Rules for Equal Coverage by Employers Remain Elusive Under Health Law

WASHINGTON — The Obama administration is delaying enforcement of another provision of the new health care law, one that prohibits employers from providing better health benefits to top executives than to other employees.

Tax officials said they would not enforce the provision this year because they had yet to issue regulations for employers to follow.

The Affordable Care Act, adopted nearly four years ago, says employer-sponsored health plans must not discriminate “in favor of highly compensated individuals” with respect to either eligibility or benefits. The government provides a substantial tax break for employer-sponsored insurance, and, as a matter of equity and fairness, lawmakers said employers should not provide more generous coverage to a select group of high-paid employees.

But translating that goal into reality has proved difficult.

Officials at the Internal Revenue Service said they were wrestling with complicated questions like how to measure the value of employee health benefits, how to define “highly compensated” and what exactly constitutes discrimination.

Bruce I. Friedland, a spokesman for the I.R.S., said employers would not have to comply until the agency issued regulations or other guidance.

President Obama signed the health care law in March 2010. The ban on discriminatory health benefits was supposed to take effect six months later. Administration officials said then that they needed more time to develop rules and that the rules would be issued well before this month, when other major provisions of the law took effect.

A similar ban on discrimination, adopted more than 30 years ago, already applies to employers that serve as their own insurers. The new law extends that policy to employers that buy insurance from commercial carriers like Aetna, Cigna, Humana and WellPoint, or from local Blue Cross and Blue Shield plans.

This could eventually be a boon to workers, the administration says.

“Under the Affordable Care Act, for the first time, all group health plans will be prohibited from offering coverage only to their highest-paid employees,” said Erin Donar, a Treasury spokeswoman. “The Departments of Health and Human Services, Labor and the Treasury are working on rules that will implement this requirement.”

The enforcement delay is another in a series of deadline extensions, transition rules, policy shifts and other steps by the Obama administration to minimize disruption from the new health care law, which is sure to be invoked by both Democrats and Republicans running for office this fall.

In recent months, the administration has delayed a requirement that larger employers offer coverage to full-time employees and delayed online enrollment in the federal insurance exchange for small businesses. It waived major provisions of the 2010 health law so consumers could renew policies that would otherwise have been canceled or terminated because they did not meet the law’s coverage requirements.

In addition, federal officials announced that people with canceled insurance policies could obtain hardship exemptions sparing them from tax penalties if they went without insurance this year.

One of the questions facing the I.R.S. is whether an employer violates the law if it offers the same health insurance to all employees but large numbers of low-paid workers turn down the offer and instead obtain coverage from other sources, like a health insurance exchange.

Some health insurance arrangements will almost surely be forbidden, officials said. For example, they said, employers will not be able to provide coverage only to management.

Likewise, the officials said, a company could not provide free coverage to “highly compensated individuals” while requiring other employees to pay, for example, 25 percent of the cost. In addition, they said, benefits available to the dependents of highly paid executives must be available on the same terms to dependents of other employees in the health plan.

Under the 2010 law, an employer that has a fully insured health plan that discriminates in favor of high-paid executives could face a steep penalty: an excise tax of $100 a day for each individual affected negatively.

Thus, if a company had 100 employees and its health plan were found to discriminate in favor of 15 executives, the employer could be subject to a tax penalty of $8,500 for each day of noncompliance, for the 85 employees discriminated against. If the discrimination continued for 10 days, the penalty could be as much as $85,000.

If a company with 60 employees failed to meet the new standards with respect to half its employees for a year, it could face a penalty of $1 million.

One reason for the delay in enforcement is that officials have decided to review the existing nondiscrimination rules for self-insured companies, even as they try to write new rules for employers that buy commercial health insurance.

The existing restrictions on self-insured health plans are “outdated, inadequate and unworkable,” said Kathryn Wilber, a lawyer at the American Benefits Council, which represents many Fortune 500 companies.

Under the earlier law, all health benefits provided to highly compensated individuals — with the possible exception of certain executive physicals — are supposed to be provided to rank-and-file employees.

But employers say they may have legitimate reasons for wanting to offer different benefits to different workers.

“Employers should be permitted to provide lower-cost coverage to employees who may not be able to afford the comprehensive coverage being provided to other employee groups,” Ms. Wilber said.

Katie W. Mahoney, the executive director of health policy at the U.S. Chamber of Commerce, said the existing nondiscrimination rules were so convoluted that employers often complied just with the spirit of the law, “rather than with the precise requirements of the regulations.”

“Employers are likely to have difficulty complying with the new nondiscrimination requirement” as well, Ms. Mahoney said.

She said the administration should scrap the existing rules and replace them with “a single set of nondiscrimination rules and a single set of penalties for all types of group health plans.”

By ROBERT PEAR

6 things to know about health care for 2014

Have you talked to your soothsayer or medicine man yet about what they see in their tea leaves about health care for 2014? Certainly with all the moving parts of the Patient Protection and Affordable Care Act, and other initiatives in the employer and medical communities, there usually tends to be quite a bit of prognostication of pending opportunities. And there may be some amazing possibilities to take advantage of by all stakeholders. Here are six things you should know about this new year:

1. Guaranteed issue: Beginning in 2014, health insurance companies cannot deny health insurance coverage to an individual based on a pre-existing condition. They must give coverage to anyone who applies, and it cannot cost more if you are sick. The cost of health insurance premiums cannot vary based on health status for children or adults. Premiums may only vary based on age, geography, family size and tobacco use. The law also restricts how much premiums can vary based on age.

2. Taxation, with representation. The penalties are phased in. In 2014, the penalty is $95 per uninsured adult (the penalty for uninsured children is always half the adult amount, but in 2014 there’s a $325 cap for a family) or 1 percent of taxable household income, whichever is greater. There are some exceptions though. You are exempt if you fall into any of these categories:

• You can’t find a premium for a qualified plan through your state health exchange that is less than 8 percent of your adjusted gross income;
• Your income is below the tax filing threshold;
• You have a hardship waiver;
• You are not covered for a period of less than three months during the year;
• You have a religious objection;
• You’re a member of a health care sharing ministry;
• You’re a member of an Indian Tribe;
• You’re incarcerated; or
• You’re not legally present in the U.S.

Also read: What’s ahead in 2014 for PPACA

3. Boomer sooner: People are aging faster, and the population growth is shifting rapidly to the 50+ age crowd. Born between 1946 and 1964, baby boomers number some 450 million worldwide, according to TrendWatching.com. And, the world’s population is aging at a staggering rate. The 50+ population is the fastest growing segment worldwide and predicted life expectancies are at a historical high. An American turns 50 once every seven seconds. Within the next few years, 50 percent of the European Union’s population will be 65+. By 2030, in Italy, retirees will outnumber active workers. By 2050, the median age in Thailand will rise to 50.

And, fitness will continue to increase in this age group with clubs catering to the senior crowd.

4. Designer teeth and eyes: More people are retiring earlier than ever before due to a variety of reasons including the economy and corporate downsizing. Therefore, these men and women have been used to keeping up appearances and having access to aesthetic benefits like dental and vision.

With those services being stripped out of most employer health plans, retirees are going to go into the market and increase demand for the individual plans for both insured and discount dental and vision programs — cosmetic work including veneers, teeth whitening, implants, and more for dental and designer frames for vision. These folks want to look and stay pretty. They already have too much invested to let their teeth and eyes go bad. Having a beautiful smile means more now than ever, and designer frames are still considered a good thing with most of this demographic group.

5. Clinical review: Americans are seeking access to less expensive health care options including clinics and urgent care centers rather than going to typical private physician offices and hospital emergency rooms. Consumers are learning to cope with increasing costs by changing their behaviors. With the cost of emergency room co-pays up 50 percent between 2009 and 2013, many consumers have switched to less-expensive venues for health care services, such as retail clinics and urgent care centers.

Visits to retail clinics, such as those in pharmacies and other retailers, nearly tripled in the past five years, according to a report by PwC’s Health Research Institute. These types of medical facilities are going to escalate in the number of patient visits. Cost-conscious consumers are a major factor driving the slowdown. Bearing a greater share of health care costs, many workers are limiting doctor visits, delaying procedures and choosing cheaper providers.

6. Doc talk: There’s a huge opportunity for mobile applications and customized, purpose-built devices. There are already roughly 100,000 health applications available in major app stores, and the top 10 mobile health applications generate up to 4 million free and 300,000 paid daily downloads. Consumer adoption of mobile health apps is going to proceed apace.

BY MARK ROBERTS

Disruption forecast if changes are made in coverage tax breaks

What if the tax breaks for employer-sponsored health benefits were to change? How would 
American workers feel about that?
As it turns out, 39 percent of those asked say they wouldn’t change a thing, according to the 2013 Health and Voluntary Workplace Benefits Survey, a public opinion poll conducted by the Employment EBRI and Greenwald and Associates.
Of course, that means plenty of others would make some changes.
Indeed, 34 percent said they would want to switch to a less costly plan provided by their employer, 22 percent say they would want to shop for coverage directly from insurers, and 5 percent say they would drop coverage altogether.
In other words, there’d be plenty of disruption in the workplace and the market.

According to EBRI research, the tax preference associated with employment-based health coverage is the largest "tax expenditure" in the U.S. budget, accounting for $1.1 trillion in foregone tax revenue between 2012-2016.

Workers who obtain health coverage through an employer pay no taxes on the employer's portion of the premium.
Libertarian think tanks such as the Cato Institute advocate elimination of the tax breaks on employer-provided health benefits.
The EBRI survey, meanwhile, found about one-third (35 percent) of workers prefer to continue getting coverage the way they do today, clearly signaling that people are ready for some change.
Nearly one-half (45 percent) said they prefer to choose their insurance plan, and one-fifth (21 percent) prefer their employer to give them the money and allow the workers to decide whether to purchase coverage at all, and how much to spend.
The bottom line, however, is that most workers are satisfied with the health benefits they have now and express little interest in changing the current mix of benefits and wages offered by their employers, the survey found.
And even though enactment of the Patient Protection and Affordable Care Act has raised questions about whether employers will continue to offer health coverage to their workers in the future, the importance of benefits in choosing a job — especially health insurance — remains high, EBRI said in a release.
“By far, health insurance in particular continues to be the most important employee benefit to workers,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the new report.
The full report, “Views on Employment-Based Health Benefits: Findings from the 2013 Health and Voluntary Workplace Benefits Survey,” can be found at www.ebri.org 

By Allen Greenberg