PPACA requires that group health plans modify their coverage to comply with the mandates set forth in Subtitle A and Subtitle C of Title I of the Act. These provisions generally amend the Public Health Services Act (“PHSA”) and are incorporated by reference into § 715 of the Employee Retirement Income Security Act of 1974 (“ERISA”) and § 9815 of the Internal Revenue Code of 1986 (the “Code”). Among other things, group health plans are required to extend coverage to adult children until the age of 26 (PHSA § 2714), must eliminate certain annual limits and all lifetime maximum limits on coverage of essential benefits (PHSA § 2711), and, beginning in 2014, will be prohibited from establishing waiting periods that exceed 90 days (PHSA § 2708).
By adding these coverage mandates to the PHSA, ERISA and Code, Congress effectively allocated enforcement authority for PPACA’s insurance market reforms and coverage mandates between the Department of Health and Human Services (HHS), Department of Labor (DOL), and the Internal Revenue Service (the “IRS”). In addition, participants have a private right of action to enforce PPACA. More specifically, the PPACA coverage mandates are enforceable as follows:
- Code/IRS: The IRS has the authority to assess excise taxes upon group health plans that do not comply with the coverage mandates. For group health plans, the penalty tax upon a non-complying plan sponsor is $100 per day of noncompliance per affected individual, and the violations must be self-reported to the IRS on IRS Form 8928. The tax may be higher where violations occurred or continued during a period under IRS examination or where the violations are more than “de minimis.” The tax does not apply where the failure was based on reasonable cause and not to willful neglect and the failure is corrected within 30 days after the person knew or should have known that the failure existed. Even if not corrected, if the failure was due to reasonable cause and not willful neglect, the tax imposed may not exceed the lesser of 10 percent of the amount paid to provide medical care during the taxable year or $500,000. In the case of a multiemployer plan, the tax is levied upon the plan itself. There is an exception for small employers with between 2 and 50 employees.
- ERISA/DOL: DOL may enforce the coverage mandates against group health plans by bringing a civil action to enjoin a noncompliant act or practice or for appropriate equitable relief under part 7 of ERISA. ERISA also provides a private cause of action by which participants, beneficiaries, and fiduciaries may sue plan fiduciaries to enforce Part 7 of ERISA (into which the PPACA reforms are incorporated by reference).
- PHSA: There may be civil money penalties of $100 per day per individual discriminated against for each day the plan does not comply with the coverage mandate (capped at 10 percent of the aggregate amount paid or incurred by the employer during the preceding taxable year for the group health plan or $500,000, whichever is less). This penalty appears to be limited in this context to non-federal governmental group health plans.
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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html
Contributors:
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.