The Verdict on Health Care Reform: Impact on Employer Health Plans

The United States Supreme Court ruled yesterday that the Patient Protection and Affordable Care Act of 2010 (“ACA”) is constitutional in almost all respects, striking down only those provisions that would withhold all Medicaid funds from States that do not implement the expanded Medicaid coverage prescribed by the ACA.The effect of this widely anticipated ruling on employers, as it turns out, is negligible since the provisions that affect employer-sponsored health plans remain completely intact.

The Supreme Court’s decision puts an end to court challenges and moves any potential changes to the ACA squarely into the political arena. In this election year, no one anticipates action by the 112^thCongress. Therefore any changes to the ACA would likely occur no earlier than the first months of 2013 and seem entirely dependent on election results this November. By the time change might happen, the increased Medicare payroll tax and the 3.8% tax on unearned income (both on high earning households) will have become effective.

As a reminder, the following benefits or design features that have already been incorporated into the health plans of large employers still apply:

• coverage available to adult children up to age 26, if dependent coverage is available;
• no lifetime limits and restricted annual limits on “essential benefits”;
• no pre-existing condition exclusions for children under 19;
• no rescissions of coverage except in cases of fraud or misrepresentation on the part of the participant; and
• no reimbursement of over-the-counter (OTC) medicines from health FSAs, HRAs, HSAs, and Archer MSAs, unless the medicine is prescribed or is insulin.

The additional requirements that apply to “non-grandfathered” plans, such as full coverage of preventive care and limits on employee cost-sharing, also remain in effect, and the nondiscrimination requirements that are to apply to fully insured group health plans are still expected to take effect after the publication of regulations by the Treasury Department. (While it is anyone’s guess when the new nondiscrimination and other needed regulations will be released, it is conceivable that Treasury and other agencies will pick up the pace of regulation writing in the hope of completing as many pending projects as possible before the end of the year.)

Upcoming reporting, disclosure, and design feature requirements include:

• Form W-2 reporting of the cost of group health plan benefits (applicable in 2012 for Forms W-2 issued in 2013);
• providing summaries of benefits and coverage during this fall’s open enrollment period; and
• capping employee health FSA contributions at $2,500 per year beginning January 1, 2013.

There will be much more to say to about these issues as the election approaches. In the meantime, you can see a listing of our prior blog posts on health care reform and the ACA by clicking on “Health Care Reform” or “Affordable Care Act” in the tag cloud to the left of this column.