ANOTHER DELAY TO ACA....THIS TIME: NON-DISCRIMINATION

On January 1, 2014 one of the provisions that was to go into place was taking away the ability of companies to discriminate towards highly compensated employees as it relates to health insurance.  In other words companies were/are able to offer richer plans or pay more towards the cost of health plans for those top earners in an organization.  Under the ACA that would not be allowed starting this year.  However, no penalties will be applied until the IRS offers guidance on the rule.  Since this hasn't happened yet, there isn't  anything that would prevent companies from continuing the practice.  It's becoming more and more apparent that nobody was ready for this law to be implemented.    

Thou Shalt Not Discriminate. Wait.......You Can For Now But...

Under Health Reform (PPACA) and effective on your company's first health insurance renewal after September 23, 2010, employers may not discriminate in favor of highly compensated employees.  However, this applies to health plans that have lost "grandfathered status" under the rules defined in the Health Reform Law (PPACA).  You may recall in previous posts that when an employer loses grandfathered status they are then subject to many rules under the Health Reform (PPACA), including not discriminating in favor of highly compensated employees.

 Your health plan will lose grandfathered status and become non-grandfathered if:

1. Employer significantly raises co-pays.  This is the greater of $5 or Medical inflation +15% 
2. Employer significantly raises deductibles.
3. Employer significantly lowers employer contributions. Can't decrease percentage by more than 5%
4. Employer Raises Co-Insurance
5. When PPACA first arrived employers couldn't change health plans, even if it was better coverage, without losing grandfathered status but this has since been rescinded.....probably because it didn't make any sense.

For the most part, it seems, many/most employers will eventually lose grandfathered status simply because it will become increasingly difficult to maintain current levels of coverage while maintaining their contribution levels. 

Therefore, under section 2716 of the Public Health Service Act (PHS) under the PPACA, it provides that a group health plan must satisfy the requirements of section 105(h) of the code. What this section essentially states is that a health plan does not discriminate in favor of highly compensated individuals as to eligibility to participate or benefits provided under the plan. 

Failure to comply with the code could result in a civil action to force employer groups to comply, and/or an excise tax of $100 per day per individual discriminated against and/or civil penalty of $100 per day for each individual discriminated against.

Some side thoughts........

This could be a good thing for many employees:  If you are an employee of a company, and you know that significant changes have been made to your health plan, first renewal after September 23, 2010, chances are you should be paying the same cost for your health care as everyone else in your company.

This could be a bad thing for some business owners:  If you are an owner of a company who has taken a risk to get it started, has provided jobs to many people, possibly put their own livelihood on the line, shouldn't that person possibly be rewarded by the company paying a larger percentage of their health care costs?

But Wait, There's More! 

The IRS on December 22, 2010 just announced in notice 2011-1 that compliance with the Non-Discrimination rules will be "Delayed" until the regulations or other administrative guidance has been issued.  The IRS said that plans would not be subject to the Non-Discrimination rules until plan years following  the issuance of the guidance.