W-2 Reporting Rules for Small Employer Groups Under PPACA

One of the provisions of the PPACA law that is worrisome to small employer groups is the requirement that the cost of employer-sponsored group health plan coverage be included on an employee’s Form W-2.

This requirement was originally scheduled to be effective for taxable years beginning on or after Jan, 1, 2011, however, the IRS granted a one year extension in late 2010 so that the requirement now applies beginning with the 2012 Forms W-2.

While the general rule is that all employers that provide employer-sponsored group health plan coverage during a calendar year are subject to the enhanced Form W-2 reporting requirement, a limited exception now exists for small employers.

Specifically, in the case of the 2012 Form W-2 (which must be delivered to employees on or before Jan. 31, 2013), an employer is not subject to the enhanced reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.

Consequently, if an employer files fewer than 250 2011 Forms W-2, the employer would not be subject to the enhanced reporting requirement for the 2012 Forms W-2.

This exception will be very helpful to those employers that do not reach the 250 Forms W-2 threshold. In addition, while the exception specifically applies with respect to the 2012 Form W-2, the exception is available until the issuance of further guidance.

Therefore, it is possible that this exception will be extended into later taxable years.

In any event, the earliest that such small employers would be required to comply is the 2013 Forms W-2 in January 2014. While the exception applies with respect to the 2012 Forms W-2, the determination of whether the 250 Form W-2 threshold has been reached is based on the prior year (i.e., 2011).

However, it is important that employers who may be eligible for this small employer exception in 2012 are aware of the exception throughout 2011.

Guidance on implementation is available in the IRS notice 2011-28 avaiable onthe IRS website.  Employers should consult with their employee benefits counsel and tax advisors to determine the impact that this guidance will have on their reporting obligations.

What Is Allowed as a Recission of Group Health Coverage Under Health Reform?

The federal health care reform law changed the way health plans and issuers approach rescissions in both the group and individual markets. 

It’s important to understand what constitutes a “rescission” for federal health care reform, as opposed to another type of coverage termination. A rescission is broadly defined as a retroactive termination of a member’s coverage. There are some important exceptions from this broad definition. For example, termination of coverage because of nonpayment of premium or contribution (either by the group or the member) is not a rescission. It is not considered a “rescission” when the member’s coverage is retroactively canceled to the last paid-to date if the member pays no premiums or contribution for periods of time after termination of employment or eligibility. The member’s coverage can be retroactively canceled to the last paid-to date.

 If a group health plan or carrier is faced with a “rescission,” certain restrictions apply for plan years that start on or after September 23, 2010.   The federal health care reform law does not allow the plan or carrier to rescind coverage, except in cases of fraud or intentional misrepresentation of material fact as specified in the contract. Examples of this include intentional misrepresentations of marital status or dependent eligibility.  When a policy or coverage is rescinded due to intentional misrepresentation of material fact or fraud, the plan or issuer must:

o Provide notice of the rescission 30 days in advance

o When providing notice carriers must inform the group or member of the opportunity to appeal the determination to rescind (as outlined in regulations for the appeals provision)

For group health plans, group policyholders control otice of membership eligibility. Therefore, when a member is removed from coverage, a carrier must be notified by the group .

What is Next for Health Reform?

(Reuters) – One year ago, President Barack Obama signed into law a sweeping healthcare overhaul to fulfill a long-standing Democratic pledge to ensure healthcare coverage for all Americans.

Passage of the law was a major legislative victory for Obama and helped change the political landscape, but not always in the way Democrats had hoped. Republicans strongly opposed the law and successfully worked public skepticism about it into sweeping election victories in November.

Here’s a look at the uncertain future of the reform law.

REPEAL, DEFUND AND TAKE APART

Republicans, who say the law gives the federal government too much control and does little to reduce costs, have pushed a repeal bill through the U.S. House of Representatives after they took control in January. Full repeal, however, is unlikely unless Republicans successfully take control of the Senate and the White House in next year’s presidential elections.

The Democratic-led Senate will not go along with repeal and Obama would veto any such bill. Democrats argue the law’s reforms will slow the growth of healthcare costs while improving care and reducing the ranks of the uninsured.

A Republican move to withhold funds to stop implementation of the law will meet similar resistance from Senate Democrats.

That leaves Republicans the option of picking apart the law regulation by regulation. This strategy could be more successful.

Already, a revenue raising provision requiring businesses to file Internal Revenue Service forms on purchases and service totaling more than $600 a year is likely to be repealed with support from both parties.

The bill passed the House, and the Senate is expected to follow. The bill adjusts insurance purchase subsidies for middle income people as a way to cover the $22 billion cost of rescinding the so-called 1099 reporting provision.

COURT CHALLENGES

A number of states have challenged the constitutionality of the law’s requirement that most Americans obtain health insurance or pay a penalty. The rulings have been divided, and the issue is certain to end up before the U.S. Supreme Court.

A U.S. District Court judge in Florida ruled the entire law unconstitutional, while a U.S. judge in Virginia ruled the insurance mandate unconstitutional and upheld the rest of the law. Other courts have dismissed cases or have found the law’s mandate to purchase insurance constitutional.

The U.S. Supreme Court could decide as early as next year. Senate Finance Committee Chairman Max Baucus, who played a leading role in writing the healthcare law, and other healthcare advocates believe the law will be upheld.

Conservative critics give better than even odds that the Supreme Court will overturn the law.

If the court does decide that the coverage mandate violates the Constitution, many experts believe the judges would most likely strike down just that provision and leave the rest of the law intact.

A decision striking down the purchase mandate but leaving intact provisions requiring insurers to cover everyone regardless of medical history would wreak havoc on the insurance industry and send premiums soaring.

The law’s major provisions establishing state insurance exchanges, imposing coverage mandates and requirements that insurers can no longer exclude or charge more for preexisting conditions take effect in 2014. That would give lawmakers time to act on any court decision.

STATE ISSUES

Despite the court challenges and stiff Republican opposition, the federal government is moving ahead with implementation that mostly falls on the states.

A number of state governors, primarily Republicans, have balked at the added cost of the law to already tight budgets. States must set up insurance exchanges to help consumers and small businesses purchase insurance. States also have to maintain their Medicaid coverage for the poor until the program is expanded in 2014 to cover millions more low income people.

The Medicaid healthcare program is run by the states with federal financial aid, and many governors are looking to cut Medicaid spending to help balance budgets that took a huge hit during the economic recession.

The federal government will pick up the cost of expanded Medicaid coverage for three years, but many states worry about future added costs.

Some states are dragging their feet on establishing the insurance exchanges that are to go into effect in 2014, leaving it to the federal government to step in and operate them.

SAVING THE HEALTHCARE LAW

Democrats note the popular Social Security retirement and Medicare healthcare programs for the elderly also faced stiff political opposition from conservative Republicans and survived legal challenges.

If the healthcare law survives the constitutional challenge, most likely the current political opposition will begin to subside and the law will remain on the books.

Most Americans did not think the costly U.S. healthcare system was working well before the new law. Costs were soaring and millions were going without coverage.

Polling data show that while people are skeptical about the law, most do not want to see it scrapped entirely.

Republicans have yet to put forward a proposal to replace the current law and are not likely to take a comprehensive approach. Instead they most likely would take it step-by-step, starting with limits on medical malpractice lawsuits. They also would push to allow insurers, who are regulated at the state level, to sell policies across state lines.

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Compromise Offered on Health Reform

 In an effort to curb rising dissatifaction and revolt by individual states, President Obama offered a compromise on Monday to states struggling to implement his health care law, offering support for a proposal that would give them some flexibility in carrying out its key parts.The Patient Protection and Affordable Care Act (PPACA) originally was designed  to lower costs and extend coverage to millions of uninsured Americans.  The law has divided Democrats and Republicans and handed states – more than half of which are suing over its constitutionality – a handful of bureaucratic challenges. The president acknowledged those issues during a meeting with state governors at the White House on Monday.  President Obama emphasized a part of the law that would allow states to tailor their own solutions to health care reform in 2017 if they fulfilled the same goals created by PPACA. “If your state can create a plan that covers as many people as affordably and comprehensively as the Affordable Care Act does – without increasing the deficit – you can implement that plan,” Obama told the governors. “And we’ll work with you to do it,” he said. 

More than half of the 50 states are suing to stop the plan in federal court, saying it usurps individuals’ and states’ rights, making it mandatory to purchase insurance coverage or pay penalties.

States must carry out many of the reforms, including establishing exchanges where individuals can buy health insurance. PPACA made more people eligible for Medicaid, the health care program for the poor that states operate with partial reimbursements from the federal government. When states balked at the huge price tag of larger Medicaid rolls, Congress agreed to pay 100% of the costs for new enrollees. Manystates are still concerned that they cannot afford to implement the plan after the financial crisis and recession induced an historic collapse in many states’ revenues. Additionally, Medicaid costs are rising as large numbers of laid-off workers turn to it for assistance (Medicaid on average takes up a third of states’ budgets).  Obama asked the governors to create a bipartisan commission to study ways to bring down costs. 

 Last week, the Health and Human Services Department announced a variety of grant programs to help fund state programs to review health insurance rates, pay for the administration of insurance regulation, and provide home healthcare to Medicaid enrollees.

Health Reform – The Fighting Continues!

Health Reform – The Fighting Continues!

 Republicans, with their newly won control of the House of Reprsentatives,  would seem to pose the greatest threat to the health reform law.  They’ve already passed a repeal bill, threatened to defund implementation, and begun holding hostile hearings. Despite these  moves, the biggest threat to the law may come from the judiciary. Two weeks ago, a Florida federal district court ruled the entire law invalid. While the decision is unlikely to have any immediate impact, it represents the second judicial ruling against health reform and makes an eventual Supreme Court decision striking down the law seem more plausible than most would have thought when President Obama signed the bill last year.

Four district courts have now heard challenges to the law, with two upholding the law and two ruling against it. Naturally, the judges deciding in favor of the law were both appointed by Democrats and the two ruling against it were appointed by Republicans. In all of the cases the central issue is the constitutionality of the individual mandate. Although the mandate’s infringement of personal liberty is what most upsets mandate opponents, the question the courts have focused on is the more mundane one of whether the mandate falls within the scope of the federal government’s power to regulate interstate commerce.

Under the Constitution, the federal government has only those powers specifically granted to it in that document, one of which is the power to regulate interstate commerce – known as the “Commerce Clause.” This authority has in the past provided the legal basis for a wide range of federal legislation. A key argument of the plaintiffs in the health reform legal challenges is that declining to purchase health insurance, which the federal government would penalize under the law, can’t be considered commerce because it doesn’t constitute activity of any kind. Someone who chooses not to buy health coverage is not engaging in commercial activity, they argue, and so is beyond the reach of the government’s regulatory powers under the Commerce Clause. In defense of the law, the government has argued that an individual’s failure to purchase coverage is economic activity because it’s a unique commodity.  Not buying coverage, they say, results in other Americans picking up the cost of their health expenses when they receive uncompensated care at an emergency room. Thus, failure to purchase coverage disrupts insurance pooling arrangements, causing higher costs for others, and so does represent commercial activity. 

A secondary, but hugely consequential, issue in these cases is what should happen to the rest of the law in the event that the mandate is deemed unconstitutional. On this point, the two courts ruling against the law parted company. Prior to the Florida court ruling, a Virginia District court found the mandate unconstitutional but also ruled that the rest of the law, including guarantee-issue and the other market reform provisions, should stand. Going way beyond his Virginia colleague, the Florida judge ruled the entire law invalid since it did not contain a severability clause – specific language stating that its provisions were severable and that if one should be stricken the others should nevertheless take effect.

The cases decided so far and others yet to come are all just a run-up to the final action, which will likely come within one to two years when the Supreme Court has its say on the matter. Unless and until the Supreme Court overturns any of its provisions, health reform will remain law.

We will keep you informed of any new developments.

Do Dental and Vision Plans Have to Cover Dependents to Age 26?

According to the Department of Health and Human Services (HHS)  the Department’s position that if benefits are “excepted  benefits” under HIPAA, the PPACA’s group health plan mandates and insurance  market reform requirements (e.g., no lifetime dollar limits on essential  health benefits, only “restricted” annual dollar limits on essential health benefits prior to 2014, no annual dollar limits on essential health benefits in 2014 and beyond, extended plan eligibility for adult children up to age 26, no waiting periods in excess of 90 days [effective 2014], insured health plan nondiscrimination rules, new internal claims and appeals/external review  processes) do not apply. 
 
A dental or vision benefit plan is a HIPAA-excepted benefit if it is:

 *Provided under a separate policy, certificate or contract of insurance (for insured plans)

 * Is otherwise not an integral part of the health care plan.
 For dental or vision benefits to be considered not an integral part of the plan (whether insured or self-insured), participants must have a right not to  receive the coverage and, if they do elect to receive the coverage, must pay
an additional premium  Accordingly, if a plan provides its dental or vision benefits pursuant to a
separate election by a participant and the plan charges even a nominal employee contribution toward the coverage, the dental or vision benefits would constitute excepted benefits, and the PPACA group health plan mandates and insurance market reform provisions would not apply to that coverage.

To put this in “plain english”  If the dental and vision plans are provided by a separate carrier than the medical and if an employee can make a separate election and premium payment for the dental and vision without having to have these benefits mirror the medical,  then the carrier does not have to offer dependent benefits to age 26.  Many dental and vison carriers are offering to continue benefits to age 26 as a courtesy, please check with the carrier to determine their position.