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Timeline: Impact of Health Care Reform on Employers |
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by
Miranda Morgan and David Ball, SZD |
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Management
Summer
2010 |
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The Patient Protection and Affordable Care Act (PPACA), better known as Health
Care Reform, signed into law in March 2010, contains a series of measures that
will impact employers over the next several years. This article summarizes
several of the more significant provisions, including the Employer Mandate,
which goes into effect in 2014. Much remains to be determined, however, as
government agencies, principally the Department of Health and Human Services,
issue regulations and interpretive bulletins to clarify the numerous unknowns.
This timeline is based on requirements for single-employer plans that operate on
a calendar year basis.
2010
· Small Business Health Tax Credit: Companies with 10 employees or less may get
a tax credit of up to 35 percent of the employer’s premium costs (25 percent for
tax exempt small employers), but only if they pay their workers $25,000 or less
and provided the employer contribution is at least 50 percent of the premium
costs. Credit is reduced on a sliding scale per employee for companies with
11-25 employees, and is reduced as the average wage increases from $25,000 to
$50,000. Companies with more than 25 employees, or that pay their employees on
average over $50,000, are not eligible. This tax credit is only available for a
maximum of five years, and only two years once the Health Insurance Exchanges
are up and running in 2014.
· Nursing Mothers: Effective immediately, employers are required to provide
nursing mothers with “reasonable break time” to express breast milk for up to
one year after the birth of their child. The Department of Labor will issue
regulations to define what constitutes reasonable break time and how violators
will be penalized. Employers also are required to provide a place, other than a
bathroom, shielded from view and free from intrusion, where nursing mothers can
take these breaks. This requirement generally applies to all employers,
regardless of size, but employers with less than 50 employees may be exempted if
this would cause an undue hardship. The PPACA does not require that this time
must be compensated.
· Early Retirees: The legislation creates a temporary reinsurance program to
assist companies that provide early retiree health insurance for ages 55-64.
Employers will be reimbursed up to 80 percent of the cost of providing coverage
to early retirees, their spouses, and dependents. Claims in excess of $15,000
and below $90,000, indexed for inflation, will be reimbursed.
· This fund will sunset on Jan. 1, 2014, or earlier if the $5 billion that has
been appropriated is depleted. Employers offering benefits to early retirees may
want to evaluate their offerings in view of this temporary program.
· Automatic Enrollment: As soon as implementing regulations become effective,
unless the employee affirmatively opts out or selects a different coverage
option, all employers with 200 or more full-time employees must automatically
enroll new full-time employees in the lowest premium group health plan coverage
option.
· Employers will need to amend their plan materials and prepare materials that
notify employees that they will be automatically enrolled unless they opt out.
2011
· Coverage for Older Children: Effective Jan. 1, 2011, persons under age 26 who
would be treated as dependents under the plan but for their age are eligible for
coverage. This is not limited to full-time students or unmarried children.
· Employers will need to remove any student eligibility requirements from their
plan documentation and enrollment materials that would otherwise apply prior to
age 26. Employers also will need to decide whether the additional cost should be
paid only by employees who request coverage for older children (if this is
permitted by the forthcoming regulations) or spread across all employees that
elect family coverage.
· Coverage Reforms: Lifetime dollar limits on “essential health benefits,” as
will be defined by forthcoming regulations, rescission of existing coverage, and
exclusion based on pre-existing conditions for children under age 19 are
prohibited. In addition, the Department of Health and Human Services will
restrict employers’ ability to impose annual limits for “essential health
benefits.” Dental and vision care will likely not be included within the
regulatory definition of “essential health benefits.”
· Employers will need to amend their plan materials to reflect these changes,
and consider whether changes in plan design are necessary to limit the increases
in premiums that would otherwise result.
· W-2 Reporting: Employers will be required to report the aggregate cost of
employer-sponsored health care benefits on the employee’s W-2.
· Employers will need to develop a process for determining this amount and
ensuring that it is reported.
· Health Savings Account Penalty: The penalty for making non-qualified purchases
from a Health Savings Account increases to 20 percent.
· Nondiscrimination Based on Salary or Wages: Eligibility for health care
benefits may not be limited based on compensation and may not otherwise
discriminate in favor of more highly paid employees.
· Employers may need to amend their plans, particularly with respect to any
special health care benefits provided to executives.
· Over the Counter Medications: Non-prescription medications (other than
insulin) can no longer be reimbursed under Flexible Savings Accounts, Health
Savings Accounts, or Health Reimbursement Accounts.
· Employers will need to amend their plan materials and change their procedures
to monitor this change.
· Federally Subsidized Long-Term Care: Employees may begin to authorize payroll
deductions for the Community Living Assistance Services and Supports (CLASS)
long-term care program. Working adults may be automatically enrolled unless they
opt out.
· Employers will need to coordinate these deductions with their payroll services
providers.
2012
· Uniform Explanation of Coverage: Group health plans and self-insured companies
must provide participants a uniform summary of benefits and coverage. This
summary may not be longer than four pages and must describe the benefits in a
“culturally and linguistically appropriate manner.”
2013
· Notice of Coverage Options: No later than March 1, 2013, employers must
provide written notice to newly hired and current employees informing them of
the availability of the Health Insurance Exchanges, how to contact the Exchange,
eligibility requirements for public assistance, and the tax consequences to the
employee of purchasing coverage through an Exchange.
· Elimination of Part D Deduction Subsidy: The employer tax deduction for the
Part D subsidy will be eliminated.
· Medicare Payroll Taxes: For those with wages and self-employment income in
excess of $200,000 ($250,000 joint), Medicare payroll taxes will increase by 0.9
percent.
· Flexible Spending Account Limits: Flexible Spending Account contributions will
be limited to $2,500 annually. This figure will be adjusted annually for
inflation after 2013.
2014
· Health Insurance Exchanges: States must establish Health Insurance Exchanges
to facilitate the purchase of qualified health plans, with a SHOP exchange that
will enable small businesses to offer a choice of plans to their employees.
· Employer Mandate: Some companies will be required to provide insurance, pay
penalties, or both. Penalties are based on the number of full-time employees;
whether the company offers coverage; and whether one or more employees qualify
for a government health care coverage premium subsidy. Individuals whose
household income is below 400 percent of the federal poverty line ($88,000 for a
family of four) are eligible to apply for the premium subsidy. Companies that
either employ 50 or fewer employees or offer insurance and no employee receives
a subsidy will not be penalized. Companies that employ more than 50 employees,
that offer health care insurance, and one or more receives a premium subsidy
will be penalized the lesser of: (a) $3,000 per employee who receives a credit
or public assistance because (1) the employer pays less than 60 percent of the
full value of the coverage provided or (2) the employee’s premium is greater
than 9.5 percent of the employee’s household income; or (b) $2,000 per employee.
Companies that employ more than 50 employees, do not offer health care
insurance, and have one or more employees receiving a premium subsidy will be
penalized $2,000 per employee, after subtracting the first 30 employees.
· Free Choice Vouchers: Employees whose household income does not exceed 400
percent of the federal poverty line and for whom the employee premiums for an
employer-provided health plan cost between 8 percent and 9.5 percent of the
employee’s household income are eligible for a Free Choice Voucher. The value of
the Free Choice Voucher is equal to the cost of coverage that the employer would
otherwise have paid if the employee was covered under the employer’s plan and is
used by the employee to purchase coverage through a Health Insurance Exchange.
The amount of the Free Choice Voucher is deductible by the employer.
· Small Business Health Tax Credit: Maximum tax credit for small employer
premium costs increases from 35 percent to 50 percent (35 percent for tax exempt
small employers).
· Annual Reports: Employers with more than 100 full-time employees must file an
annual report with the Department of Health and Human Services on whether they
offer a health plan that covers essential health benefits and other details of
coverage offered and employee participation. Employers must provide a copy of
their report to participants.
· Coverage Reforms: Annual limits and pre-existing condition exclusions for
persons of any age prohibited for group health plans. Plans may no longer set
eligibility rules based on health status, medical condition, claims experience,
receipt of health care, medical history, genetic information, evidence of
insurability, or disability. Waiting periods limited to a maximum of 90 days.
· Employers will need to amend their plan documents to reflect these changes.
Employers that currently have longer waiting periods or that permit admission
only on certain days will need to amend their plan materials.
2017
· Large Employer Participation in Exchanges: States may choose to permit large
employers to offer coverage through the Health Insurance Exchanges.
2018
· “Cadillac Tax”: Health coverage costing in excess of $10,200 annually for an
individual or $27,500 annually for a family (with increased thresholds for
certain high-risk professions and retirees over age 55) will be taxed at 40
percent. These thresholds are indexed to the Consumer Price Index (CPI) plus 1
percent for the first two years, and to the CPI only for 2020 and beyond.
If you have questions about the impact of health care reform on employers or for
assistance with compliance issues, please contact Miranda Morgan, a member of
SZD’s Employee Benefits and Tax and Wealth Management Practice Areas, David
Ball, or any member of SZD’s Labor and Employment Practice Group at (614)
462-2700. |
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