PTPN Insights

The Patient Protection and Affordable Care Act: What practice owners need to know as employers.

December 7th, 2012 |

The Patient Protection and Affordable Care Act: What practice owners need to know as employers.While the Patient Protection and Affordable Care Act (PPACA, also known as “Obamacare”) was passed in 2010, the bill’s provisions are gradually being implemented over the next few years. The bill affects practice owners not only as healthcare providers, but also as employers and small business owners. With 2013 only a few weeks away, it’s time to review what new provisions should be in place by the end of the year. (A big thank you to Dennis Bernstein, Director of Sales and Marketing at Total HR, a PTPN Preferred Vendor, for helping us gather this information.)

Reporting for employee W2s

When filing taxes for 2012, employers must report the annual cost of COBRA eligible benefits (medical, dental, etc.) on each employee’s W2. This is currently required only for companies that generated more than 250 W2s for 2012, but all companies will be required to do this by 2014, so it’s not a bad idea to start incorporating this into your year-end reporting.

Summary of benefits and coverage (SBC)

This is the big one for 2012. The goal was to make it easier for employees to discern the differences between available healthcare plans. The bill establishes guidelines for uniformity when HR presents these descriptions to new and existing employees. As of September 23, 2012, these guidelines must be in place by the next time your company offers renewal in your healthcare plans.

The bill requires that employers create a shorter, new summary document, the SBC, to help employees easily compare one benefit plan to another. The Department of Health has posted a template to help employers create such a document. The document must be provided to each participant or beneficiary for each benefit package for which the participant or beneficiary is eligible (i.e., if the employee qualifies for four different benefit packages, he or she must receive four summary documents, one for each benefit package).

The SBC must include:

  • Uniform, standard definitions of medical and health coverage
  • A description of the coverage, including cost-sharing requirements like deductibles, coinsurance and co-payments
  • Information on any exceptions, reductions or limitations of the coverage
  • Provisions for renewal and continuation

The SBC must be uniform and easy to understand, and the formatting requirements are very detailed:

  • 12-point font
  • Any formatting (e.g., shading, bolding, symbols) must be replicated and standard throughout
  • The document cannot exceed four double-sided pages (or eight one-sided pages) in length

The SBC document may be distributed electronically, as long as

  • The format is easily accessible (e.g., HTML, Word doc, PDF)
  • Employees may receive a paper version upon request, free of charge
  • If the document is provided via the Internet, participants and beneficiaries are notified in a timely manner when it is available, and they are provided the url for the document (this can be done via email)

To see a sample SBC or to learn more, see the government’s description of the requirements. Your broker or insurance company may also be able to assist or provide you with these documents.

Medical loss ratio rebates

For insurers that cover individuals and small companies (2-100 employees), at least 80% of all insurance premiums must be used on actual medical costs. Plan sponsors or fiduciaries must act impartially, in the interest of the plan participants and beneficiaries.

Starting in 2012, if the insurers have not reached that standard, they are required to give rebates to their consumers. You can learn more about the rebates in the press release that announced the program.

Coming soon: Provisions for 2013

Starting next year, the amount employees can contribute to Flexible Spending Accounts (FSAs) toward health contributions will be limited to $2,500. As many companies do their plan renewals during the first quarter, this is something to keep in mind over the next few months. Be sure to communicate the limit when preparing the paperwork for renewals.

Coming soon: Provisions for 2014

  • An employer mandate to provide health insurance. Applies to companies who employ more than 50 full-time (or full-time equivalent) employees.

  • Auto-enrollment. Applies to large companies who employ over 200.

  • Establishment of health insurance exchanges.

  • An individual mandate to carry health insurance.

As we get closer to implementation of these requirements, look to ptpn.com for more information on how they could affect your business.

A review: Are you complying with these aspects of the bill that are already in effect?

  • Child dependents are now covered up to the age of 26
  • No lifetime or annual dollar maximum limits
  • No pre-existing condition exclusions for anyone under the age of 19
  • Tax credits for small employers (for more information on how to file, see the information posted by the IRS on the tax credit)
  • Preventative services covered at no cost
  • Over-the-counter (OTC) drugs cannot be purchased with money from FSAs, HSAs or HRAs unless prescribed by a doctor

As more provisions go into effect in the upcoming months and years, it is imperative to incorporate these new practices into your business. While they may cause some growing pains, keep in mind that the goal of such provisions is to help your employees understand their healthcare benefits and to make responsible, rational decisions about their coverage.

Printable version.

For further reading:

U.S. Department of Health and Human Services

Small business healthcare tax credit for small employers. Internal Revenue Service, September 26, 2012.