The U.S. Supreme Court decision yesterday upholding the constitutionality of the Patient Protection and Affordable Care Act ("Act") means that employers must continue to prepare for new federal regulations governing the provision of health insurance coverage to employees. In a 5-4 decision, the Supreme Court concluded that Congress had authority under the Constitution's taxing powers to mandate that individuals obtain health insurance coverage or pay a tax penalty. It also held that Congress, under its constitutional authority to spend funds for the general welfare, may require each State to implement an expansion of Medicaid but may not withhold federal Medicaid funds to penalize States that do not wish to participate in the expanded Medicaid program.
The Court's decision keeps on track steps required to fully implement the Act by 2014. Already in force in 2012 are requirements that employers provide a uniform summary of benefits and coverage (SBC) to health plan participants, report the cost of coverage on IRS Forms W-2 and provide additional preventive care services to women (annual well-woman visits and domestic violence counseling).
In 2013, additional provisions take effect: the $2,500 limit on contributions to flexible spending arrangements, imposition of fees on insurers and self-insured plan sponsors to fund research on the effectiveness of medical treatments and drugs, required notices to employees about health care exchanges, 2.3% fee imposed on medical device manufacturers, higher payroll taxes on wages exceeding $200,000 ($250,000 for married couples) and initial open enrollment in state health care exchanges.
The major reforms under ACA take effect in 2014 with establishment of state health care exchanges providing different health insurance plans for purchase, a dramatic expansion of Medicaid to provide health care to adults with incomes up to 133% of the federal poverty level (currently, $14,856 for individuals; $30,656 for a family of four), assessment of a tax penalty on individuals who violate the mandate to obtain health insurance coverage of $95 or 1% of income in 2014 but rising by 2016 to the greater of $695 or 2.5% of income, a prohibition on pre-existing condition exclusions for adults and an increase in permissible rewards for wellness programs from 20% to 30% of the cost of employee-only coverage. The most significant change, however, will be assessment of "pay or play" penalties of up to $250 for each employee of employers with more than 50 employees who are receiving subsidized health insurance coverage through an exchange.