Health Care Update

September 18, 2013

pic-health-insuranceDespite certain delays in the health care reform law, there are several deadlines right around the corner of which small businesses should be aware. This update addresses the activation of health insurance exchanges starting Oct. 1, the notice to employees regarding health insurance exchanges that must be provided by employers by Oct. 1 and efforts to defund the Patient Protection and Affordable Care Act (PPACA).

Exchanges to Become Operational Oct. 1, 2013

The PPACA establishes health insurance markets in each state called “American Health Benefit Exchanges.”  They are usually called health insurance exchanges or just “exchanges.”  Recently, the Department of Health and Human Services (HHS) has taken to calling the exchanges “marketplaces.”  Health insurance exchanges are, essentially, a structured marketplace where relatively standardized health insurance policies are offered, primarily over the internet, by insurance companies. Complete information disclosure by insurers selling policies on the exchange to consumers and small businesses is required in a standardized format.

Exchanges fall into three different categories:  (1) state exchanges; (2) partnership exchanges; and (3) federal exchanges (called “federally-facilitated exchanges by HHS). State exchanges are operated by the state government.  Partnership exchanges are operated by states in conjunction with the federal government.  Federal exchanges are operated by HHS in states that did not elect to run either their own exchange or a partnership exchange.

The exchanges must be up and running by October 1, 2013 selling policies for 2014. They must include a Small Business Health Options Program or SHOP Exchange.

The SHOP is designed to assist small employers in providing health insurance to their employees.  Federal exchanges will have FF-SHOPs (federally facilitated SHOPs).  Starting in 2014, to receive the small employer tax credit, an employer must purchase its health insurance through the SHOP.

There are likely to be serious computer glitches and other difficulties, particularly initially.  In addition, there will great difficultly educating consumers about their responsibilities under the individual mandate, their health insurance options and the tax subsidy provided to those with household income over the poverty level but below 400 percent of the poverty level.

Required PPACA Notice to Employees

Employers must provide a “Marketplace Notice” to their current employees by Oct. 1, 2013. The notice also must be provided to new-hires on and after Oct. 1, 2013. For new-hires, the notice will be considered timely if it is provided within 14 days of their start date. The notice may be provided by first class mail, or electronically under the Department of Labor’s electronic disclosure safe harbor rules, which generally permit email or other electronic disclosure for employees who have computer access as a regular part of their job functions or consent to electronic disclosure.

To satisfy the content requirements, two model “Marketplace Notices” are now available on the Department of Labor’s website. There is one model for employers who do not offer a health plan and another model for employers who do offer coverage to some or all employees. To read the model for employers who do not offer a health plan, click here.  To read the model for employers who do offer coverage to some or all employees, click here.  The two model notices are similar, but the model for employers that offer health coverage must also describe which of its employees are eligible for coverage, which dependents are eligible for coverage, and whether coverage provides minimum value and is intended to be affordable.

This notice is required by section 1512 of the PPACA (as amended) which creates a new section 18B of the Fair Labor Standards Act (29 USC 218b).  Given the structure of the law, it is not entirely clear what, if any, penalties can be imposed on non-compliant businesses by the Department of Labor.

Efforts to Defund the PPACA 

A substantial number of Republicans have cosponsored the Defund Obamacare Act of 2013 (H.R.2682/S. 1292).  H.R.2682, introduced by Rep. Tom Graves (R-Ga.), now has 148 sponsors and S.1292, introduced by Sen. Ted Cruz (R-Texas), now has 32 sponsors.  Thus, both bills have support from a majority of Republicans in each chamber. Many Republicans see this as their last chance to stop implementation of the health care law.

Some members of the Senate GOP leadership have signed on as cosponsors, including Minority Leader Mitch McConnell ( R-Ky.) and Sens. Rand Paul (R-Ky.) and Marco Rubio (R-Fla.). The House Republican leadership has, however, been skeptical about such an approach and is reluctant to set a course likely to lead to a government shut-down in October.  House Republican leaders are also reluctant to adopt an approach that cannot achieve the support of a majority of their caucus yet a substantial portion of Republicans stand ready to vote against any spending bill that continues funding for the health care law.  The Democratic controlled Senate and the President, of course, will strongly defend funding for the health care law.

A government funding bill (either an omnibus appropriations bill or a continuing resolution) must be passed in September or the government will run out of money and be forced to shut down on Oct. 1, the beginning of the new fiscal year.,