Self-Funded: When It Comes To Healthcare Reform, Don’t Forget About Reporting Requirements

There is a lot to consider when wading through the reams of regulatory provisions associated with healthcare reform – immediate and eventual insurance market reforms, grandfathered plans, the individual mandate, health insurance exchanges, pay or play provisions, etc. From an administrative standpoint, this new law is likely to increase an employer’s burden as well. The need to produce health trend analysis is not going away. There is the need to produce customized reports along with the new reporting requirements of healthcare reform. So, it’s critical that employers are positioned for success now so they can comply with the law and serve their employees as the mandates of this new law continue to take effect. Let’s take a closer look at new W-2 reporting requirements under this new law. Employers will be required to disclose the aggregate cost of the applicable employer-sponsored coverage they provide to their employees annually. (An exact date has not been defined through regulations.) The aggregate cost reported is to be determined under rules similar to COBRA regardless of whether the employer or employee pays for the coverage. Employers will use the COBRA valuation of their employees’ benefits on the W-2 form (minus the 2% COBRA surcharge). Applicable employer-sponsored coverage does not include the following:

• Employee salary reduction contributions to a flexible spending arrangement (FSA) under a cafeteria plan.

• Contributions from an employee or an employee’s spouse to an Archer medical savings account or health savings account.

To further complicate matters regarding FSAs, employer contributions will be counted and reported. In sum, the law only requires the employer to provide reporting about the aggregate cost of employer-sponsored health insurance coverage. It does not mandate a specific breakdown of the different types of medical coverage. For example, an employee who is enrolled in employer-sponsored health insurance coverage, through a medical plan, a dental plan, and a vision plan, is required to report the total cost of the combination of all of these health related insurance policies. Other areas of the new law also require employers to adapt to new reporting requirements. Beginning in 2014, large employers (more than 50 full time employees) will be required to report to the Secretary of the Treasury whether they offer full time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer sponsored plan. The employer must provide details about the coverage being offered. Employers must provide the number of full-time employees for each month during the year including their names, addresses, and taxpayer identification numbers. They must also provide the months, if any, when these employees and any dependents were covered under a health benefit plan. The report must be provided to the Secretary of Treasury. Also, a written copy must be furnished to the individual who is the subject of the report.

The following type of data is required for the report:

• The length of any waiting period imposed upon employees before eligibility under the plan.

• The months, during the calendar year, for which coverage was available.

• The monthly premium for the lowest cost option in each of the enrollment categories under the plan.

• The employer’s share of the total allowed costs of benefits provided under the plan.

• The option for which the employer pays the largest portion of the cost of the plan and the portion of the cost paid by the employer in each of the enrollment categories under that option.

Meeting these requirements will be very difficult, extremely timely, and costly to produce. The delivery of health benefits is rapidly changing, as are the reporting requirements and reporting needs of employers. Employers should make sure they understand exactly what is required under the law and they should work closely with their third party administrators or insurance providers to ensure they are using cutting-edge technologies to comply with these new requirements.

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