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Health care reform raises key employer compliance issues

Guidance needed on compliance issues affecting employers

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Health care reform raises key employer compliance issues

WASHINGTON—With last month's Supreme Court ruling ending uncertainty about the health care reform law's constitutionality, regulatory uncertainties have leaped to the front and center of employer concerns.

Who will be considered a full-time employee, how to meet an automatic enrollment requirement, how to communicate the availability of state insurance exchanges and how much will be paid under a temporary but often overlooked “reinsurance” mandate are a few of the many key compliance issues yet to be definitively addressed by final regulations.

“Where do we begin?” asked Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York, referring to the sheer number of issues for which final rules have yet to be developed.

Some of the uncertainties involve core employer-related provisions of the Patient Protection and Affordable Care Act.

For example, starting in 2014, employers that do not offer coverage to full-time employees are liable for an annual penalty of $2,000 per employee.

However, the health care reform law defines full-time employees in only the most general terms as those who work an average of at least 30 hours a week.

That broad definition is of little use to employers such as retailers, whose workforces often comprise employees whose work hours vary substantially week to week and season to season.

“Employers, especially retailers, are champing at the bit” for definitive guidance, said Molly Iacovoni, a senior vp with Aon Hewitt in Lincolnshire, Ill. “That is one of the hottest issues.”

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“The IRS has got to get moving on that one,” agreed Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.

Another vital issue for employers relates to a health care reform law provision affecting employees who do not select a health care plan or do not tell their employer that they don't want to enroll in a plan because they have coverage elsewhere, such as through a spouse's employer.

In such situations, employers with at least 200 employees will be required to automatically enroll the employee in one of their health care plans.

The IRS has not issued guidance related to how employers would comply with the requirement. For example, employers would need to know how much autonomy they would have in selecting the default plan for those employees who don't choose a plan.

Another area in which guidance is lacking is a requirement in which employers—by March of next year—have to communicate to employees the availability of state health insurance exchanges as a coverage option.

But regulators have yet to provide guidance on suggested wording of those notices, as well as how—electronically or in print—health insurance exchange information would be communicated to employees.

“Those are issues that would have to be addressed,” said Paul Dennett, senior vp-health care reform with the American Benefits Council in Washington.

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Guidance also is lacking on what some benefit experts label a “sleeper” provision—one that requires insurers and employers to fork over tens of billions of dollars to the government under the reform law's “transitional” reinsurance program.

That program is intended to help offset the losses health insurers are expected to incur in providing coverage to high-risk individuals buying coverage in state insurance exchanges.

Regardless of those individuals' health status, insurers will not be able to deny them coverage. In addition, there will be limits on how much insurers will be able to vary premiums based on such factors as age.

Many of those individuals who—if their incomes are less than 400% of the federal poverty level—will be eligible for federal premium subsidies now are uninsured and, as a result, may have neglected to seek treatment for medical conditions.

To help offset insurers' adverse experience, the law authorizes financial assessments from 2014 through 2016 totaling $25 billion to be imposed on health insurers and third-party claims administrators, in the case of self-funded employers. TPAs are expected to seek reimbursement of these assessments from their clients.

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But so far, the government has not provided any guidance as to the methodology it will use to determine how much insurers and TPAs will pay. Most of the money will be paid to “reinsurance entities” states are supposed to set up. In turn, these entities will reimburse insurers providing coverage to high-risk individuals.

“How this will be assessed is not yet known,” said Gretchen Young, senior vp-health policy with the ERISA Industry Committee in Washington.

Several sources said the assessment could run about $60 per plan participant, at least during the first year.

If so, that could mean millions of dollars in new costs in the case of employers with very large health care plans.

“This could be a benefits horror story,” Aon Hewitt's Ms. Iacovoni said.