At the risk of understatement, the Patient Protection & Affordable Care Act (PPACA) has many created many challenges and opportunities. In certain circles, it has been referred to as a hurricane of compliance. While not many would argue that point, the jury is still out whether this Act will either protect the patient or provide affordable care as it is intended. Until then, HR and Benefits Professionals are trying to keep their heads above water and learn as much as they can about the compliance hurricane named Healthcare Reform. Many of the PPACA mandates will, on their surface, appear administratively onerous and some question their individual value. However, as noted above, with each challenge also comes an opportunity. In the case of the upcoming mandate for employers to report the cost of employer-sponsored group health coverage on Form W2, I believe such an opportunity exists and it hinges on effective communication of these newly reported amounts. Think of it as making lemonade out of the government’s recently delivered lemons. As way of a quick overview, beginning with 2012 (for employers > 250 EEs; a year later for everyone else), W-2s issued in January 2013 for 2012 income require employers to report the cost of coverage under a group health plan. More specifically, according to the IRS, employers must report the total cost of all “applicable employer-sponsored coverage” provided to an employee. Applicable employer-sponsored coverage, says IRS, “is coverage under a group health plan that the employer makes available to the employee that is non-taxable to the employee.” There are several exclusions, including contributions to HSAs, employee contributions to FSAs and the costs for items like Long Term Care insurance and stand-alone dental and vision coverages. Click here for additional information on the mandate: IRS Notice 2011-28 So, given all of this, it begs the question as to why our legislators felt compelled to include this mandate within the Act. Will it protect the patient and/or provide affordable healthcare (the 2 P’s, the A and the C of PPACA)? The answer, as is typically the case, can be found not in the mandate itself but in the execution – and by execution, I mean communication – of the mandate. Without effective communication to the employees about this change, the everyday person will see that amount on their W2 and assume they will be taxed on it. Why else would the IRS want to know the cost of my group health coverage, they’ll ask. If this is the outcome, then this mandate will certainly have backfired on the original objectives. Quite frankly, without effective communication, this will be the outcome. It will have backfired. Employers will be simply frustrated by additive work required by the mandate. Employees will be confused. No value will have been delivered. We’ll be stuck with a bunch of lemons. However, if an employer can effectively communicate to the employee what the number is in Box 12, code DD, then there is hope that it will deliver on its intended objective of helping employees better understand the cost and value of their healthcare and employees may begin to make better decisions as a result. If my assumption is correct in that 9 out of 10 employees have absolutely no sense for the value of their employer-sponsored benefit program, then the government has actually provided us with a (relatively) easy means to close that gap. Think of it as a poor-mans total compensation statement, which is intended to help shine a bright light on the total value of compensation, inclusive of benefits. It is incumbent on employers and the advisors who consult them to ensure compliance with PPACA. However, it is equally important for the employer and consultant to ensure that employees are made aware of these associated changes so that the true value of such a mandate can be delivered. Enjoy your lemonade!
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