Healthcare Reform: Prepare for a Reporting Onslaught

Contained within the many pages of the Patient Protection and Affordable Care Act are numerous provisions outlining new disclosures required of nearly all companies.

Among them: reporting the value of employees' healthcare benefits on their Form W2s; providing employees with a summary of their benefits coverage and informing them of the health insurance exchanges; and informational reporting on the healthcare coverage the company offers for each employee.

By now, most compliance and benefits executives know the recordkeeping and reporting requirements of ACA are both voluminous and complex. “They drastically increase plan administration,” says Adam Solander, a Washington D.C.-based associate in the healthcare and life sciences practice with the law firm of EpsteinBeckerGreen.

Moreover, the ACA applies to an extraordinarily wide swath of employers and group health plans. That's a shift from historical precedent; past legislation involving similar mandates often would exempt plans for such groups and non-profits or very small companies, says Andrea Bailey Powers, an employee benefits attorney at law firm Baker, Donelson, Bearman, Caldwell & Berkowitz. “The Affordable Care Act didn't do that for fairly obvious reasons: The goal is to achieve universal coverage,” Powers says. Meeting the requirements can be challenging for smaller organizations that typically haven't had to respond to this type of regulatory and administrative oversight, she adds.

In addition, guidance on the disclosure requirements has been issued in fits and starts, and deadlines have shifted. The biggest shift came in July, when the deadline for compliance with ACA requirements to provide information on all employees and the health options companies provide them—administered by the Internal Revenue Service—were extended one year to January 2015. The delay was so unexpected, Shawn Gilman, an associate in the healthcare and life sciences practice at EpsteinBeckerGreen, thought the first reports of the deadline extension were a result of news organizations being “pranked.”

Despite the challenges the disclosure requirements can impose, organizations need to do all they can to implement them, or risk fines and penalties that can quickly add up. For instance, companies that don't provide a Summary of Benefits and Coverage as required can be fined up to $1,000 per health plan participant.

Given that some disclosures will help determine who may be eligible for healthcare through the exchanges, the government appears intent on checking the information companies provide. Amy Bergner, a healthcare consultant and managing director in PricewaterhouseCoopers' human resources services practice says she's seen an uptick in audits of group health plans by the Department of Labor. Many examiners are looking specifically at the mandates outlined in the ACA, she adds.

W-2 Disclosures

One of the first disclosure requirements under the ACA hit employers who issued at least 250 Form W-2s. Starting with the W-2s issued for 2012, they had to report the value of each employee's healthcare coverage in Box 12 of the form.

From what Powers observed, most employers were able to meet the rule. She notes that many of the companies affected tend to use outside payroll services or have sophisticated software systems, allowing them to make the change fairly easily.

The delay “gives both government agencies and employers more time to articulate the rules and implement the system changes.”

—Julie Barnes,

Executive Director,

Breakaway Policy Strategies

Still, meeting the new requirement involved a fair amount of work. Employers first had to determine exactly what to report. While major medical coverage is included in the total, for example, dental plans are optional. In addition, the amounts could vary by employee, depending on the plan each selected, notes Kathryn Bakich, senior vice president and national healthcare compliance practice leader with the Segal Company.  “It has to be individualized for each employee.”

For many companies, compliance also required greater coordination and communication, Bergner says. Many had to link the internal departments that manage employee data with service providers that handle W-2 forms. In addition, companies needed to communicate to employees what the number represented and why it was being reported to the IRS. Many companies, for example, emphasized that even though this amount was appearing on their W-2s, it wasn't taxable.

Some companies welcomed the disclosure, since it helps communicate the value of health benefits that companies provide employees. It “was an opportunity to underscore the fact that the employer was providing a valuable benefit,” Bergner adds.

Summary of Benefits and Coverage

Another disclosure requirement already in effect for many group health plans and health insurance issuers requires them to provide a summary of benefits and coverage (SBC), to applicants, enrollees, and policy or certificate holders. This provision kicked in with the first open enrollment period on or after Sept. 23, 2012, Powers says.  

According to an FAQ issued by the Department of Labor, an SBC should “accurately describe the benefits and coverage under the applicable plan or coverage.” Powers describes it as a quick reference guide employees can use to understand their coverage.

For the majority of healthcare plans that either are fully insured or administered by a third-party administrator, the insurers or TPAs often took on the role of drafting the SBCs for employers, Powers says.  In addition, the Labor Department provided a template plan sponsors or insurers could use.

WHO OFFERS BENEFITS?

The chart below from the Kaiser Family Foundation and the Health Research * Educational Trust shows the percentage of firms offering health benefits from 2008 to 2013.

Sources: The Kaiser Family Foundation; The Health Research & Educational Trust.

Even so, assembling information in the specified format and language initially required “was a big lift,” for some companies, Bergner says. For instance, some employers had to combine information from their health plans and prescription drug plans to produce an accurate SBC. “It created an additional layer of complexity,” she says.

Another disclosure requirement that will affect many employers this year comes via Section 1512 of the Affordable Care Act, or “Employer requirement to inform employees of coverage options.” This provision requires employers to provide a notice to employees of the coverage options available through exchanges.

According to guidance issued by the Labor Department earlier this year, no later than Oct. 1, 2013—the start of open enrollment for the exchanges—employers must provide an exchange notice to each employee. The notices must be available at no charge and written in language the average employee can understand.

This requirement may catch some employers off-guard, as it applies even to many companies with fewer than 50 employees, as well as those that don't offer their own health plans. In addition, the notices need to be issued to full- and part-time staff, whether or not they receive healthcare through the employer.

The government has provided templates for the notices, including one for firms that offer their own healthcare plans and one for those that don't. Employers that use the government form may have an easier time if they're audited, Bakich notes. Many companies are using the government form, then adding a cover letter they write themselves, she says. 

A Welcome Reprieve

Big Pharma Not Taking Sunshine Act Lightly

Along with the many disclosure provisions that companies in all industries face, many firms in the pharmaceutical and medical device industries also need to comply with Section 6002 of the Affordable Care Act, known as the “Sunshine Act,” even though it is just a part of the law.

This requires many manufacturers of drugs, medical devices, and other medical products to report yearly to the Centers for Medicare and Medicaid Services any “transfers of value” to physicians and teaching hospitals. The companies also need to provide information on investment or ownership interests in these companies by physicians or their families.

Companies had to start collecting this data at the start of August and will need to begin reporting it by March 31, 2014. The data will be published on a public Website starting in September 2014.

Most larger pharmaceutical and medical device companies have begun implementing solutions and should be well positioned to comply with the provision, says Todd Kerr, managing director at Deloitte's governance, regulatory, and risk strategies practice, working with healthcare companies. “The big players are ready.”

That's key, given that a company executive will have to sign off on the completeness and accuracy of the data, says Jonathon Kellerman, principal with PWC's U.S. pharmaceuticals and life sciences practice. “No executive wants to sign without some level of comfort.”

Collecting and checking the data, while critical, are only parts of the process. Equally important is managing the disclosure of the information to the healthcare providers and patients with whom they work, Kellerman notes. Inaccurate or incomplete data may harm those relationships.

—Karen Kroll

The disclosure and reporting requirements that have garnered the lion's share of attention, especially recently, concern those under Internal Revenue Codes 6055 and 6056, which requires employers to report on health insurance coverage. These rules also are known as the “pay or play” provisions because they can impose penalties on employers with 50 or more full-time equivalent employees that don't make health coverage available that is considered affordable and of minimum value under the ACA.

Essentially, these provisions require companies to report, to both the government and their employees, the healthcare options they offer. This information will help the government determine who is eligible for coverage and subsidies through the exchanges.

The provisions had been scheduled to go into effect Jan. 1, 2014, with the first reports due in 2015. In notices that appeared to catch even the most attuned regulatory observers off guard, the deadlines were pushed back one year in early July. “I don't know anyone who knew about this,” says Julie Barnes, executive director with Breakaway Policy Strategies, a health policy firm.

At the same time, the change “was a very welcome shock,” Solander says. He points out that the regulations to implement the rules, as well as any forms that companies could use, had yet to be issued. Given the complexity of the provisions, clear, detailed instructions are critical for employers to have any hope of accurately complying with them. 

This July report from the Congressional Research Services, “Potential Employer Penalties Under the Patient Protection and Affordable Care Act” describes some of the reporting required: “a return including the name, address, and employer identification number; a certification as to whether the employer offers its full-time employees (and dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; the length of any waiting period; months coverage was available; monthly premiums for the lowest-cost option; the employer plan's share of covered healthcare expenses; the number of full-time employees; and the name, address, and tax identification number of each full-time employee.”

                     ABOUT THIS SERIES

Compliance Week's exclusive four-part series on healthcare explores how corporate compliance will intersect with healthcare reform. It examines both the pragmatic and the philosophical sides of healthcare reform for businesses—both public and private—outside the healthcare sector.

Part 1: Fuzzy Math: Calculating the Compliance Costs, Oct. 1Part 2: Healthcare Reform: Prepare for a Reporting Onslaught, Oct. 8Part 3: How Healthcare Reform Is Affecting Coverage Options, Oct. 16Part 4: Meet the Enforcers of Health Reform Regulations, Oct. 22

Meeting these demands will require many employers to assemble information from various information systems, as well as from employees. The delay “gives both government agencies and employers more time to articulate the rules and implement the system changes,” Barnes says. 

While the deadline postponement offers some much needed breathing room, it would be foolish for most employers to take a break in their efforts to comply with the ACA. “The worst thing you can do is stop,” Solander says. Instead, employers want to continue moving forward with their systems' implementations and testing.

For the last few years, most companies have been “drinking from a fire hose,” Gilman says, when it comes to absorbing information on healthcare plans and disclosure requirements. They can use the delay to review and possibly adjust the decisions they've made so far, audit the systems they've put in place and try to prepare for future guidance and requirements.

Employers can also take time to engage, probably through trade associations, their regulators and congressional representatives, Gilman says. That way, the final regulations are more likely to reflect their concerns and insight.

As Barnes notes, the ACA is transforming the healthcare system on multiple levels. “This is more over-arching than Medicare by far. It deals with every American, every employer, and reflects every industry stakeholder,” she says.

While employers received a temporary break, a great deal of work remains.