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Another component of the Health Care Reform Act signed into law on 3/23/2010 is that beginning with the 2011 tax year, employers must report the aggregate cost of applicable employer-sponsored health insurance coverage on employees W-2 forms.  General information about this requirement has been provided, however, the Department of Labor (DOL) has not yet issued Interim Final Rules on this provision of the Health Care Reform Act.

1. When does an employer have to be ready to be in compliance with this new reporting requirement?

Employers must be prepared to accurately report this information on an employee’s 2011 W-2 form as early as February, 2011.  Although employers will be sending most of the 2011 W-2 forms to the employees in January, 2012, if an employee terminates employment in 2011, they do have the right to request an early 2011 W-2 form.  Employers must be prepared for this possibility.

2. How is “applicable employer-sponsored health insurance coverage” defined?

The “applicable employer-sponsored health insurance coverage” is more than just the employer’s health plan.  The requirement includes:

• Medical plans;
• Prescription drug plans;
• Health Reimbursement Accounts
• Executive physicals;
• On-site clinics if they provide more than de minimus care;
• Medicare supplemental policies; and
• Employee assistance programs (EAP).

Typically, dental and vision plans are not included if they are “stand alone” plans.  For example, most employers will have a separate dental or vision plan with, perhaps, a different insurance carrier than their medical plan.  However, an employer might sponsor a medical plan that has a separate rider that provides a benefit for routine vision exams.  In the latter case, the cost for the vision rider should be factored into the cost/value.

Other benefits in which an employer might be making a contribution on behalf of an employee, such as flexible spending accounts, health savings accounts, specific disease or hospital/fixed indemnity plans, are excluded from the reporting requirement.

3. How does an employer calculate the cost/value for the “applicable employer-sponsored health insurance coverage”?

For medical plans and prescription drug plans an employer should use the fully-insured monthly rates charged by their medical and prescription drug carriers.  Employers with self-funded plans should use the rates developed for COBRA participants (minus the 2% administrative fee).

This is an area in which further guidance is needed from the DOL, through issuance of Interim Final Rules, and from the IRS.  For example, how should the cost/value be calculated for an employee whose coverage starts or stops mid-month?  For fully-insured plans the expectation is that cost/value will be calculated based on the amount of monthly premium payments made by the employer to the insurance carrier for the employee.  For self-funded plans, however, the calculation may be more difficult.  Will the cost/value be prorated based on the number of days for the month and calculated on a per day basis, or, will the calculation be based on a cut-off date for the month?  For example, if an employee has coverage for more than half of the month, should the employer add that month’s COBRA rate to the employee’s calculation?  If the employee had the coverage for less than half the month, the employer should not add that month to the employee’s calculation?   We will provide further guidance when updates from the DOL or IRS are released.

4.  How does an employer calculate the cost/value for an on-site clinic or an EAP?

Once again, this is an area in which further guidance is needed.  Most employers with an on-site clinic have probably never calculated the cost/value of that benefit to its employees.  Even if the employer had calculated the cost/value of that benefit, at this time, there is no guarantee that the methodology would be acceptable.

An employer paying a premium rate to an EAP vendor would use that premium to calculate the cost/value.  However, recent years have seen a trend in EAP services being provided to an employer as a value-added service by a different vendor, typically, the life or disability insurance company.  Guidance will be needed as to how to determine the cost/value in these situations.

5. Will the employee be taxed on the cost/value of the employer-sponsored health insurance?

No.  The reporting of the cost/value of the employer-sponsored health insurance is for informational purposes only and the employee, at this time, will not have to pay tax on the amount reported.

6. What are the reasons for this reporting change?

The reasons for this new W-2 reporting requirement have never been clearly defined. However, the assumption is that there are 3 probable reasons for this change.

• Disclosure – Employers will now be reporting to the employees the actual cost/value of the health insurance.    Previously, most employees did not have this information unless the employer sent communication materials such as benefit statements.

• Individual Mandate – In 2014, all U.S. citizens will have to have health insurance or pay a penalty.  How an individual is going to document having coverage is still unclear – perhaps the W-2 will be the vehicle used for documentation.

• “Cadillac Tax” – Beginning in 2018, employer-sponsored health plans with aggregate values exceeding $10,200 for individual coverage and $27,500 for family coverage will be subject to the “Cadillac Tax”.  How will the IRS know which employer-sponsored health plans are subject to this Cadillac Tax?  Most likely from the amounts reported on the W-2 forms.  If subject, then the Plan will be taxed.  The employee will not be taxed, at least not directly.

7. What do I need to do now?

• Develop an implementation strategy with your Payroll department and/or your Payroll administrator by February, 2011.

• Determine how and if you can calculate the cost/value for all the plans subject to reporting on the W-2 form.

• You may want to consider preparing a communication piece for your employees to, first, alert them of the inclusion of the new information on the W-2 so that they will see the amount you pay for health insurance coverage for them and, secondly, to assure them that they are not being directly taxed on this amount in 2011.  For future tax years, there is no expectation that the employee will be directly taxed on this amount however that is always subject to change.  Your Payroll department and/or Payroll administrator may already be drafting communication pieces on your behalf. 
 
If you have any questions on this or any new health care reform regulation, please consult with a member of your Banyan Consulting team.

How the Affordable Care Act will make Medicare stronger into the future

• The life of the Medicare Trust fund will be extended to at least 2029, a 12-year extension as a result of reducing waste, fraud and abuse, and slowing cost growth in Medicare. This will provide you with future cost savings on your premiums and coinsurance.
• Medicare will take strong action to reduce payment errors, waste, fraud, and abuse in Medicare. The President has made a commitment to reduce Medicare fraud 50 percent by 2012. The Affordable Care Act makes an historic, ten-year, $350 million investment to prevent, detect and fight fraud in Medicare, Medicaid and the Children’s Health Insurance Program—including criminal efforts to exploit the new law. Visit Stop Medicare Fraud for more information.
• In 2011, if you hit the prescription drug donut hole, you will get a 50% discount on brand-name drugs. Every year after, you will pay less for your prescription drugs in the donut hole until there’s complete coverage of the donut hole in 2020. Between now and then, you will get continuous Medicare coverage for your prescription drugs.
• The coordination of care between doctors and the overall quality of care will improve so that you will be less likely to experience preventable and harmful re-admissions to the hospital for the same condition.
• Hospitals will have new, strong incentives to improve your quality of care.
• Starting in 2014, the Affordable Care Act offers additional protections for Medicare Advantage Plan members by taking strong steps that limit the amount these plans spend on administrative costs, insurance company profits, and things other than health care.

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The following information is provided by Banyan Consulting LLC:

One component of the Health Care Reform Act signed into law on 3/23/2010 requires minimum coverage, without employee cost-sharing, for services rated A or B by the US Preventive Services Task Force.  Beginning with the first day of the first plan year beginning on or after 9/23/2010, plans can no longer require a copay or apply a deductible or coinsurance to these services.  On 7/14/2010, the Department of Health & Human Services (HHS) released the list of A and B services determined by the US Preventive Services Task Force.

1.  Does this health care reform provision apply to “grandfathered” plans?

No, grandfathered plans do not need to comply with this provision.  If, in the future, your health plan loses its grandfathered status, this reform will apply to your plan.

2.  What are the A and B rated preventive services?

The A and B rated preventive services are segmented into 3 categories which are:

•  Adult Covered Preventive Services
•  Women (including Pregnant Women) Covered Preventive Services
•  Children Covered Preventive Services

There is still some debate on additional services for women that, most likely, will not be resolved until August, 2011.  There is lobbying from organizations such as Planned Parenthood, for example, who want birth control to be included in the preventive services category.  More information is sure to follow.

3.  What are the Adult Covered Preventive Services?

The services currently identified include:

•  Abdominal Aortic Aneurysm – One time screening for men of specific ages who have ever smoked
•  Alcohol Misuse – Screening and counseling
•  Aspirin – Use for men and women of certain ages
•  Blood Pressure – Screening for all adults
•  Cholesterol – Screening for adults of certain ages or at higher risk
•  Colorectal Cancer  – Screening for adults over 50
•  Depression – Screening for adults
•  Type 2 Diabetes – Screening for adults with high blood pressure
•  Diet – Counseling for adults at higher risk for chronic disease
•  HIV – Screening for all adults at higher risk
•  Immunization – Doses, recommended ages, and recommended populations vary:
     o  Hepatitis A
     o  Hepatitis B
     o  Herpes Zoster
     o  Human Papillomavirus
     o  Influenza
     o  Measles, Mumps, Rubella
     o  Meningococcal
     o  Pneumococcal
     o  Tetanus, Diphtheria, Pertussis
     o  Varicella
•  Obesity – Screening and counseling for all adults
•  Sexually Transmitted Infection (STI) – Prevention counseling for adults at higher risk
•  Tobacco Use – Screening for all adults and cessation interventions for tobacco users
•  Syphilis – Screening for all adults at higher risk

4.  What are the Women Covered Preventive Services?

The services currently identified include:

•  Anemia – Screening on a routine basis for pregnant women
•  Bacteriuria – Urinary tract or other infection screening for pregnant woman
•  BRCA – Counseling about genetic testing for women at higher risk
•  Breast Cancer Mammography – Screenings every 1 to 2 years for women over 40
•  Breast Cancer Chemoprevention – Counseling for woman at higher risk
•  Breast Feeding – Interventions to support and promote breast feeding
•  Cervical Cancer – Screening for sexually active women
•  Chlamydia Infection – Screening for younger women and other women at higher risk
•  Folic Acid – Supplements for women who may become pregnant
•  Gonorrhea – Screening for all women at higher risk
•  Hepatitis B – Screening for pregnant women at their first prenatal visit
•  Osteoporosis – Screening for women over age 60 depending upon risk factors
•  Rh Incompatibility – Screening for all pregnant women and follow-up testing for women at higher risk
•  Tobacco Use – Screening and interventions for all women, and expanded counseling for pregnant tobacco users
•  Syphilis – Screening for all pregnant women or other women at increased risk

As mentioned in Question #2, this is an incomplete list as additional preventive services may be added by August, 2011.

5.  Special Provision – Breast Feeding at Work

A little-known provision within national health-care reform legislation requires employers to accommodate breast-feeding mothers in the workplace.  Effective immediately, employers must allow lactating women to take breaks to express breast milk for the first year after the birth of a child.  The federal provision does not require those breaks to be paid.  Employers also must provide a private break area — not in the restroom — for female employees to express milk.  Small employers with fewer than 50 employees can be excluded if they prove the requirement would cause a hardship.

If you do not have an official Breast Feeding at Work policy, you should draft one that meets the requirements of this provision. If you need assistance in drafting an official policy, please contact a member of your Banyan Consulting team for sample language.

6.  What are the Children Covered Preventive Services?

The services currently identified include:

•  Alcohol and Drug Use – Assessments for adolescents
•  Autism – Screening for Children at 18 and 24 months
•  Behavioral  – Assessments for children of all ages
•  Cervical Dysplasia – Screening for sexually active females
•  Congenital Hypothyroidism – Screening for newborns
•  Developmental – Screening for children under age 3, and surveillance throughout childhood
•  Dyslipidemia – Screening for children at higher risk of lipid disorders
•  Fluoride Chemoprevention – Supplements for children without fluoride in their water source
•  Gonorrhea – Preventive medication for the eyes of all newborns
•  Hearing – Screening for all newborns
•  Height, Weight and Body Mass Index – Measurements for children
•  Hematocrit or Hemoglobin – Screening for children
•  Hemoglobinopathies or Sickle Cell – Screening for newborns
•  HIV – Screening for adolescents at higher risk
•  Immunization – Doses, recommended ages and recommended populations vary:
     o  Diphtheria, Tetanus, Pertussis
     o  Haemophilus Influenza Type B
     o  Hepatitis A
     o  Hepatitis B
     o  Human Papillomavirus
     o  Inactivated Poliovirus
     o  Influenza
     o  Measles, Mumps, Rubella
     o  Meningococcal
     o  Pneumococcal
     o  Rotavirus
     o  Varicella
•  Iron – Supplements for children ages 6 to 12 months at risk for anemia
•  Lead – Screening for children at risk of exposure
•  Medical History – For all children throughout development
•  Obesity – Screening and counseling
•  Oral Health – Risk assessment for your children
•  Phenylketonuria (PKU) – Screening for this genetic disorder in newborns
•  Sexually Transmitted Infection (STI) – Prevention counseling for adolescents at higher risk
•  Tuberculin – Testing for children at higher risk of tuberculosis
•  Vision – Screening for all children

7.  Have the Department of Labor (DOL) regulations and/or any sample language been released?

The DOL released Interim Final Regulations on 7/19/2010.  Generally speaking, the regulations were directed towards insurance carriers, third party administrators, and providers of care regarding how to administer or bill the new Preventive Services provision.

Some of the notable items are:

•  The no cost-share requirement on Preventive Services applies only to in-network providers of care.  A plan can still require cost-sharing if care is provided out-of-network.

•  Plan Sponsors/Administrators can establish treatment schedules and limits provided reasonable medical management techniques are used.  For example, an annual cholesterol screening may be considered reasonable medical management so the plan could limit routine, preventive cholesterol screenings to one every 12 months.

•  Several billing examples were also given in which a Preventive Service such as a cholesterol screening was billed along with an office visit.  In certain situations, the cholesterol screening may be payable at 100% with no cost-share while the office visit can still have a cost-share such as a copay or deductible.

The DOL Interim Final Regulations do not provide any sample language to communicate the changes in the Preventive Services to the plan participants.  The DOL also did not state that any sample language would be provided in the “very near future”.

8.  How should I communicate the new Preventive Services provision to my plan participants?

The DOL has not issued any clear guidance or sample language to be used in communicating the changes in Preventive Services to plan participants.  If your plan is fully-insured, it will be the responsibility of your insurance carrier to develop and distribute communication materials to the plan participants.  If your plan is self-funded, you should work closely with the claim administrator to develop and distribute the needed materials.

Regardless of whether your plan is fully-insured or self-funded, you will also need to follow standard ERISA disclosure procedures, such as:

•  Summary of Material Modifications (SMM) – As always, anytime a change is made to a plan design, an SMM should be sent to the plan participants.

•  Summary Plan Description (SPD) – The plan’s SPD should be updated with the new Preventive Services benefits.

In addition, you should also “prominently” display the new list of Preventive Services in any open or new enrollment materials.  Although for most plan participants, their physician will be the one aware of the new Preventive Services that will be payable at 100%, there are certain services on the new list (such as aspirin, fluoride supplements, etc.) that the participant may not be aware of unless informed by the plan sponsor.

9.  I have a qualified High Deductible Health Plan (HDHP) with a Health Savings Account (HSA).  How does the new Preventive Services provision impact me?

The DOL Interim Final Regulations do not specifically address this situation.  Until further guidance is provided by the DOL, any answer to this question is purely based on assumptions.

10.  How much is the implementation of this health care provision going to cost?

HHS has estimated that the cost for implementing the new preventive services provision will result in a +1.5% increase in costs in either premium or claims.  However, at this time insurance carriers are still trying to grasp the impact of the list of services and how it will affect claims and administration.  For example, some preventive services such as Fluoride Chemoprevention and paying 100% of the cost for fluoride supplements for children who do not have fluoride in their drinking water may prove to be an administrative challenge.  As a result, the ultimate cost adjustment that your health plan insurance carrier or administrator may add to your premium rates or administrative costs is still yet to be determined and may be significantly different than +1.5%.

11.  What do I need to do now?

•  Determine what the financial impact to your plan will be for an approximate 1.5% increase in claims or premium.   If your plan is fully-insured, you can expect to see this amount added to your monthly rates.  If your plan is self-funded, you will need to incorporate this increase into any cost projections and/or budget rates.

•  If you are a non-grandfathered plan, you should discuss this new provision with your insurance carrier or claims administrator to begin preparations to implement this reform on the first day of the first plan year beginning on or after 9/23/2010.

•  Lastly, if you are subject to this new provision, you need to begin preparing your communication strategy for the upcoming open enrollment, and ongoing, to educate your plan participants on what is now available to them at 100%.

We will continue to update you as additional guidance is released.  In the interim, if you have any questions on this or any new health care reform regulation, please contact a member of your Banyan Consulting team.

The following information is provided by cdc.gov:

CDC urges women to take 400 mcg of folic acid every day, starting at least one month before getting pregnant, to help prevent major birth defects of the baby’s brain and spine.

About folic acid - Folic acid is a B vitamin. Our bodies use it to make new cells. Everyone needs folic acid.

Why folic acid is so important - Folic acid is very important because it can help prevent some major birth defects of the baby’s brain and spine (anencephaly and spina bifida) by 50% to 70%.

How much folic acid - a woman needs 400 micrograms (mcg) every day.

When to start taking folic acid- For folic acid to help prevent some major birth defects, a woman needs to start taking it at least one month before she becomes pregnant and while she is pregnant. Every woman needs folic acid every day, whether she’s planning to get pregnant or not, for the healthy new cells the body makes daily. Think about the skin, hair, and nails. These – and other parts of the body – make new cells each day.

How a woman can get enough folic acid- There are two easy ways to be sure to get enough folic acid each day:

1. Take a vitamin that has folic acid in it every day. Most multivitamins sold in the United States have the amount of folic acid women need each day. Women can also choose to take a small pill (supplement) that has only folic acid in it each day. Multivitamins and folic acid pills can be found at most local pharmacy, grocery, or discount stores. Check the label to be sure it contains 100% of the daily value (DV) of folic acid, which is 400 micrograms (mcg).

2. Eat a bowl of breakfast cereal that has 100% of the daily value of folic acid every day. Not every cereal has this amount. Check the label on the side of the box, and look for one that has “100%” next to folic acid.

Fact Sheet  - Download and print this fact sheet.

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