Part 1: Health Reform 10+ Years Later
Health Reform - The Path Ahead
Most provisions of the Patient Protection and Affordable Care Act of 2010 (Health Reform)[i] have either been implemented or eliminated (discussed in more detail later).
As coverage costs continued their increase, and as Health Reform added new costs to insured plans, more and more plan sponsors, especially smaller plans, changed from an insured to a self-insured basis. There was a marked increase, which may have since leveled off.
Changing from an insured to a self-insured basis introduces new compliance requirements - self-insured health plans cannot discriminate in favor of highly compensated employees in terms of eligibility, contributions or benefit design, or in operation. These rules may create a challenge where the plan design includes: (1) Different eligibility requirements, (2) Benefits that vary based on classification or years of service, or (3) Separate plans.
One remaining, significant Health Reform change is the delayed implementation of similar non-discrimination rules for insured, non-grandfathered health plans.[ii] Those changes were to be effective for plan years starting on or after October 23, 2010. The rules are similar to those for self-insured plans. However, the penalty is much different – civil action to compel provision of nondiscriminatory benefits and an excise tax of $100 per day per individual discriminated against. All benefit professionals believe these penalties, if implemented, will all but end insured health coverage that discriminates in favor of highly compensated employees.
Health Reform – Annual Enrollment
Here’s a checklist of items to consider in your continuing efforts to comply with Health Reform – this list is not exhaustive – compliance with:
Health Reform – Looking Back
Then-Speaker of the House Nancy Pelosi had a(n) (in)famous quote regarding Health Reform way back on March 9, 2010 – two weeks prior to Health Reform enactment. In her speech at the 2010 Legislative Conference for the National Association of Counties, she noted that:
“… but we have to pass the bill so that you can find out what is in it,
away from the fog of the controversy. …”
Well, here we are, ten years later and most of the fog has cleared; even if the controversy is still being decided in the courts.[iii]
The Journey to Date
Here’s a high-level summary of Health Reform changes that impacted employer-sponsored coverage:
What Was Discarded/Changed
Many Health Reform provisions were discarded or changed, including but not limited to:
Contact us to review compliance If you’ve made the change from insured to self-insured, or if you are considering such a change at this time. Most plan sponsors adjust their coverage and other provisions to remove discriminatory features. Failure to comply requires imputing taxable income to highly compensated employees.
[i] Patient Protection and Affordable Care Act of 2010, Pub. L. 111-148, Signed by President Obama on 3/23/10. See also: Health Care and Education Reconciliation Act of 2010, Pub.L. 111–152, 3/30/10.
[ii] Request for Comments on Requirements Prohibiting Discrimination in Favor of Highly Compensated Individuals in Insured Group Health Plans, IRS Notice 2010-63, 9/20/10, Accessed 10/5/20 at: https://www.irs.gov/pub/irs-drop/n-10-63.pdf See also: Affordable Care Act Nondiscrimination Provisions Applicable to Insured Group Health Plans, Notice 2011-1, 12/22/10. “… compliance should not be required (and thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued… the Departments anticipate that the guidance will not apply until plan years beginning a specified period after issuance. …” Accessed 10/5/20 at: https://www.irs.gov/irb/2011-02_IRB
[iii] California v. Texas, Docket No. 19-840, Cert granted from the 5th Circuit Court of Appeals, 3/2/20. “In 2012, the U.S. Supreme Court upheld the individual mandate of the Affordable Care Act (ACA) against a constitutional challenge by characterizing the penalty for not buying health insurance as a tax, which Congress has the power to impose. In 2017, the Republican-controlled Congress enacted an amendment to the ACA that set the penalty for not buying health insurance to zero, but it left the rest of the ACA in place. Texas and several other states and individuals filed a lawsuit in federal court challenging the individual mandate again, arguing that because the penalty was zero, it can no longer be characterized as a tax and is therefore unconstitutional. California and several other states joined the lawsuit to defend the individual mandate. The federal district court held that the individual mandate is now unconstitutional and that as a result, the entire ACA is invalidated because the individual mandate cannot be “severed” from the rest of the Act. The U.S. Court of Appeals for the Fifth Circuit upheld the district court’s conclusion but remanded the case for reconsideration of whether any part of the ACA survives in the absence of the individual mandate. The Supreme Court granted California’s petition for review, as well as Texas’s cross-petition for review.” Oral arguments are scheduled for the week after the November 2020 election.
[iv] Originally represented as essential coverage for millions of Americans, at no time did more than 115,000 Americans enroll in this coverage prior to its termination (during the period October 2011 – January 2014.) – confirming that the challenge was as much one of cost as it was of access.
[v] The threshold for itemization of medical expenses was at 7.5% until 2013 when Congress increased it to 10% - leaving 7.5% in place for those age 65+. The Tax Cuts & Jobs Act of 2017, Pub. L. 115–978, 11/2/17, retroactively reset the threshold to 7.5% for the tax years 2017 through 2018 for everyone, regardless of age. The National Defense Authorization Act for Fiscal Year 2020, Pub. L. 116-92), 12/20/19, maintained the 7.5% threshold for 2019 and 2020.
[vi] Pub. L. 112-9, Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, 4/14/11. Repealed the requirement that businesses file an information report (IRS Form 1099) whenever they pay a vendor more than $600 for goods in a single year.
[vii] Pub. L. 112-10, Department of Defense and Full-Year Continuing Appropriations Act, 2011, 4/15/11. Repealed the free-choice voucher program, which would have required certain employers to provide vouchers to qualified employees for purchasing coverage through a health insurance exchange.
[viii] Pub. L. 112-240, American Taxpayer Relief Act of 2012, 1/2/13. Repealed Title VIII of the ACA, the Community Living Assistance Services and Supports (CLASS) Act.
[ix]Pub. L. 113-93, Protecting Access to Medicare Act of 2014, 4/1/14. Repealed the cap on deductibles for small-group health plans, which was to be $2,000 for self-only plans and $4,000 for family plans in plan year 2014 (and indexed to average per capita premium costs in subsequent years).
[x] Pub. L. 114-60, Protecting Affordable Coverage for Employees (PACE) Act, 10/7/15. Amended the definition of small employer to mean employers with up to 50 employees, while giving states the option to expand the definition to include employers with up to 100 employees.
[xi] Pub. L. 114-74, Bipartisan Budget Act of 2015, 11/2/15. Repealed the requirement that employers with more than 200 employees automatically enroll new full-time employees in health insurance and continue coverage
for current employees.
[xii] Pub. L. 115-97, 12/22/17. Reduced the adjusted gross income (AGI) threshold from 10% to 7.5% for individual taxpayers claiming an itemized deduction for unreimbursed medical and dental expenses in 2017 and 2018.
[xiii] Pub. L. 115-97, Note xii, Ibid.
[xiv] Pub. L. 115-97, Note xii, Ibid.
[xv] Bipartisan Budget Act of 2018, Pub. L. 115–123, 2/9/18.
[xvi] Pub. L. 115-120, Extended the moratorium on the medical device excise tax for an additional two years—through Dec. 31, 2019. The moratorium was first established under P.L. 114-113, for the period 1/1/16 – 12/31/17
[xvii] Pub. L. 116-94, Further Consolidated Appropriations Act, 2020, 12/20/19, Pub. L. 115-120, Division D, SUSPENSION OF CERTAIN HEALTH-RELATED TAXES, DELAY IN IMPLEMENTATION OF EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED HEALTH COVERAGE, 1/22/18, delayed effective date of excise tax on high cost employer-sponsored health coverage from 1/1/20 to 1/1/22. Pub. L. 114-13 previously delayed effective date of excise tax on high cost employer-sponsored health coverage from 1/1/18 to 1/1/20.