Regulators Give Firms Grace Period for Health Law

Employee Benefits

Regulators Give Firms Grace Period for Health Law

The government will also clarify some key provisions in the law.

Companies grappling with deadlines associated with the new health care law will get a reprieve of sorts. Regulators will give employers and insurers a six-month grace period for some rules set to take effect Jan. 1. Firms won’t be penalized during the grace period if they are moving to comply. “This is an important step in the right direction,” says James A. Klein, president of the American Benefits Council, one of the employer groups that have been lobbying for more time to comply.

On Oct. 13, the IRS said it would hold off for a year on a requirement that businesses include the value of the health care benefits they provide to employees on W-2s. Employers may voluntarily start reporting the value on W-2s for 2011 – those issued early in 2012 -- but they won’t be required to do so until the 2012 forms are issued. The amount reported is not considered taxable income.

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Other key easings involve internal claims and appeals standards. The grace period will delay a rule requiring insurers to make urgent care decisions within 24 hours instead of the current 72 hours; another requiring that firms give workers more information when claims are denied; and a third stating that communications be made in a “culturally and linguistically appropriate manner.”

Also, a softening of rules affecting external appeals for self-insured companies. Regulators are backing away from a requirement that self-insureds with nongrandfathered plans contract with at least three independent review outfits to handle final benefit appeals. Employers with self-funded plans will be allowed to have their third-party administrators do the contracting.


Clarification on rules requiring coverage of kids up to age 26 is included as well. Many companies voluntarily offer coverage to employees’ grandchildren, nieces and nephews if certain conditions are met, such as financial dependency or guardianship. Regulators will allow employers to continue to impose such restrictions without running afoul of the law.

Coming soon: Allowing firms to change carriers and keep grandfather status. Regulators are likely to modify an earlier plan to treat a change in carriers as an automatic reason to end grandfather status. The concern was that such a requirement would lock companies in with a carrier and stifle competition.