2012: Health Care Reform Provisions Effective Yet This Year

While we are all eagerly awaiting whether the United States Supreme Court will be rendering a decision on the individual mandate, and if so, what the decision will be, we have to be mindful of a number of compliance measures becoming effective yet this year.  Please ensure you are properly prepared to handle these issues.  Even if the individual mandate is stricken, the rest of the law may remain intact.

With that in mind, we are providing a general overview of some of this year’s legal requirements:

1)  Summary of Benefits and Coverage (SBC): 

Effective September 23, 2012, group health plans and health insurance issuers must provide a 4-page front and back summary of benefits and coverage offered under the group health plan to participants and beneficiaries, including COBRA qualified beneficiaries. Generally, HIPAA excepted benefits are not determined to be group health plan coverage but you must carefully analyze each of your benefits to determine whether an SBC is required.  The SBC must be provided at various times and circumstances. Please see the attached memorandum for more information.

Please keep in mind that these requirements DO NOT just apply to your medical and prescription coverage, but may also apply to other benefits such as dental/vision/health FSA (unless HIPAA excepted benefits), HRAs, wellness, EAPs to name a few.  For more information, please visit our Updated SBC Guidance.


2)  Form W-2 Reporting of Group – New Updates

Since we last sent you information on Form W-2 reporting of group health plan coverage, the IRS has issued Notice 2012-9 which changed some of the previous guidance and added additional information.  Of significance, the new Notice clarifies that reporting will not be required for dental / vision benefits only if those benefits meet the HIPAA excepted benefit requirements.  It also discusses new transition relief, reporting obligations of health FSAs, wellness programs, employee assistance programs and on-site medical clinics, issues regarding discriminatory arrangements and 2% shareholders in an S corporation, composite rate calculations, as well as other updates.

Please review the memorandum for a summary of IRS Notice 2012-9.

Please keep in mind that these requirements DO NOT just apply to your medical and prescription coverage, but may also apply to other benefits such as dental/vision (unless HIPAA excepted benefits), health FSA, HRAs, wellness, EAPs to name a few.


3)  Health FSA Limitation to $2,500 for 2013

Effective taxable years after December 31, 2012 (i.e., generally January 1, 2013), the salary reduction amount for health flexible spending accounts (“health FSAs”) under a cafeteria plan cannot exceed $2,500.  This is not based on the plan year, so if you have a mid-calendar year plan year, you need to take action now to determine how your plan will comply.

If you plan currently offers a health FSA in excess of $2,500, you must have it amended this year.


4) Medical Loss Ratio – Insurance Rebates by August 1st and Employer Obligations

Insurance companies this year must spend a certain proportion of income (80-85% depending on market size) on health care and quality improvement for their insured population as set forth in the Medical Loss Ration (MLR) standards.  If the insurer does not meet these MLR standards, then it will be required to issue refunds to the policyholders (typically employers, but may also be plans or trusts) by August 1, 2012.  This applies to fully insured plans only, not self-funded plans.

However, these rebates create obligations on group health plans.  For example, if the rebate is considered a “plan asset,” then ERISA plans must consider fiduciary responsibility, prohibited transaction rules and trust requirements in handling the plan asset.  The Department of Labor (DOL) has issued Technical Release 2011-04 regarding numerous issues to consider and how to return or distribute the refund to participants.

If the employer is the policyholder and you believe you will be receiving a refund this year, please contact us to amend your plan documents to provide that the rebate will belong to the employer.  Otherwise, distribution to plan participants cannot be avoided unless the employer had paid the full premium.

For non-federal government plans, the Department of Health and Human Services (HHS) issued rules outlining the distribution procedure to participants.  Similarly, church plans receiving insurance refunds are subject to the same distribution procedures but must also agree in writing with the insurer as to the method chosen prior to receiving the refund.

If you would like further information regarding the above matters, health care reform, or employee benefits in general, please feel free to contact our office. You can reach attorney Elizabeth Latchana at elatc@fraserlawfirm.com or 517-377-0826.