By Jane F. Pribek
The Daily Record Newswire
MINNEAPOLIS — Few pieces of federal legislation will have a more wide-ranging effect on the practice of law in 2013 and beyond than the Affordable Care Act.
After a two-year holding pattern that left lawyers unsure of whether the measure, signed into law in 2010, would withstand a constitutional challenge, the U.S. Supreme Court upheld most of the law in June 2012 in National Federation of Independent Business v. Sebelius.
Still, government agencies decelerated the pace of releasing guidance throughout the summer and into fall, awaiting the outcome of the presidential and congressional elections, said Minneapolis employee benefits lawyer Steve Brunn.
Now that that’s over and there’s little doubt that most of the law’s provisions will remain intact, employers focusing on the portions taking effect next year and beyond are keeping their benefits lawyers busy.
The ACA alone is some 2,000 pages in length, with regulations implementing it nearly tripling its size, said Brunn.
The law affects practitioners in tax, employment, insurance and health law, to name just a few. But, he said, “Certainly, for any lawyer who works in employee benefits, this law has significant impacts.”
“The floodgates have opened,” Brunn said, referring to voluminous regulations that started being released post-election.
Proposed rules released Nov. 20 encourage the expansion of nondiscriminatory wellness programs, said Minneapolis attorney Angela Bohmann.
Pursuant to 2006 amendments to another federal law, HIPAA, wellness programs have been a part of employers’ group health plans for several years now, incentivizing employees to pursue healthy lifestyles and penalizing those who don’t.
Starting in 2014, the new ACA regulations will increase the maximum permissible reward — a break on employee contributions on premiums — under a health-contingent wellness program from 20 to 30 percent of the cost of health coverage, and will increase the maximum reward for smoking
cessation programs to as much as 50 percent. However, Bohmann said, employers must offer alternatives for people whose health status makes
participation in smoking cessation difficult or impossible, and employers must pay for the program entirely.
Nov. 20 also saw the release of proposed regulations for public insurance exchanges.
Brunn explained that each state can set up its own health insurance exchange, from which individuals may purchase insurance; Minnesota has chosen to do this. Or the states may opt out, and individuals within those states will rely upon federally subsidized exchanges.
Notably, previous regulations regarding states’ exchanges set a March 1, 2013 deadline for employers to give employees notice of how exchanges will work in their states, with the exchanges up and running by Oct. 1, 2013. Brunn anticipates, however, that the March 1 deadline will be extended, as states scramble to set up their exchanges and start open enrollment. Guidance containing model notices for employers will likely be forthcoming too.
On Nov. 20, proposed regulations additionally defined “essential health benefits,” detailing minimum coverage standards. Employers will face penalties for substandard plans — $2,000 per fulltime employee, per the act itself, Brunn said.
The law allows each state to decide its essential health benefits within a range of acceptable options — some mirror private insurance policies, while others reflect federal plans. Whichever is chosen becomes the “essential health benefits” for that state’s exchange.
“What’s interesting there is, because this is something that states can choose, you can have different essential health benefits depending upon where you live,” Bohmann said.
It gets complicated for employers who operate in multiple states, she continued. On Nov. 30, regulations came out regarding multistate plans.
Also Nov. 30, the government released regulations regarding the new “transitional reinsurance fee” to be imposed upon providers of group health plans starting in 2014. For three years, employers must pay annually an estimated $63 per enrollee or more to the government.
The monies will fund reimbursements to insurance companies that are hit with sizeable claims related to care for individuals with preexisting conditions, once the individual mandate has kicked in, also in 2014.
In addition, the IRS issued on that that same day a final regulation regarding how employers will implement the Medicare payroll tax required by the Act. Employers must withhold an additional 0.9 percent for employees earning more than $200,000 annually. “Employers are going to have to make sure that their payroll systems are able to start that withholding in 2013,” Bohmann said.
Some this recent guidance is still in the notice-and-comment phase, while others are “reliance regulations,” Brunn explained, and can be relied upon not to change significantly as they affect private employers at least through 2014.
The central discussion Brunn and Bohmann have had with clients is regarding the ACA’s employer shared-responsibility mandate, the so-called “play or pay” provision.
This takes effect in 2014, where employers of 50 full-time employees and upward must decide whether to provide healthcare coverage at all. They can opt to pay a penalty in lieu of providing coverage, leaving workers to buy their own health insurance from the exchanges.
Brunn said that some clients, often those in the restaurant, hospitality and retail businesses, are seriously considering ceasing to provide healthcare to their employees. Other employers are restructuring jobs to offer more part-time positions.
So far, most large employers are expected to continue offering health insurance, Bohmann said, as a means of attracting and retaining talented employees.
Not surprisingly, more guidance is expected in 2013 regarding the details of the mandate, while more information becomes available about the exchanges — both of which will play a role in employers’ decisionmaking, Brunn said.
It’s one of several gray areas in the act.
For example, lawsuits are pending regarding mandatory coverage of contraception for religious-type employers, Brunn said. Notably, on Nov. 26, the U.S. Supreme Court remanded Liberty University, et al. v. Geithner to the Fourth Circuit Court of Appeals for reconsideration in light of NFIB v. Sebelius.
Moreover, there are challenges to the individual mandate that could be played out in 2014 once it’s effective.
“There are some discrete challenges out there in the courts. But it’s not expected that, even if they were to win, they will have a significant impact on where we are in health care reform,” Brunn said.
Many more regulations are expected for the next six to nine months, Brunn noted.
Bohmann said, “I think as more of the regulations come out and are finalized, there probably will be more lawsuits — people saying, ‘No, you’ve gone too far.’ But it’s hard to know exactly where they will come from now.”
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