Employer Guidance For Implementing Health Reform Picks Up Steam

Even as the fate of Patient Protection and Affordable Care Act inches closer towards resolution in the Supreme Court, more and more guidance is being issued that will help employers implement provisions of the law already in effect and provisions that will take effect in the future.

The Department of Health and Human Services already has issued guidelines for establishing Exchanges and the Small Business Health Options Program (SHOP).

There is much more that employers and plan administrators will have to attend to now or in the near future.

Premium Tax Credit

For example, the Internal Revenue Service published in the August 17 Federal Register proposed regulations relating to the health insurance premium tax credit

The proposed regulations provide guidance to individuals who enroll in qualified health plans through American Health Benefit Exchanges and claim the premium tax credit, and to Exchanges that make qualified health plans available to individuals and employers.

Beginning in 2014, under the ACA, individuals and small businesses will be able to purchase private health insurance through state-based competitive marketplaces called American Health Benefit Exchanges

ACA Sec. 1401 amended IRC Sec. 36B, which allows a refundable premium tax credit to help individuals and families afford health insurance coverage. The Sec. 36B credit is designed to make a qualified health plan affordable by reducing a taxpayer's out-of-pocket premium cost. The credit is in part available to employees covered by employer-sponsored health plans that are deemed “unaffordable.”

An employer-sponsored plan is not affordable if the employee's required contribution for the plan exceeds 9.5% of the applicable taxpayer's household income for the taxable year.

Generally, a large employer that offers health coverage to its full-time employees and their dependents is subject to the assessable payment (or penalty) if at least one full-time employee is certified to receive a premium tax credit or cost-sharing reduction because the employer-sponsored coverage either does not provide minimum value or is unaffordable to the employee. However, employers have noted that they do not know employees' household income and would not be able to determine if their plans are affordable. Consequently, the IRS expects to develop and provide an affordability safe harbor for employers in future proposed regulations, as follows: an employer that meets certain requirements, including offering its full-time employees (and their dependents) the opportunity to enroll in eligible employer-sponsored coverage will not be subject to an assessable payment for an employee who receives a premium tax credit or cost-sharing reduction for a taxable year if the employee portion of the self-only premium for the employer's lowest cost plan that provides minimum value does not exceed 9.5% of the employee's current W-2 wages from the employer.

The ACA provides that an eligible employer-sponsored plan generally provides minimum value if the plan's share of the total allowed costs of benefits provided under the plan is at least 60% of those costs. Proposed regulations that HHS will issue later this year will apply in determining the percentage of "the total allowed costs of benefits" provided under a group health plan or health insurance coverage, taking into account that employer-sponsored group health plans and health insurance coverage in the large group market are not required to provide each of the essential health benefits or each of the ten categories of benefits. According to the IRS, "It also is anticipated that the regulations will seek to further the objective of preserving the existing system of employer-sponsored coverage, but without permitting the statutory employer responsibility standards to be avoided." The IRS also wrote that it is contemplating whether to provide appropriate transition relief for the minimum value requirement for employers currently offering health care coverage.

More Guidelines Coming

There is more, including proposals for plans to report summaries of benefits and coverage and increases in the levels of reimbursement under the Early Retiree Reimbursement Program (ERRP).

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