In the second half of 2010, employers should review their current benefit plan offerings to ensure compliance with new regulations issued by the U.S. Departments of Health and Human Services, Labor and the Treasury under the Patient Protection and Affordable Care Act (PPACA). For more information, see “Health Care Reform: PPACA Interim Final Regulations on Pre-existing Condition Exclusions, Lifetime and Annual Limits, Rescissions and Patient Protections” (6/29/10). Employers must also determine whether group health plans in existence as of March 23, 2010 (the general effective date of PPACA) are “grandfathered” for the purpose of applying many of the changes under PPACA. Part of this determination is analyzing the benefits of maintaining grandfathered status versus the restrictions on plan design and cost-sharing changes that are necessary to maintain grandfathered status. For information regarding determining grandfathered status and actions that result in the loss of grandfathered status, see “Health Care Reform: Grandfathered Health Plan Regulations” (6/15/10).
The PPACA enacted IRC Section 162(m)(6) which imposes a $500,000 deduction limit on compensation paid by certain health insurers and their related companies to all employees and other individual service providers. This provision limits the ability of many health insurers and their related companies to fully deduct compensation paid to employees and other individual service providers in 2013 and later tax years. All health insurers will want to take action now to determine the effect of the new rules and to review the compensation structure for their highly paid employees and individual service providers in order to maximize potential deductions. See “Health Care Reform: New Deduction Limit on Compensation Paid by Certain Health Insurers” for a detailed discussion of this new provision. (6/30/10).
Under PPACA, both group health plans and insurers offering group health coverage must implement internal claims and appeals processes that comply with the claims and appeals procedures requirements under Section 503 of the Employee Retirement Income Security Act (ERISA). HHS, DOL and Treasury recently clarified the scope of an employer’s internal claims and appeals procedures and external review processes. See “Health Care Reform: Guidance on Claims and Appeals Rules” (7/29/10).
Finally, the PPACA retains the Retiree Drug Subsidy, but eliminates an employer’s ability to deduct the amount of the subsidy. This change increases an employer’s income tax liability, in effect increasing the employer’s cost of providing prescription drug coverage to retirees. Employers should analyze the increased future tax liability and the current accounting charges necessary to retain retiree prescription drug coverage. A more detailed discussion of these issues can be found in “Health Care Reform: Elimination of Retiree Drug Subsidy Deduction” (7/21/10).