Employee benefits attorneys continue to advise clients on Obamacare, say more guidance is needed

Bethany Krajelis Sep. 17, 2012, 8:47am







CHICAGO (Legal Newsline) - A lot of employers waited for the U.S. Supreme Court to issue a ruling over the Affordable Care Act (ACA) before they started making major decisions.

While that might have made more than perfect sense given that its constitutionality was up in the air, many attorneys who focus their practices on employee benefits are now telling their clients not to hold their breath when it comes to the November General Election.

"I think no matter what happens in the election, a lot of these changes are here to stay," said Robert Christenson, chair of the employee benefits practice group at Fisher & Phillips in Georgia. "To be realistic here, employers need to bite the bullet and treat this law like it's going to be here after the election."

While President Barack Obama pushed the new law as a top priority of his first term in the White House, Mitt Romney, his Republican opponent in the upcoming election, has said he wouldn't mind repealing portions of the law that has been dubbed Obamacare.

Penny Wofford, a shareholder at Ogletree, Deakins in South Carolina, said although some employers may look at the upcoming presidential election as something that could change the fate of the ACA, she tries to keep her clients focused on complying with the law that is in place today.

"There's not enough time to wait and see how the election plays out," Wofford said. "We are right at the end of 2012. We need to do things now and in 2013 to prepare for Jan. 1, 2014. There's really only a year left. If you wait until after the election, you just won't have enough time."

The ACA was signed into law in 2010 and set staggered deadlines for individuals, businesses and health care systems to comply with a variety of changes, some of which have already been implemented.

Many employee benefits attorneys have been working with their clients since before the law even passed and continued to do so throughout the court challenge that ended in June, when the U.S. Supreme Court upheld the law's individual mandate requirement, as well as other provisions.

Getting started

Janice Anderson, a shareholder at Polsinelli, Shughart in Chicago who represents clients in the health care industry, said one of the most common client questions she has heard over the past two years is "Where do we start?"

Given that the ACA is laid out in more than 2,000 pages of legislation, Anderson said it's a legitimate question.

Although her answer varies depending on the client, Anderson said the most consistent piece of advice she gives to clients who may have waited until the court issued its ruling is to start preparing to meet the law's staggered deadlines.

Many provisions of the ACA have already have been implemented, such as changes in payment and delivery methods, providing free preventive care, extending coverage to young adults and prohibiting the denial of coverage to youth with preexisting conditions.

But, there are many more deadlines for her clients, as well as those on the employer side on the matter, to meet over the next few years, Anderson said.

"A lot of changes are going to take place over the next few years," she said. "These are fairly large fundamental changes and they are really changing the relationship between hospitals and physicians, how they work together and of course, how they are going to get paid."

On the employer side, Nancy Campbell, a shareholder at Snell & Wilmer in Arizona, said she has been advising her clients to focus on the short term.

The next deadline to meet, Campbell said, is later this month, when employers need to have their summaries of benefits and coverage complete.

Although many employers previously provided a description of their benefits and coverage (SBC), the new law requires them to provide employees with a summary that will allow them to better compare their options.

This change, Anderson said, "has created a lot of busywork."

Some of her clients' insurance companies have been working for months to prepare these summaries. If employers aren't finished or currently putting the final touches on their SBCs, Anderson said they need to hurry up so they can meet the deadline and be ready for their next open enrollment periods.

Harvey Cotton, a principal at Ropes & Gray in Massachusetts, said right now, his clients are focused on meeting the upcoming SBC

"Everyone is busy making sure that those are well in hand and a process is in place for distribution," Cotton said. "That's the No. 1 issue right now."

Once that is complete, Cotton said he has told his clients to ensure their payroll departments or vendors are prepared to report the coverage cost of their health plans on their employees' W2 tax forms.

This new reporting requirement needs to be completed on 2012 forms, which typically get sent out to employees in 2013, when Cotton said a new cap on flexible spending accounts will be implemented.

William Sweeney, a shareholder at Polsinelli, Shughart in Chicago, said since he has been advising his employer clients on the law since it first passed, his biggest advice following the court's ruling has been "to stay on course."

Many of his clients have already implemented or at least have been working on meeting this year's deadlines under the ACA, such as modifying documents and changing their benefit structures.

"It's really been an ongoing process since March of 2010, but I've been regularly following up and keeping clients up to speed," he said.

Looking ahead

Now that 2012 is coming to an end, he said, employers need to look ahead and start preparing for next year and gear up for 2014, which he said "will be the big year" for changes under the ACA.

By the time 2014 rolls around, Sweeney said employers will have to decide whether they are going to "pay or play" when it comes to the law's provision requiring employers to either offer health care benefits to their full-time employees or to pay a $2,000 penalty per employee for not doing so.

Sweeney said many of his clients have already begun crunching the numbers and analyzing a variety of factors in order to reach a decision ahead of the deadline so they can start preparing.

The penalty is just one factor in this decision, he said.

Christenson said he has advised his clients to start thinking strategically in anticipation for 2014. He said when it comes to the "pay or play" provision, his clients' analyses vary depending on what kind of industry they belong to.

Campbell agreed and said she tells clients who may be on the fence about this provision to seek out the help of a benefits consulting firm. Even if an employer thinks it knows how it will act, she said having a consulting firm crunch the numbers couldn't hurt.

Wofford said when it comes to the ACA's "pay to play" provision, many of her clients have decided to offer benefits to not only avoid the penalty, but to attract and retain employees.

Like Christenson, Wofford said discussing this provision with her clients differs based on their industry.

For instance, Wofford said the hospitality industry hasn't typically offered employees health coverage. That, she said, might change employers in this industry after they sit down, classify their employees' statuses and crunch the numbers.

Doug Neville, a St. Louis attorney who leads Greensfelder's employee benefits practice group, said details and advice on the "pay to play" provision is one of the most common questions he gets from clients, along with whether plans meet grandfather requirements under the ACA.

Although some employers considered getting rid of their health plans and taking the penalty when the law was first passed, Neville said he has not heard any of his clients talking about doing so lately.

Waiting for guidance

Like many attorneys advising clients on the ACA, Neville said there are still a lot of questions over the new law that requires regulatory guidance in order for employers to be able to make informed decisions going forward.

While guidance on the definition of "full-time employee status" came down just last week, Neville said there is still some uncertainty over what is considered "part time" for purposes of the ACA.

Campbell agreed. Because both full and part-time employees are calculated to determine whether an employer meets "large employer" status under the ACA, Campbell said employers need guidance on what exactly part-time is so they make sure to comply with the changes.

To avoid penalties, the ACA will require employers to provide coverage to substantially all of their employees by 2014.

Misclasifying employees, Campbell said, could create some confusion for tax purposes and possibly lead to penalties.

"There are still some very important questions that need to be answered," she said, adding that many are still unclear over what constitutes "substantially."

Cotton said his clients have also asked him about the definition of part time status.

He said some employers have always classified employees who work 30 hours as part time and as such, haven't provided coverage. That, he said could change depending on the definition under the ACA.

"We're getting lots of definitional questions and this is why the guidance that just came out and expect will continue to come out is so important," he said.

In addition to waiting for more guidance, Cotton and Christenson both said employers should also be aware of the ACA's non-discrimination provisions that address plans that provide better benefits for highly compensated employees and executives.

Christenson said in the past non-discrimination rules applied to self-insured plans, but that under the ACA, they will apply to insured plans as well.

"A lot of employers just suddenly realized that," he said. "That's
going to be a big game changer."

Cotton agreed and said the ACA's nondiscrimination provisions could have a significant impact on the way certain employers structure their benefits for executives.

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