceding two years. Can HelpWhat do you need to do? Consider establishing a cafeteriaplan, if you’re eligible and don’t already have one in place.Extension of Dependent CoveragePlans that cover dependent children must cover all children ●● Through our strategic partnership with Ameriflex,(married and unmarried) of the insured until the child reaches we can help our accounts establish simple cafeteriaage 26. plans at no direct cost to them, as long as theyWhat do you need to do? Ensure the coverage option is in maintain $1,800 in Colonial Life premium.place and that your employees are aware of it. ●● Our 1-to-1 benefits counseling sessions enableEnd of Pre-Existing Condition Limitations – us to highlight any of the health care reformChildren Under 19 requirements for your employees. Through our discussions and web-based enrollment process,Health insurance companies are required to make their we can verify eligible dependents, note reminderspolicies available to individuals with no pre-existing of new legislation, and make employees aware ofcondition exclusions applied. This mandate took effect for important benefit offering details.people under age 19 for plan years beginning on or afterSeptember 28, 2010. It will apply to all individuals in 2014.What do you need to do? Ensure your coverage compliesand your employees are aware of this mandate. 4
Requirements in Place — to Confirm or CommunicateThese requirements may have already been implemented by your insurance carriers and other benefit providers.However, you still need to confirm that your benefits comply, and be sure to communicate any relevant require-ments to your employees.Flexible Spending Account Changes – Access to Provider Choice forOTC Medications Emergency ServicesOver-the-counter medicines and drugs are no longer eligible Medical insurers are to treat and charge insured individuals forfor reimbursement under a health FSA or HRA without a emergency services received from out-of-network providersdoctor’s prescription. Insulin remains reimbursable. the same way they do for in-network emergency services.What do you need to do? Ensure that your cafeteria plan What do you need to do? The benefit plans you offer shoulddocuments provide for this requirement. Also, ensure your comply with this practice.employees are aware of this change as they plan their expensesfor the coming plan year. What Are “Grandfathered” Plans?Preventive Care Covered 100 Percent A “grandfathered” plan is one that was in existence on MarchMedical insurers are required to pay for the entire cost of 23, 2010 (the day PPACA was enacted). A grandfathered healthpreventive services and cannot ask employees to share in this plan is required to comply only with a subset of the groupcost. This is designed to motivate insured individuals to receive market reforms under PPACA. The benefit of maintainingroutine preventive care and screenings, such as PAP smears, grandfathered health plan status is that an employer-mammograms, PSA tests and colonoscopies. sponsored plan will not have to comply with some of theWhat do you need to do? The current coverage you offer market reforms.should comply with this requirement, which became effective A “non-grandfathered” plan is a plan that was not in existencefor plan years beginning on or after September 23, 2010. on the date the law was enacted OR one that loses itsNo More Lifetime Maximums grandfathered status due to certain changes to the plan.Health insurance plans may not impose lifetime limits on thedollar value of any essential health benefits, as establishedunder the law. Annual limits are also restricted by regulations of How Colonial Lifethe Secretary of Health and Human Services (HHS). Can HelpWhat do you need to do? Your benefit plans should complywith the removal of maximums for essential benefits, whichbecame effective for plan years beginning on or afterSeptember 23, 2010.Plans Cannot Rescind CoverageInsurers cannot retroactively cancel or rescind coverage for Through our 1-to-1 benefits counseling sessions,insured individuals except in the case of fraud. guided by our enrollment system, we can highlightWhat do you need to do? The benefit plans you offer should any pertinent health care reform mandates for yourcomply with this condition. employees and help clarify how the mandates affect them and their personal benefit situations. 5
Future Requirements — to Be Prepared ForThe following requirements will take effect between 2013 and 2018. While these may not require immediate action,some may require advance preparation. We are providing this summary to help you begin planning today.2013 cases. Employers will be required to offer qualified health insurance to their employees or pay a penalty in someSubsidy Eliminated circumstances.The deduction previously permitted for amounts received by Small businesses with fewer than 50 employees will bean employer as a subsidy for retiree prescription drug plans will exempt from this requirement.be eliminated for tax years beginning after December 31, 2012. Failure to Provide CoverageWhat will you need to do? If you currently receive this subsidy,you may incur higher tax liabilities. ●● If an employer is subject to the penalty and fails to offer any full-time employee health coverage, and if any full- Health FSA Caps time employee enrolls in the exchange and receives a taxSalary reduction contributions for health flexible spending subsidy to purchase coverage, the employer is subject toarrangements (FSAs) will be capped at $2,500 per employee, a penalty equal to the number of the business’ full-timeper year for cafeteria plan years beginning on or after January employees, minus 30, times $2,000 per year.1, 2013. ●● If an employer offers its employees health insurance, butNon-elective contributions are not impacted, and unused that coverage does not provide a “minimum value” asamounts carried over during a grace period are not counted required by the law, or if the coverage premium is greatertoward the $2,500 cap amount. than 9.5% of the employee’s household income, the employee is eligible to receive a tax subsidy to purchaseWhat will you need to do? FSA plans should be amended to coverage through the exchange. The employer mustcomply with the cap. Ensure that your employees are aware of pay a penalty tax of $3,000 per year for each of thesethis cap as they plan their expenses for the coming plan year. employees.Written Notice of Insurance Exchanges What will you need to do? Beginning in 2014, you will beEmployers must provide all employees and new hires with required to report whether or not you comply with theinformation about state health insurance exchanges no mandate, and, if you don’t comply, pay any resulting penalty.later than March 1, 2013. Employers must provide writtennotices that include information on employee eligibility forpremium credits received through the exchange under certain Insurance Exchanges Availablecircumstances. The employer must also provide written notice Exchanges will create an open but highly regulatedregarding the effect on any employer contribution toward the marketplace where individuals and small employers cancost of health insurance if the employee purchases a plan on purchase health insurance coverage through an onlinethe exchange. portal. Exchange health plans will be offered in four tiers (Platinum, Gold, Silver, Bronze) that adjust premiumsWhat will you need to do? You will need to create and according to the level of cost sharing. The exchanges aredistribute a written notice about the exchange. designed to:Medicare Taxes l Use a competitive marketplace to lower health insurance Effective January 1, 2013, a .9% increase in Medicare taxes will premiums.go into effect for employees who earn more than $200,000 l Make health insurance benefits affordable and accessible and file as single and employees who earn more than $250,000 outside the workplace.and file jointly. l Make it easy to “comparison shop” online.What will you need to do? You will be required to withhold theadditional tax for employees who fall in this category. l Deliver insurance subsidies to low-wage workers. What will you need to do? If you are an eligible small2014 employer, you may use the exchanges to help yourCoverage Mandates and the employees obtain health insurance.Play-or-Pay PenaltyIndividuals will be required to obtain coverage under aqualified health insurance plan or pay a tax penalty, in some 6
End of Pre-Existing Condition Limitations for All How Colonial LifeHealth insurance companies will be required to make theirpolicies available to all individuals with no pre-existing Can Helpcondition exclusions applied, effective for plan years beginningon or after January 1, 2014.What will you need to do? Most employer-sponsored healthcoverage does not include pre-existing condition exclusions,but you should ensure that your plan complies. With so many rules and regulations to consider,Limit on Waiting Periods employee communications will be critical to help guide employees to the exchanges andMedical carriers that offer group coverage cannot have a ensure they understand the new features ofwaiting period for benefit plans longer than 90 days. their plans.What will you need to do? If you currently offer coverage that Not only will they need to understand how thehas a waiting period longer than 90 days, you will need to exchanges will help them, they need to knowensure your plan is changed as needed to comply for plan years about the features that will impact their healthbeginning on or after January 1, 2014. care — like caps on flexible spending accounts.Auto-Enroll Here’s how we can help with employeeIf you have more than 200 employees, you must automatically education and enrollment:enroll all new full-time employees in one of your health plans. ●● We can cover all of these in our 1-to-1New employees should have the opportunity to opt out of this benefits counseling sessions, which can becoverage. At this time it is unclear when implementation will further emphasized through notes on ourbegin, pending regulations to be issued by the U.S. Secretary of enrollment system.Labor. ●● We can provide benefit statements toWhat will you need to do? If this requirement applies to you employees at each enrollment. Thesewhen it become effective, you need to do several things. You statements act as a natural complement toneed to ensure all new employees are enrolled, notify them of the W-2 and Cadillac Tax provisions becausetheir option to opt-out, and then remove employees who opt they outline what goes into the figure thatout from that coverage. appears on the employee’s W-2.2018 ●● If we’ve enrolled your employees in their core benefits, we can be available to helpExcise Tax on High-Cost Coverage – enroll new hires and un-enroll them ifThe ‘Cadillac Tax’ needed. Our enrollment system can help“High-cost” health plans will be subject to an excise tax, paid by streamline this process for you.the insurance company selling the plan. Plans or combinationsof plans are considered “high-cost” plans if the aggregateannual value of the coverage provided by an employer toan employee is greater than $10,200 for single coverage and$27,500 for family coverage.Special rules apply for plans for retirees and employees inhigh-risk professions and multi-employer plans. This excise taxis intended to encourage employers to hold down the value ofthe plans they offer to employees and could possibly result inreduced medical spending.What will you need to do? You will be required to calculatethe value of the benefit plans you offer your employees andnotify the insurance carriers of their pro-rata share of the tax,beginning with the 2018 tax year. 7