Last week, the Internal Revenue Service (IRS) issued Notice 2011-1, which delays until at least 2012 the effective date of nondiscrimination rules made applicable to fully insured non-grandfathered health plans under the Patient Protection and Affordable Care Act (PPACA). On the same day, the Departments of Health and Human Services, Labor and Treasury also released new guidance on the PPACA and the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The most important features of these releases are summarized below.
IRS Notice 2011-1 essentially provides an enforcement safe harbor in that there will be no enforcement of the new nondiscrimination rules for non-grandfathered insured plans until the first plan year after regulations are issued. Since guidance will not be issued prior to 2011, the earliest these provisions could become effective would be January 1, 2012. This also means that employers will not be required to file IRS Form 8928 with respect to excise taxes prior to the date required for compliance with the new nondiscrimination rules.
Note that the IRC’s nondiscrimination rules under 105(h) will continue to apply to self-insured group health plans including grandfathered plans. The regulatory relief announced in the Notice only affects insured group health plans.
The issuance of Notice 2011-1 means that for health plan provisions, as well as provisions touching on healthcare in employment contracts and separation agreements that extend into 2011, employers will not have to worry about the new nondiscrimination rules. This does not, however, impact plans, employment contracts and separation agreements with insured plan subsidies extending into 2012, nor does this Notice provide any relief from current nondiscrimination rules under self-insured medical benefit plans
Last week, the DOL and HHS also issued Part V of FAQs regarding implementation of the PPACA. The FAQs provide the following guidance:
- A plan may charge a higher copay for a service provided in an in-network hospital than for the same service provided in an in-network ambulatory center;
- A plan may make distinctions in coverage based on age without violating the rules on providing dependent coverage to age 26 as long as the distinction applies to all coverage under the plan;
- In certain cases, an insurer may screen applicants for eligibility for alternative coverage options before offering a child-only policy;
- Grandfathered health plans that determine cost-sharing based on a percentage-of-compensation formula will not lose grandfathered status if the formula is unchanged even though this may lead to cost increases in excess of the cost increase thresholds in the regulations; and
- In line with other agency extensions of compliance deadlines due to a lack of regulatory guidance, the FAQs addressed two areas where employers will be provided with some relief. First, the Employee Benefits Security Administration (EBSA) has responsibility for rulemaking for a new requirement that large employers automatically enroll new full-time employees in the employer’s health plan. Until EBSA issues regulations under this new section of the Fair Labor Standards Act, however, employers will not be required to comply with this rule. Second, group health plans will not be required to comply with the 60-day notice requirement for material plan modifications under section 2715 of the Public Health Service Act until the federal agencies provide standards on benefits and coverage explanations.