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Federal agencies issue guidance clarifying numerous health care reform rules

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Federal agencies issue guidance clarifying numerous health care reform rules

Employers can impose a one-month orientation period before a 90-day waiting period starts to either offer qualifying employees group health insurance or face a penalty, according to the latest federal guidance on complying with the health care reform law.

The rules, issued last month by the departments of Health and Human Services, Labor and Treasury, said employer orientation periods are “commonplace” for the estimated 5.1 million new employees per year and are reasonable as long as they are short.

“The danger of abuse increases, however, as the length of the period expands,” the agencies said in the guidance that goes into effect on Jan. 1, 2015. “The creation of a clear maximum prevents abuse and facilitates compliance.”

The orientation period rules soon are to be followed by additional rules, such as the form employers must use in 2016 to report to the government the names and Social Security numbers of group health plan enrollees.

“We are hearing late summer,” said Judy Bauserman, a partner at Mercer L.L.C. in Washington, about when the form is expected to be released by the IRS.

Other still-to-come guidance will be more far-reaching. For example, under the Patient Protection and Affordable Care Act, a 40% federal excise tax will be imposed in 2018 on health premiums that exceed $10,200 for single coverage and $27,500 for family coverage.

But the law is not clear on whether costs, such as employees' pretax contributions to health savings accounts, and benefits provided through self-insured dental and vision care plans, are to be included in calculating health plan costs.

“What is counted and not counted” is a key issue for employers, said J.D. Piro, a senior vice president at Aon Hewitt in Norwalk, Connecticut.

That guidance, however, is not around the corner.

“I don't expect guidance in the next year or two” on specific parts of health insurance to be included in calculating which employers would be subject to the penalty, said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, New Jersey. That, in part, is because implementing the tax is still nearly four years away.

For several provisions that were ready to go into effect, regulators have delayed enforcement because they have not issued the necessary guidance.

For example, the law bars insured group health care plans from discriminating in favor of highly compensated employees, a provision that was to start in 2011 but has been delayed until rules are issued.

The issue could be important for employers that offer low-cost, limited-benefit plans to certain employees, such as part-time workers. To avoid a $2,000 per employee penalty, employers under the law must offer health insurance to full-time employees — those who work an average of 30 or more hours per week.

Such coverage, sometimes dubbed skinny health plans, may subject employers to another penalty if a plan fails to cover 60% of expected health costs. But it would be imposed only if an employee rejects the coverage, is eligible for a federal premium subsidy and uses the subsidy to buy health insurance through a public exchange.

While an employer would be liable for a $3,000 penalty, it would be only for each affected employee — not its entire full-time workforce.

“A lot of employers are exploring that option” as a low-cost way to offer coverage and thus avoid the $2,000 per employee penalty that is triggered when employers do not offer a health plan, said Amy Gordon, a partner at McDermott, Will & Emery L.L.P. in Chicago.

“That is a piece of guidance that we are now missing,” said Amy Bergner, managing director at PricewaterhouseCoopers L.L.P. in Washington.

And whether such subsidized coverage could only be purchased through a state health insurance exchange is an issue pending before the Supreme Court.

While the law itself could be reshaped by lawmakers, deep divisions among Democrats and Republicans in Congress make any changes unlikely — even if Republicans in the upcoming November elections regain control of the Senate.

“Nothing will change while President Obama is in office. He has veto power,” said Greg Stancil, an account executive at Scott Benefit Services in Greensboro, North Carolina.

Meanwhile, many of the ACA-required changes, such as extending coverage to employees' adult children up to age 26, have had only a modest cost effect on many employers' health plans, experts say.

While the age 26 provision boosted Kendal at Oberlin's health plan enrollment by nearly 15%, there was little financial effect, said Barbara Thomas, CEO of the Oberlin, Ohio-based senior living organization, noting that young adults tend to be healthier and use less health services.

The modest cost to employers of offering coverage to young adults is one some say they can accept.

“We are not distressed if our staff's young adult family members are supported in this way while they navigate finding their first jobs with benefits,” Ms. Thomas said.