In preparing for 2014, make sure you consider the changes in the benefits your practice may offer.
As we approach the end of the fiscal year, it’s important for physician practices to determine how changes in the law that go into effect in 2014 may affect their practices.
One big area to assess: Changes in the benefits your practice may offer its employees. Here are two of the biggest changes to consider:
1. Medical Expenses Reimbursement Plans (MERP). The Affordable Care Act (ACA) broadly defines a group health plan to include medical expense reimbursement plans and prohibits a group health plan from placing a limit on annual or lifetime benefits. In the case of a MERP, this new rule (with limited exceptions) will prohibit a MERP from capping the amount of medical expenses which can be reimbursed or paid. This creates a substantial risk to an employer, as the potential cost for reimbursements under the MERP would be open-ended.
There are limited exceptions to this new rule. First, a MERP which only covers a single participant can still impose an annual limit on benefits. Since a MERP generally must cover at least 70 percent of employees who have met the minimum age and service requirements contained in IRS Code Section 105(h) (i.e., three years of service and age 25), few employers will be able to utilize this exception.
Second, a MERP is not precluded from placing a limit on reimbursements if it’s “integrated” with a group health insurance plan. The IRS and Department of Labor recently issued guidance on how such integration can be achieved:
a. The employer must offer group health insurance that does not consist solely of excepted benefits. (Examples of "excepted benefits" are limited dental and vision benefits and long-term care insurance.) Most group health policies that provide comprehensive benefits will satisfy this requirement.
b. An employee who is otherwise eligible to participate in the MERP must actually be enrolled in a group health plan of the employer or of another employer (e.g., the group health plan of the employee’s spouse).
c. Participants in the MERP must be provided the opportunity to opt out of participation in the MERP annually or the opportunity to permanently opt out of participating in the MERP.
d. If a MERP is integrated with a group health insurance plan, the reimbursements permissible under the MERP depend upon whether the group health plan provides "minimum value." A group health plan provides minimum value if it pays at least 60 percent of the total cost of medical services for a standard population. While there are numerous ways to determine if a group health plan provides minimum value, the plan must disclose annually whether it meets "minimum value."
Reimbursement under a MERP integrated with a group health plan which does not provide minimum value must be limited to copays, coinsurance, deductibles, premiums, and medical care that does not constitute "essential health benefits" (defined to include items and services such as emergency services; maternity and newborn care; mental health and substance use disorder services, etc.). If the MERP is integrated with a group health plan that provides minimum value, the MERP may reimburse out-of-pocket medical expenses and impose an annual limit on those reimbursements.
Employers who maintain a MERP with more than one participant, which is not integrated with a group health insurance plan, will have to terminate the MERP by the end of the current plan year or eliminate the maximum annual limit on reimbursements. MERPs which can be integrated with a group health plan will need to be amended to incorporate changes required to achieve integration.
2. Employer Reimbursement of Health Insurance Premiums. A 1961 IRS ruling permits employers to reimburse an employee on a pre-tax basis for the employee’s individual health insurance policy premiums. Beginning in 2014, the ACA prohibits an employer’s reimbursement or payment of premiums for individual health insurance policies on a pre-tax basis. This change will greatly affect many physician practices.
In preparing for 2014, make sure you consider the above changes in the benefits your practice may offer. These items are ones that will impact the practice’s employees and must be addressed before the end of the year. Contact your legal and financial advisers in order to assure full compliance.