March 24, 2011
This year, significant federal regulatory activity with respect to the implementation of the Affordable Care Act is expected. Some of the regulations are geared toward implementation of health reforms in 2014, but others, such as the uniform disclosure rules, will require plan sponsors to take action in 2011.
Regulations that are expected in 2011 include the following:
- Uniform Disclosure The Act required the agencies to develop standards for uniform plan disclosures no later than March 23, 2011 (12 months after enactment), but the standards were not released by that date. This uniform disclosure will take the form of a four-page summary of benefits and coverage (with print in 12-point font or larger). The summary must describe the benefits, exceptions or limits on coverage, and cost-sharing provisions, all presented in a culturally and linguistically appropriate manner. Group health plan sponsors and health insurance issuers must provide these summaries to plan participants by March 23, 2012, and they must also notify participants of any material modification to the summary no later than 60 days prior to the effective date of the modifications. Sample uniform disclosure models are available on the National Association of Insurance Commissioners (NAIC) website.
- W-2 Reporting The Act requires employers to report the aggregate cost of employer-sponsored health coverage on employees' W-2 forms. This is merely a reporting requirement; employees would not pay income or payroll taxes on that amount. In Notice 2010-69, the Internal Revenue Service (IRS) delayed the effective date of this requirement so that it now applies to coverage provided during 2012. W-2 forms reflecting 2012 coverage would typically be provided in January 2013, but they would have to be provided earlier if requested by an employee who leaves a job during 2012. The aggregate cost of coverage will be determined under rules similar to those that apply to calculating rates for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The IRS has promised guidance will be forthcoming in 2011.
- Essential Health Benefits The Department of Health and Human Services (HHS) may also issue a proposed rule this fall defining the term "essential health benefits." This concept is critically important to health insurance issuers that must provide these benefits in coverage offered through the state-based Exchanges beginning in 2014. In the short term, its primary significance to group health plans is in the context of lifetime and annual dollar limits, as the Act prohibits (lifetime) or limits (annual) dollar limits on essential health benefits. In issuing this rule, HHS will draw on recommendations from the Institute of Medicine due by September 2011 on the criteria and methods for determining the essential benefits package and data from the Department of Labor describing benefits typically provided by employer-sponsored health plans.
- Rules Governing the Exchanges In November 2010, HHS issued preliminary guidance to the states about establishing Exchanges. This guidance was not issued as a formal regulation but was instead posted on the HHS website. According to that guidance, a proposed rule is scheduled for publication in the spring of 2011. Additional regulations are scheduled for publication later in 2011 and in 2012.
- Rules Governing the Consumer Operated and Oriented Plans (CO-OP) Program The Act calls for the establishment of the (CO-OP) Program, which aims to foster the creation of qualified nonprofit health insurance issuers to offer qualified health plans primarily in the individual and small-group markets. The Act created a 15-member advisory board to make recommendations to HHS. Because HHS is currently considering responses to a formal request for comments that were due on March 4, 2011, the agency is likely to issue regulations in 2011. No CO-OPs have been established so far.*
- Nondiscrimination Rules for Insured Health Plans The IRS may issue guidance on the new nondiscrimination requirements applicable to insured group health plans, which prevent discrimination in favor of highly compensated employees. Although these requirements take effect for non-grandfathered plans with the plan year beginning on or after September 23, 2010, pursuant to Notice 2011-1 group health plans will not be required to comply with the new statutory requirements until guidance is issued. The IRS is currently considering responses to a formal request for comments that were due on March 11, 2011.
In addition, the agencies may release in final form various regulations published as interim final regulations in 2010 (e.g., age-26 rules, lifetime/annual dollar limits and preventive services).
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As with all issues involving the interpretation or application of laws or regulations, plan sponsors should rely on their attorneys for authoritative advice on the Affordable Care Act. The Segal Company can be retained to work with plan sponsors and their attorneys on all compliance issues related to health care reform.
- Examples of existing regional health cooperatives are the Seattle-based Group Health Cooperative and the Minneapolis-based HealthPartners.