IRS to Issue New Health Care Reform Law Affordability Test

August 15, 2011

IRS to Issue New Health Care Reform Law Affordability Test

The Internal Revenue Service said it will develop new rules that will make it easier for employers to determine if their health care plans are “affordable” and exempt from a stiff financial penalty mandated by the health care reform law.

Under the law, starting in 2014, employers are liable for an annual $3,000 penalty for those employees whose required health insurance premium contribution for single coverage exceeds 9.5 percent of family income and the employees are eligible for federal premium subsidies to buy coverage through state insurance exchanges.

In rules proposed Aug. 12 that were welcomed by employers, the IRS said it will develop a safe harbor in which coverage would be considered affordable so long as the premium contribution for single coverage did not exceed 9.5 percent of employees’ W-2 wages.

The IRS said it is developing the new safe harbor to give employers more certainty on whether their plans will pass the affordability test.

“Giving employers the ability to base their affordability calculations on their employees’ wages [which employers know] instead of employees’ household income [which employers generally do not know] is intended to provide a more workable and predictable method of facilitating affordable employer-sponsored coverage for the benefit of both employers and employees,” the IRS said in its notice of proposed rule-making. That notice is expected to be published in the Aug. 17 Federal Register.

Employers had complained that it would be difficult—if not impossible—for them to know employees’ household income, creating a big obstacle to determine whether their plans would be considered affordable, said Anne Waidmann, a director with PricewaterhouseCoopers in Washington, D.C.

The IRS safe harbor “would provide more certainty and effective planning,” said Frank McArdle, a principal with Aon Hewitt Inc. in Washington, D.C.

“This will make it easier for employers to do the necessary calculations,” said Chantel Sheaks, a principal with Buck Consultants, also in the District.

The IRS also affirmed that the 9.5 percent affordability test is to be applied only on single coverage, allowing employers to charge higher amounts for family coverage.

“While we think that was clear in the law, employers will welcome the additional clarity,” said James Klein, president of the American Benefits Council in Washington, D.C.

from Workforce Management

New Guidelines Provide Additional Women’s Preventive Care with No Cost Sharing

On August 1, 2011, the Department of Health and Human Services (HHS) released an amendment to the Interim Final Regulations for preventive care under the Patient Protection and Affordable Care Act (PPACA). The amendment applies to non-grandfathered individual insurance policies as well as non-grandfathered insured and self-insured group health plans.

The amendment provides additional guidelines for women’s preventive services. Health plans will need to cover women’s preventive services, including birth control, without copayments or deductibles. The guidelines reflect the recommendations made last month by the independent Institute of Medicine.

For plan years beginning on or after August 1, 2012, non-grandfathered plans will be required to cover the following additional preventive care services for women with no cost sharing:

• Annual well-woman visits
• Screening for gestational diabetes
• HPV DNA testing for women 30 years and older
• Sexually-transmitted infection counseling
• HIV screening and counseling
• FDA-approved contraception methods and contraceptive counseling
• Breastfeeding support, supplies, and counseling
• Domestic violence screening and counseling

For more detail on the amendment and the additional preventive care services for women, visit: www.hrsa.gov/womensguidelines/.

For more information on the existing PPACA preventive care guidelines, visit: http://www.healthcare.gov/center/regulations/prevention/taskforce.html.

Plans may impose cost sharing on brand name preventive drugs if a generic version is available and is just as effective and safe for the patient to use. Cost sharing would not be permitted on the generic drug.

Religious Exemption
The regulations do not provide for a religious exemption. However, the regulations permit the Health Resources and Services Administration (HRSA) to establish exemptions from these guidelines for coverage of contraceptive services for group health plans of religious employers. A religious employer is defined as an organization that meets all of the following criteria:

• The promotion of religious values is the purpose of the organization
• The organization primarily employs individuals who share the religious beliefs of the organization
• The organization primarily serves people who share the religious beliefs of the organization
• The organization is a nonprofit organization as described in the Internal Revenue Code Sections 6033(a)(1) and 6033(a)(2)(A)(i) and (iii).

No religious exemption is available for individual policies; they must cover contraceptives with no cost sharing.

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