Patient Protection and Affordable Care Act (PPACA)

The link below will take you to the Health Care Reform Timeline

http://americanhealthsolution.org/assets/Uploads/Blog/HC-Reform-Bill-Timeline-Final.pdf

Please remember that the existence of a law is just one step in the process of implementing legislation. Perhaps even more important than passing the law is creating the regulations that will interpret and define how that law will work, and how we will need to act to meet the requirement of that law. Those regulations are still in the future and until they are drafted and approved we can only speculate on most of the points of the law and how they will impact our lives. However, unlike COBRA (where the regulations were not issued until 17 years after the law was enacted) the current administration is committed to getting their interpretation of the law into place quickly, so we can anticipate there will be a flood of rules and regulations emerging over the next 6 to 24 months.

As we discuss the act we will do our best to indicate those points that are certain to occur (and why) and those that are our expectations (and why). The fact that the law exists does not mean that it will go fully into effect. There are many efforts being mounted to either repeal or limit the law. State Attorneys General are suing on the grounds that the law exceeds the powers of the federal government over state government. Political efforts are growing to elect congressmen and senators who will pledge to either overturn or minimize the effect of the law. However, only a fool would look to such actions to insulate themselves from the possible impact of the law. Thus all of us who work in the field are burning midnight oil to try to understand the law and prepare for what might (and probably will) happen. The law is written to take effect in “waves” over the next several years. Here are the changes set to take effect prior to 2014 along with some thoughts on each point.

When do plans have to comply with PPACA?

·   If the plan is a Collectively Bargained Agreement (CBA) it is not subject to the act until the date the CBA is terminated (rewritten).

·   If the plan was “in effect” on the date of enactment it may be “grandfathered” and not subject to the act until “changes” are made in the plan. “Changes” are not defined and are the topic of many different opinions, so we will leave it without plans, including those that are “grandfathered”.

·   What is grandfathered? The wording from the law is:

NO CHANGES IN EXISTING COVERAGE

(1)   In General – Nothing in this Act (or an amendment made by this Act) shall be construed to require than an individual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.

(2)   Continuation of Coverage – With respect to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage after such date of enactment.

·   This is interpreted to mean that group health plans in effect on the date of enactment are exempt from many (but not all) of the health care reforms.  The grandfather rule is not limited to individuals enrolled on the date of enactment, but rather:

o New employees (and their families) may be covered under and employer’s grandfathered plan.

o Family members of current employees who are covered by the grandfathered plan may also be added.

·   But, what about existing employees who were not covered by the plan on the date of enactment?

·   And, what changes to the plan or coverage will compromise the grandfather status?

·   Until we have regulations we simply do not know.

Changes effective 1/1/2011:

o Elimination of tax deductibility of OTC (Over the Counter) drugs.

   ·   Over The Counter medicines will no longer be reimbursable as of January 1, 2011 without a doctor’s prescription.  The January 1, 2011 date refers to the tax year, not the plan year.  If the plan year is not a calendar year and straddles 2010 and 2011 the plan must discontinue reimbursement for over-the-counter medicines purchased 1/1/2011 or after.

   ·   This impacts FSA, HSA, HRA, MERP, etc.

   ·   OTC is eligible with a doctor’s prescription.

  ·   THIS WILL IMPACT ALL PLANS EFFECTIVE 1/1/2011, SO SHOULD BE COMMUNICATED IMMEDIATELY.  THE CONCERN IS THAT FSA PARTICIPANTS MAY OVER CONTRIBUTE PLANNING TO USE FSA FUNDS FOR OTC MEDICINE.

o Non-qualified distributions made after December 31, 2010 from HSAs will be subject to a 20% excise tax, as well as income tax.  That is an increase from the current 10% excise tax.

o SIMPLE cafeteria plan rules for small employers.

   ·   Effective 1/1/2011 small employers are eligible for safe harbor from the nondiscrimination rules for cafeteria plans (and certain plans offered through a cafeteria plan such as group term life insurance, self-insured medical insurance, and dependent care assistance (benefits) to the extent certain requirements are met.  A small employer is an employer with 100 or fewer employees during either of the two preceding years.

o W-2 reporting for cost of coverage (first report due in 2012, but compiled in 2011).

   ·   Plan sponsors will need to be sure their W2 programs will accumulate the needed data beginning 1/1/2011.

Changes effective 1/1/2013 (no specific changes on 1/1/2012):

o Loss of Medicare Part D retiree subsidy deductions.

   ·   This is the provision which is causing major valuation restatements by AT&T, etc.

o $2,500 cap on FSA salary reductions.

   ·   The cap is indexed to the CPI starting in 2014.

   ·   It does not limit direct employer contributions, only employee salary redirections.

On and after 1/1/2014 the changes include:

o Individual mandate.

o Employer pay or play requirement.

o Employer coverage reporting (first report in 2015 for 2014)

o Free Choice Vouchers.

o Exchanges.

o In 2018 the “Cadillac Plan” excise tax.