Health Care Reform: What’s Happening in 2012
The centerpiece of the Patient Protection and Affordable Care Act, health insurance exchanges, won’t go into effect until 2014. However, some portions of the law will begin taking effect this year. Here’s an overview of some of the changes you’ll see.
A new health plan model. Starting on January 1, accountable care organizations (ACOs) can enter into contracts with Medicare. The Affordable Care Act provides incentives for physicians and hospitals to join together in ACOs, integrated healthcare systems that coordinate patient care to improve quality, prevent disease and illness and reduce unnecessary hospital admissions. ACOs that furnish high-quality services will be rewarded based on standards that they help develop, based on solid medical evidence.
Many insurers and employers will be watching to see if ACOs can deliver quality healthcare at a savings to Medicare patients. If they can, look for employer groups to move to ACO models. Please see related article on Page 2.
New plan disclosures. Starting on March 23, health insurers and group health plans must provide two documents designed to help plan members understand their benefits: a standardized summary of benefits and coverage and a uniform glossary of health insurance coverage terms. If you have a fully insured plan, your insurer will provide these documents.
The summary will contain simple and consistent information about health plan benefits and coverage. It will allow individuals to easily compare different coverage options by summarizing key features, such as covered benefits, cost-sharing provisions, coverage limitations and exceptions. People will receive the summary when shopping for coverage, enrolling in coverage, at each new plan year, and within seven days of requesting a copy from their health insurance issuer or group health plan.
A new fee. For policy or plan years ending after Sept. 30, 2012, issuers and employers sponsoring certain group health plans must pay a fee of $1 per member per year. The fee jumps to $2 per member per year for policy or plan years ending after Sept. 30, 2013, and then is subject to adjustment. Fees will go to the Patient-Centered Outcomes Research Institute (PCORI) to fund research that will help inform health care decisions. PCORI, an independent nonprofit organization established by Congress through the Affordable Care Act, will seek to provide evidence on the effectiveness of different treatment options for different patients. Studies will compare drugs, medical devices, tests, surgeries and ways to deliver healthcare.
A new way of keeping medical records. The first regulation implementing electronic health records will go into effect on October 1. Healthcare remains one of the few industries that rely on paper records. The Affordable Care Act institutes a series of changes to standardize medical billing and requires health plans to begin adopting and implementing rules for the secure, confidential, electronic exchange of health information. Using electronic health records will reduce paperwork and administrative burdens, cut costs, reduce medical errors and, most importantly, improve the quality of care.
New reporting requirements. Employers that issue 250 or more W-2 forms should be preparing to report their contributions toward employees’ health insurance premiums on W-2s for tax year 2012 (which go out in early 2013). All other employers must comply by tax year 2014. Although employees who terminate their employment before the end of 2012 may request an early W-2, employers are not required to report health coverage costs on those early W-2 forms.
The IRS has clarified that the reporting is informational only, to inform employees of the cost of their health care coverage, and does not cause excludable employer-provided health care coverage to become taxable. The IRS further clarified that “applicable employer-sponsored coverage” does not include dental or vision coverage, unless they are included in a major medical plan. It also does not include long-term care or disability coverage. Finally, the law does not require employers to send a Form W-2 with healthcare reporting information to retirees or other former employees who receive no compensation from the employer.
To calculate the premium amount, use the monthly premium rate for a fully insured plan or the COBRA premium equivalent rate minus the 2 percent administrative fee for a self-insured health plan. Include both employer and employee contributions; employer contributions to medical savings accounts (MSAs), health savings accounts (HSAs), health reimbursement arrangements and most flexible spending accounts (FSAs) are excluded.
For more information on the Patient Protection Act and how it might affect your benefit plans, please contact us.
Health Care Reform: What’s Happening in 2012
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