What Do We Do About Health Insurance Reform and When Do We Have to Do It?

EFFECTIVE DATES

ACTIONS TO BE TAKEN

2010

IMMEDIATELY

TAX CREDIT FOR

EMPLOYERS' CONTRIBUTION

For tax years 2010 through 2013, an employer of 10 or fewer employees whose average annual wages are less than $25,000 qualifies for a 35% tax credit toward employee health insurance premiums if that employer pays at least 50% of the total premium cost or a benchmark premium. This credit diminishes under a sliding scale for those with more employees and higher average wage increases. Tax-exempt small businesses meeting the same criteria receive tax credits up to 25% of employer contribution payments. (These credits increase to 50% and 35%, respectively, in 2014.)

JUNE 23, 2010

RETIREE INSURANCE SUBSIDY

Until the earlier of January 1, 2014 or exhaustion of a five billion dollar account, the federal government will reimburse eligible plans 80% of health claims between $15,000 and $90,000 for retirees over age 55 but not yet eligible for age 65 Medicare.

HIPPA CHANGES

Plans must begin a process leading to certification that certain transactions meet new rules for electronic record-keeping and information requirements. These requirements become due starting October 1, 2012.

SEPTEMBER 23, 2010

BENEFIT CHANGES

Plans must implement new rules:

1) Removing any limits (annual or lifetime) on "essential health benefits" (to be defined by regulations).

2) Ending the authority to rescind future coverage except for fraud or intentional misrepresentation.

3) Allowing coverage for dependents until their 26^th birthday (which benefit is not taxable to the employee).

4) Ending use of pre-existing condition limitations on children under age 19.

5) Covering preventive services such as immunizations.

6) Satisfying IRS non discrimination rules.

7) Allowing the participant to use any available doctor for primary care.

8) Treating as "in-network" any emergency service, whether or not pre-authorized.

9) Instituting a new (not yet defined) standard appeal process which includes external review.

10) Allowing use of any OB/GYN designated by the primary care doctor.

SPECIAL NOTE

A "Grandfathered Plan" is exempt from many of these rules if the plan already exists on March 23, 2010 and makes "no change in existing coverage." Changes will preclude this exemption. Collectively bargaining plans have a different time table. Better explanations await follow-up regulations, such as whether changes to comply with any of the above described "benefit changes" due September 23, 2010 will remove this exemption.

2011

JANUARY 1, 2011

SAFE HARBOR FROM NON-DISCRIMINATION RULES FOR CAFETERIA PLANS

Small employers (up to 100 employees) who provide minimum contribution to cafeteria plans will not be subject to IRS non-discrimination rules.

W-2 FORM

Beginning with tax years after 12/31/10, employees' W2 forms must include the aggregate cost of employer-sponsored coverage.

MORE BENEFIT CHANGES

The excise tax on non-medical payments from HSA goes from 10% to 20%, and over-the-counter purchases cannot be reimbursed by HSA, FSA, ARCHER MSA unless prescribed by a

doctor.

2012

SEPTEMBER 30, 2010

COMPARITIVE EFFECTIVENESS FEE

$1.00 per participant fee ($2.00 in 2013; indexed thereafter) for agency to develop information about the clinical effectiveness of medical treatments to inform patients who must make health decisions.

2013

JANUARY 1, 2013

HEALTH FSA

CONTRIBUTION CAPS

Subject to inflation index after 1/1/14, $2,500 is annual limit on FSA contributions.

3/

NEW TAXES

Employer FICA and SECA increased .9% if wages exceed $200,000 for single or $250,000 for joint return, to total 2.35%; same categories taxed 3.8% for unearned (non-wage) income.

EMPLOYER SUBSIDY

DEDUCTIONS FOR MEDICARE

PART D ENDED

Deduction no longer allowed for an employer that maintains retiree drug benefit as alternative to Medicare Part D.

MARCH 1, 2013

INSURANCE

EXCHANGES

Employers must notify employees of insurance exchanges and the employee's eligibility for a premium tax credit or other cost sharing if he/she uses such insurance and the employer pays less than 60% of this premium cost.

AUTOMATIC ENROLLMENT

Although the effective date is not clear, by 3/1/13 employees are to be notified that employer of more than 2000 will automatically enroll them in a plan, from which the employees can then opt out at their choice.

JULY 1, 2013

CO-OPS

Non-profit insurance co-operatives are to be created to serve individuals and small employers.

2014

SIGNIFICANT FEES, TAXES, CHARGES BEGIN

A penalty is imposed on any employer of more than 50 full-time employees (5 employees for construction industry employers with annual payrolls of at least $250,000.00) which does not offer "MINIMUM ESSENTIAL COVERAGE." There is no penalty for the first 30 employees; thereafter it is $2,000 per year for each full-time employee (e.g., # 31-50) if any of the employees received a federal subsidy (e.g. a tax credit) for use in an insurance exchange. If the employer offers "unaffordable insurance (more than 9.8% of the employee's income, subject to indexing, or if the employer pays less than 60% of the Plan's actual value, the penalty is $3,000 for each subsidized employee to a maximum of $750 times the number of all full-time employees. (A full-time employee is one working an average of 30 hours per week.)

"FREE CHOICE

VOUCHERS"

Effective 1/1/14, the employer which provides "minimum essential coverage" must also offer vouchers to those "qualified employees" whose contribution to the employer's plan requires 8% to 9.8% of their "household income" for the employee's use in an exchange plan. The amount of the voucher is the value of the employer's payment to the plan. The employee can cash in and retain the portion of this voucher not needed to purchase insurance on the exchange. This is a non-taxable item to the recipient, and a tax deductible item for the employer.

CAPS ON

EMPLOYEE COSTS

A plan qualifies as providing "essential health benefits" if its annual deductibles are no more than $2,000 for individuals and $4,000 for others.

MORE PLAN CHANGES

IN BENEFITS

Effective 1/1/14, plans cannot (1) exclude pre-existing conditions of any covered person of any age or (2) require a waiting period for coverage of more than 90 days.

REPORTING REQUIREMENTS

Employers of more than 50 employees must report to the federal government the names, number of employees and costs of employees and dependents, and give summary reports of this information to the employees. This requirement also applies to any employer who offers "minimum essential coverage" through its own plan, pays some portion of that plan's costs, and has employees who pay more than 8% of their wages for that coverage.

OTHER NEW RULES

Although not direct assessments against employers, new costs which will probably be passed on to employers, including annual fees for insurers and third party administrators effective 1/1/14. Individuals will also be required to have their own "minimum essential coverage," or pay an annual penalty of $95.00 (increasing incrementally) to $695 in 2017). At the same time, premium assistance will be paid through tax credits for those in low-income categories who do not qualify for Medicaid or for their own employer's insurance programs at regular rates.

WELLNESS PROGRAMS

Limits on premium discounts for utilization of wellness programs increase to 30% to 50%, subject to future regulation and the "grandfathered plan" exception.

2017

EXCHANGES

Exchanges become available to virtually all employees.

2018

EXCISE TAX FOR

"CADILLAC" PLANS

Subject to a variety of exceptions, the amount by which any annual premium payment exceeds $10,200 per individual or $27,500 for others is taxed at 40%.