As the business community continues waiting for practical guidance on the Patient Protection and Affordable Care Act (ACA), the IRS has recently proposed regulations illustrating how it believes companies should qualify as “large employers” falling within the ACA’s mandates and what type of coverage it feels those employers must provide to avoid penalties. Not surprisingly, the IRS approach not only overwhelmingly favors employer coverage, it also makes providing qualifying health benefits a potentially expensive proposition. Continue reading this entry
On June 14, 2010 the U.S. Departments of the Treasury, Labor, and Health and Human Services released interim final regulations providing guidance on the effective date of certain Patient Protection and Affordable Care Act (PPACA) provisions for collectively bargained plans. The PPACA provides that certain of its health insurance reform provisions shall not apply “… in the case of health insurance coverage maintained pursuant to one or more collective bargaining agreements …” “… until the date on which the last of the collective bargaining agreements relating to the coverage terminates … .” (PPACA Section 1251). Many in the employee benefits community thought that this statutory language signaled Congress’ intent to broadly exempt collectively bargained plans from the PPACA’s required changes during the terms of existing bargaining agreements. However, the newly issued interim final regulations surprisingly conclude that there is no broad-based PPACA exemption for collectively bargained plans.
Self-Insured Collectively Bargained Plans
Self-funded group health plans that are maintained pursuant to a collective bargaining agreement are not entitled to any special treatment under the PPACA. According to the new regulations, collectively bargained self-funded group health plans are fully subject to the new law at the same time and in the same manner as all self-funded group health plans.
Insured Collectively Bargained Plans
Insured group health plans that are maintained pursuant to a collective bargaining agreement that was in effect on March 23, 2010, will be treated as “grandfathered” plans under the PPACA at least until the collective bargaining agreement terminates. The new regulations provide that collectively bargained insured group health plans (as of March 23, 2010) will continue to be treated as grandfathered plans during the term of the collectively bargaining agreement that was in effect on March 23, 2010. This grandfathered status will continue even if changes (e.g., switching to a new carrier) that would ordinarily destroy grandfathered status are made to the collectively bargained insured group health plan. Once this underlying collective bargaining agreement (that was in effect on March 23, 2010) terminates, this special grandfathered status protection will end and the collectively bargained insured health plan will only be treated as a grandfathered plan if it has otherwise met the general PPACA grandfathered rules since March 23, 2010.
What Is a Grandfathered Plan?
A grandfathered health plan is a plan that provides coverage to at least one participant and was in existence on March 23, 2010. Grandfathered plans escape some PPACA requirements such as the mandate to provide first-dollar coverage for preventative health services, although they must comply with others such as the exclusion on lifetime limits and the provision of adult child coverage until age 26. In order to maintain grandfathered status, the regulations generally prohibit a plan from taking actions that would significantly increase the cost of current coverage for a participant and, in the case of insured plans, force the participant to switch carriers. For more information about grandfathered plans, see our alert entitled, Defining Grandfathered Plans and Maintaining Grandfathered Status Under Health Care Reform.
Renegotiating Collectively Bargained Plans
While clearly acknowledging the unique circumstances under which these plans operate, and the intense discussions and negotiations they involve, the agencies issuing the new regulations have concluded that Congress did not give them the authority to broadly exempt collectively bargained health plans from PPACA requirements. Management and labor groups may now need to work through how to make required PPACA changes right in the middle, or even near the beginning, of a collectively bargaining agreement period.
It’s now mid-June 2010. Health care reform passed in March 2010. Feeling a bit panicky about how it will affect your workplace? You’re not alone.
In the coming months, we plan to provide you details about what you should be doing now to prepare for required changes needed to comply with the Patient Protection and Affordable Care Act (PPACA).
Here are a few reminders of issues we have reported to you, and some things you should already be putting (or have) in place:
- In April, we wrote to you about changes that the health care reform law made to the federal wage/hour law. Remember that employers are now required to give nursing mothers a break “each time such employee has the need to express the milk” for one year after a child’s birth. For more details, read our article: Nursing Mothers Get Break(s) Under New Federal Law .
- The PPACA expanded the definition of “dependent child” by requiring coverage for adult children until age 26. We reported on IRS guidance that has been released on this issue in our Tax & Employee Benefits Legal News Alert in May. For more details, read our article: PPACA Early Retiree Reinsurance Program
- Within six months after enactment of the PPACA, all existing health insurance plans must prohibit lifetime limits, prohibit rescissions, restrict annual limits, and include limitations on excessive waiting periods.
- Employers with more than 200 employees must automatically enroll employees in health insurance plans offered by the employer, allowing for an employee opt-out. Effective date on this provision is not yet known.
Here are a few reminders of issues that will affect you in the future:
- Businesses with fewer than 100 employees will have access to state health insurance exchanges starting in 2014. These exchanges are designed to help smaller businesses enroll their employees in small group qualified health benefits plans. For more information on how the exchanges will work, read our article Will Proposed Health Insurance Exchanges Work and Be Affordable?
- Beginning in 2011, employers must report the value of employees’ health benefits on W-2 Forms.
- Beginning in 2014, group health plans must prohibit pre-existing condition exclusions and prohibit annual limits.
- Beginning in 2014, employers with more than 50 full-time employees (FTE) that do not offer health insurance will need to pay a penalty of $2,000 per FTE.
Stay tuned as we update you on these and other requirements — and help you maintain the health of your HR compliance.
Among the least-publicized changes in the recently enacted health care reform bill (Patient Protection and Affordable Care Act, or Act) is an amendment to the Fair Labor Standards Act (FLSA) that will significantly impact the workplace. The new law requires employers subject to the FLSA to provide rest breaks so nursing mothers can express milk. The amendment requires that a break be provided “each time such employee has the need to express the milk” for one year after the child’s birth. It also mandates that the employer provide a place other than a bathroom, shielded from view, and free from intrusion from co-workers or the public where the milk can be expressed.
Departing from DOL regulations, which provide that rest periods of a short duration should be paid as hours worked, the new Act specifically states that these breaks can be unpaid. The Act applies to all employees covered by the FLSA, but those with less than 50 employees are exempt if the requirements “would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, or structure of the employer’s business.” Given the application of similar language in other employment-related legislation, the burden will be placed on the employer and will not easily be satisfied.
The Act raises several practical concerns and questions. For example, the frequency of the need to express milk as well as the length of time needed to do it will vary. It also could be open to abuse and could impact productivity. Providing a suitable place also could be problematic for some businesses. The DOL is expected to issue regulations that might address some of these issues.
It is unclear when this Act will become effective and what the penalty will be for a violation. However, especially in light of the fact that some states already provide protections for nursing mothers, and may even require the breaks to be paid, employers should change their policies to reflect this obligation and train managers accordingly.