Most U.S. employers are fully aware of the risks associated with their employer-sponsored medical plans and the full implementation of health care reform.
However, employers are currently focused on the risk of potential penalties around minimum value and bronze level plans and the risk of discrimination looms unnoticed on the horizon.
This risk, NOT often discussed concerning health care reform, is tied to the ultimate implementation of the nondiscrimination rules for non-grandfathered insured plans. PPACA prohibits insured plans from discriminating in favor of highly compensated employees (HCEs). These PPACA provisions—PHSA § 2716 as added and amended by PPACA, Pub. L. No. 111-148 (2010)—provide that the rules will be similar to those under IRC Section 105(h) that currently apply to self-funded plans.
The hidden risk is that many employer plans may be discriminatory. However, even if all employees are offered the same coverage and options, employers often make concessions for many HCEs. This may include waiving waiting periods, or charging less for the same coverage. Other ways employers might discriminate is to provide certain HCEs extended COBRA, or pay the COBRA premiums. Those types of accommodations could potentially be discriminatory.
The penalty for violating the prohibition will be $100 per day for each individual who is discriminated against (likely all the rank and file non-HCEs). The IRS has not yet released regulations but they are expected by 2014, which does provide employers a window of opportunity to mitigate the risk by identifying and amending potentially discriminatory programs, and to avoid the potentially damaging penalties.
While guidance issued on December 28 by the federal agencies has made compliance with many other requirements of health care reform much less problematic, this risk is still one that employers need to keep in view.