2013 – Washington Bureaucrats Exercise Unbridled Power

2013 is shaping up to become the year of health care reform regulations

The Year Ahead: Benefits Management 2013

Jerry Geisel

December 23, 2012 – 6:00 am ET

2013 is shaping up to become the year of health care reform regulations. With many key provisions of the Patient Protection and Affordable Care Act set to go into effect on Jan. 1, 2014, a slew of regulations intended to help employers comply with the law aren’t far down the road.The most important employer-related regulation that is expected to be issued soon involves what the law calls “shared responsibility” — the requirement that employers either offer coverage to full-time employees or pay a stiff financial assessment.“Everyone’s focus is on shared responsibility. That is the Big Kahuna,” said Gretchen Young, senior vice president for health care policy with the ERISA Industry Committee in Washington.“This one is critical,” added Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.It is easy to understand the interest of employers in the upcoming regulation. Under the law, starting in 2014, employers are liable for a $2,000-per-full-time-employee penalty if:• Just one of their lower-paid employees is not offered coverage.• The employee is eligible for a federal premium subsidy and;• The employee uses the premium subsidy to purchase coverage at a public insurance exchange.%%BREAK%%Experts have warned that without regulatory flexibility, there could be situations in which an employer could face the full force of the assessment even though it offered coverage to all, or nearly all, of its full-time employee.One common situation involves employers that do not offer health care coverage to part-time workers working less than 30 hours a week.But in any given month, a part-time employee might work more than an average of 30 hours a week. As experts interpret the law, if that employee received a premium subsidy to buy coverage in a state exchange, the assessment would be applied on all full-time employees.More than a year and a half ago, the U.S. Treasury Department issued a notice that it contemplated an approach in which the penalty would not apply if an employer offered coverage to “substantially all” full-time employees.At the time the notice was issued in May 2011, a top Treasury Department official said he expected a proposed rule would be issued within a few months.Employers still are waiting for that proposed rule, but Treasury Department officials have not sent out signals when the rule will be published.EXCHANGE NOTICEOn the other hand, benefit experts expect a delay in a health care reform law requirement that employers notify employees in March 2013 about the availability of public health insurance exchanges.%%BREAK%%“At this point, we are getting indications that could be delayed,” Buck Consultants’ Mr. Stover said.COVERAGE AFFORDABILITY

Employers also are waiting for Treasury to make clear if a provision that imposes a penalty if coverage is not “affordable” applies to individual and family coverage.Treasury Department guidance said if the share of the premium paid by an employee for individual coverage was at least 9.5% of his or her income and the employee was eligible for and used a reform law subsidy to buy coverage in a public exchange, the employer-offered coverage would be unaffordable. In that situation, the employer would be liable for a $3,000 penalty for that employee.Since then, however, the Treasury Department has said it was reconsidering that rule to examine whether the penalty should also apply if the premium for family coverage is at least 9.5% of employee income. A final decision is expected in 2013, experts say.PRESCRIPTION CONTRACEPTIVE COVERAGE

The courts also will play a role in 2013 in the shaping of the health care reform law. Court rulings are expected next year in a slew of suits challenging an Obama administration rule that requires, generally on Jan. 1, 2014, nonprofit affiliates of religious organizations to offer coverage for prescription contraceptives.“This is one that will be winding its way through the courts,” the ERISA Industry Committee’s Ms. Young said, adding that the issue ultimately may have to be resolved by the U.S. Supreme Court.CASH BALANCE PENSION PLANS

Not all employee benefit regulatory action in 2013 will involve the health care reform law, though. The Treasury Department, for example, is expected to finalize rules involving a provision in a 2006 pension funding law that allows plan sponsors to use a “market rate” to credit interest to participants’ account balances.%%BREAK%%The rules first were proposed in 2010, but the IRS has twice delayed them, giving no indication on when the rules would be finalized and how the final rules would differ from what it proposed.But employers’ wait may end in the coming months. “Regulators have been talking about putting out rules pretty soon,” said Anne Waidmann, a director with PricewaterhouseCoopers L.L.P. in Washington.PENSION PLAN DE-RISKING

Washington, though, isn’t the only place where employee benefit developments will take place in 2013.Experts expect more employers to explore and implement strategies to “de-risk” their pension plans.One de-risking strategy employers are using is giving plan participants an option to convert their monthly annuity benefit to a cash lump sum. Another strategy — used so far by General Motors Co. and Verizon Communications Inc. — is to transfer benefit obligations of selected plan participants to an insurer through the purchase of a group annuity.“It is very clear that employers want to reduce the size of their pension programs,” said Matt Herrmann, St. Louis-based leader of Towers Watson & Co.’s retirement risk management group.By reducing pension obligations, employers face less exposure to increased plan contributions — such as when interest rates fall — which inflates the value of plan liabilities, or when investment results are less than expected.