Health Care Reform Implications for Employers with Seasonal Employees
Many industries (e.g. ski resorts, retail, restaurants, agriculture, fishing and tourism) have a significant number of seasonal employees. These employees are hired by the employer to work for a limited period of time, typically during the employer’s “busiest” season.
Health care reform legislation passed earlier this year will have significant impacts on individuals and employers. This is particularly true for employers with a seasonal employee population. While many of the requirements are not effective until 2014, this summary is intended to highlight some key points for employers with a seasonal workforce to consider when developing a long-term benefits strategy. It is not an exhaustive analysis and further guidance is needed on many of these issues.
2010 – 2011
Benefit Design Requirements
Effective for the first plan year that begins on or after September 23, 2010, all group health plans will need to comply with the following requirements:
- No lifetime limitation on essential benefits;
- No unreasonable annual limits on essential benefits;
- Provide coverage for an employee’s child up to age 261;
- No recessions of coverage except for fraud, intentional misrepresentation of material fact, or failure to pay premiums; and
- Impose no pre-existing condition exclusions on individuals under age 19.
- Non-grandfathered plans will need to comply with the following additional requirements effective for the first plan year that begins on or after September 23, 2010:
- Cover preventive services at 100% in-network;
- An insured plan cannot discriminate in favor of highly compensated individuals as to eligibility or benefits;2
- Certain patient protections (PCP designation, OB/GYN access and emergency services); and
- More expansive claims, appeals and external review procedures.
Expenses for over-the-counter (OTC) medicines and drugs incurred on or after January 1, 2011 are noteligible for reimbursement through a health flexible spending account (health FSA) or a health reimbursement arrangement (HRA) without a prescription.
If OTC medicines and drugs are reimbursed through a health savings account (HSA) without a prescription, then they will be treated as a non-qualified reimbursement, subject to taxation as well as a 20% penalty.
Starting in tax year 2011, employers are required to report the value of the health insurance coverage they provide employees on each employee's annual Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income and it is not taxable.
This calculation may include medical insurance coverage (including prescription drugs), HRA contributions, or other supplementary health plan coverage (e.g. EAPs, wellness programs). It does not include stand-alone dental or vision coverage. More guidance is needed on how to determine the value of the coverage provided.
Impact to Employers with Seasonal Employees
- If you offer a group health plan, you must comply with the applicable requirements described above.
- Determine whether your group health plan(s) will retain grandfathered status.
- If applicable, communicate changes to the health FSA, HRA and HSA to employees, and update relevant plan documents as applicable.
- Ensure payroll vendors can assist with W-2 reporting.
Limited Medical Plans
Many employers offer limited medical plans to seasonal, part-time or low income workers. These plans generally provide a fixed amount of medical benefits available in a year (e.g. $15,000 annually). Health care reform prohibits a group health plan from imposing annual limits that fall below the following thresholds:
- For a plan year beginning on or after September 23, 2010, but before September 23, 2011, $750,000.
- For a plan year beginning on or after September 23, 2011, but before September 23, 2012, $1,250,000.
- For plan years beginning on or after September 23, 2012, but before January 1, 2014, $2,000,000.
Thus, many limited medical plans will violate this requirement. However, the regulations and subsequent guidance provide that, prior to January 1, 2014, a limited medical plan may seek a waiver from the strict annual limitation requirements through the Department of Health and
Human Services (HHS). The waiver program is available if compliance with the required annual limitations would result in a significant decrease in access to benefits or a significant increase in premiums for those individuals covered by the limited plan.
Only limited medical plans in place prior to September 23, 2010 are eligible for the waiver program. The waiver application must be submitted not less than 30 days before the beginning of the plan year, or in the case of a plan year that begins before November 2, 2010, not less than 10 days before the beginning of the plan year.
The application must include:
- The terms of the plan for which a waiver is sought;
- The number of individuals covered by the plan submitted;
- The annual limit(s) and rates applicable to the plan submitted;
- A brief description of why compliance with the regulations would result in a significant decrease in access to benefits for those currently covered by such plans, or a significant increase in premiums paid by those covered by such plans, along with any supporting documentation; and
- An attestation, signed by the plan administrator or Chief Executive Officer (“CEO”) of the issuer of the coverage, certifying (a) that the plan was in force prior to September 23, 2010; and (b) that the application of restricted annual limits to such plan(s) would result in a significant decrease in access to benefits for those currently covered by such plans, or a significant increase in premiums paid by those covered by such plans.
A waiver approval applies only for the plan year beginning between September 23, 2010 and September 23, 2011. A group health plan or health insurance carrier must reapply for any subsequent plan year prior to January 1, 2014. HHS may modify this waiver approval process at any time.
Further guidance is available at: http://www.hhs.gov/ociio/regulations/patient/ociio_2010-
Impact to Employers with Seasonal Employees
Seasonal employers with a limited medical plan will have to make some decisions:
- Determine whether to increase the annual limits to meet or exceed the permitted thresholds; or
- If a limited medical plan was in place prior to September 23, 2010, and otherwise satisfies the requirements, you may be eligible to apply for a waiver from the annual limit requirement. For an insured plan, you should consult with your carrier to determine whether the plan is eligible for the waiver. For a self-insured plan, the plan administrator should coordinate with the third-party administrator to apply for relief.
The changes that go into effect in 2014 will be included in the next post.