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Affordable Care Act

July 13, 2012

On June 28th the Supreme Court released its decision regarding issues surrounding the Affordable Care Act (ACA). The decision was fragmented with different groups of justices issuing differing opinions – four opinions were issued in total. In the final tally, most elements of the law were upheld, including the controversial “individual mandate.” The Medicaid expansion provisions regarding new funds for new programs were upheld. The provisions that penalized states by cutting off funds for programs already in place were held to be unconstitutional because of their coercive nature.

Impact on States

Many states have taken a wait-and-see approach to the law thus far. Some of those states will now begin preparations to comply with the ACA. Other states may continue to wait in the hopes that Mitt Romney will win the election in November and be able to repeal the law before many of the provisions are effective.

Assuming the law is not repealed, it may have a far reaching impact on the federal budgets, state budgets, and Medicare and Medicaid reimbursements. The Medicaid expansion would have required the states to cover under-65, non-pregnant, non-Medicare or Medicaid entitled individuals at or below 133 percent of the federal poverty level. The cost of this would be shared between the federal government and the states with the federal government picking up most of the cost. Because of the Supreme Court opinion, this expansion now seems to be voluntary by the states. States that opt out of the Medicaid expansion could leave a significant number of individuals without affordable coverage.

Because there is very little time left before many of the provisions are effective, states will need to accelerate their efforts to comply. A major priority of the states that do plan to comply will be the establishment of health insurance exchanges. Currently 14 states have established a state exchange. Louisiana, Maine, and New Hampshire have decided not to create an exchange. The other states are either in the process of evaluating options (or waiting for the November elections).

Impact on Employers

The decision means that employers must continue to prepare for the ACA requirements. We expect guidance to be issued by various government agencies on a number of outstanding issues such as how part-time employees will be defined and how “minimum value” will be determined.

Employers will need to pay attention to the following in order to prepare:

  • Comply with the form W-2 reporting requirements for the 2012 tax year
  • Receive and apply any Medical Loss Rebates associated with the 2011 plan year
  • Ensure that the $2,500 FSA maximum is applied properly beginning in 2013
  • Finalize and distribute the Summary of Benefits and Coverage information for the 2013 open enrollment
  • Update Summary Plan Descriptions to include any changes required by the ACA

In addition to the items above there are a number of other requirements that are effective in 2013 and 2014. Sentinel is committed to working with our clients to monitor further developments and provide them with assistance and information in order to comply with these regulations. Many of the provisions of the ACA do not substantially affect our Massachusetts clients since Massachusetts already has an exchange in place and already has many of the components of the ACA in effect. Most of our clients have already amended their cafeteria plans to comply with the new regulations and are working with their insurance carriers to finalize their documentation and the summary of benefits for the upcoming open enrollment. If you have any questions, please contact your Relationship Manager.