Thursday, April 8, 2010

What does health reform mean for employers?

While the yearlong push to pass health reform has ended, the process of understanding and implementing the newly passed Patient Protection and Affordable Care Act (PPACA) has just begun. As with most legislation, the devil is in the details. What makes this bill even more complicated is that many of the details have yet to be determined.

One of the most common phrases in the PPACA is "the Secretary shall." Not only does this demonstrate the enormous amount of power this legislation grants to HHS and other government agencies, it also proves that the federal rule-making process will play a vital role in determining how PPACA is interpreted and implemented.

The timeline below summarizes the key provisions pertinent to employers. We will provide more detailed analysis of specific provisions and how they impact your business on an ongoing basis as we receive clarification from Washington. As always, do not hesitate to contact us with your questions or concerns.

To view a printer-friendly version of the timeline below, CLICK HERE.

Timeline for Implementation
This summary includes the key provisions for employers and is not inclusive of all the provisions effective as a result of the health care legislation.

Effective immediately
• Allows individuals and employer group plans to keep their current policy on a grandfathered basis if the only plan changes made are to add or delete new employees/dependents
• Requires that grandfathered plans still comply with the following provisions as they go into effect: extend dependent coverage to adult children up to age 26; prohibit rescission of coverage except for fraud or intentional misrepresentation; eliminate pre-existing condition exclusions for children and adults; eliminate waiting periods greater than 90 days; and eliminate lifetime limits and annual limits
• Provides small employers with no more than 25 employees and average annual wages of less than $50,000 with a tax credit of up to 35% of the employer’s contribution for employee health coverage if the employer contributes at least 50% of the total premium cost (Phase I of small employer tax credits available in tax years 2010-2013)
• Requires employers that provide a Medicare Part D subsidy to retirees to account for the future loss of the deductibility of this subsidy on liability and income statements (immediate accounting impact; deduction disallowance takes effect in 2013)

Effective within 6 months
• Prohibits pre-existing condition exclusions for children under 19
• Prohibits lifetime benefit limits and annual limits as determined by the Secretary of HHS
• Allows children to be covered as dependents up to age 26
• Prohibits coverage cancellation or rescission except in cases of fraud or intentional misrepresentation
• Requires individual and group plans to cover specified preventive services without cost sharing
• Requires that plans cover emergency services at the in-network level, allow enrollees to designate any in-network doctor as their primary care physician and have a coverage appeal process
• Requires group health plans to comply with IRC Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals

Effective in 2011
• Provides $200 million in grant funding for small employer-based wellness programs for fiscal years 2011-2015
• Requires 80% medical loss ratio (MLR) for individual and small group plans (1-100 employees) and 85% MLR for large group plans (101+ employees)
• Requires carriers to issue a premium rebate for plans that fail to meet the minimum MLR threshold
• Requires employers to include the aggregate cost of employer-sponsored health benefits on W-2s
• Increases the penalty for using HSA funds on non-qualified medical expenses from 10% to 20%
• Prohibits the use of FSA/HSA funds for over-the-counter drugs not prescribed by a doctor
• Allows employers with 100 employees or less to adopt new “simple cafeteria plans”
• Establishes a national, voluntary long term care program financed through voluntary payroll deductions; employers may automatically enroll employees, unless they opt out
• Requires employers with 200 employees or more to auto-enroll all new employees in the employer-sponsored health plan; employees may opt out if they have another source of coverage (effective date to be determined)
• Requires the Department of Labor to begin annual studies on self-insured plans using data collected from Form 5500

Effective in 2012
• Imposes $2.8 billion in annual fees on brand-name prescription drug manufacturers and importers
• Requires all employers and insurers to provide a summary of benefits and a coverage explanation that meets specified criteria to all enrollees, in addition to the summary plan descriptions (SPD)
• Requires group plans to submit an annual report to HHS to determine if the benefits provided meet certain criteria; must also provide the report to plan enrollees during open enrollment

Effective in 2013
• Imposes a new federal premium tax on insurers, equal to $2 annually per covered individual, to fund federal comparative effectiveness research
• Imposes a new excise tax on medical device manufacturers equal to 2.3% of the price for which the device is sold
• Imposes an additional 0.9% Medicare Hospital Insurance tax on self-employed individuals and employees with earnings above $200,000 for individuals and $250,000 for joint filers
• Levies a new 3.8% Medicare contribution on certain unearned income for individuals with AGI over $200,000 ($250,000 for joint filers)
• Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% of AGI to 10% of AGI for regular tax purposes
• Limits the annual contribution to medical FSAs to $2,500
• Eliminates plan sponsors’ ability to deduct the 28% federal subsidy for Medicare Part D prescription drug coverage
• Requires all employers to provide a notice to their employees informing them of the existence of an exchange

Effective in 2014
• Imposes annual fees on private health insurers, phased in at $8 billion in 2014 and reaching $14.3 billion by 2018
• Requires coverage in all markets to be offered on a guarantee issue basis and be guarantee renewable
• Prohibits pre-existing condition exclusions in all markets
• Prohibits all annual and lifetime limits on essential health benefits
• Imposes strict modified community rating standards on all individual and fully insured policies, 100 lives or less, with premium variations only allowed for age (3:1), tobacco use (1.5:1), family composition and geographic location
• Requires each state to create an exchange to facilitate the sale of qualified benefit plans to individuals and small employers; will include multi-state plans and non-profit co-operative plans
• Specifies that an individual with family income up to 400% of the federal poverty level (FPL) is eligible for a premium assistance tax credit and can opt out of the employer plan, if the actuarial value of the employer’s coverage is less than 60% or the employer requires the employee to contribute more than 9.5% of the employee’s family income toward the cost of coverage
• Imposes a non-deductible fine of $2,000 per employee, excluding the first 30 employees, for employers with 50+ full-time eqivalent employees if the employer does not provide group coverage
• Requires employers that offer coverage but have at least one full-time employee receiving the premium assistance tax credit to pay a non-deductible fine of $3,000 for each employee receiving a credit, capped at a maximum of $2,000 per employee, excluding the first 30
• Requires employers to provide vouchers for employees to use in the exchange instead of participating in the employer-provided plan if the employee is required to contribute between 8% and 9.8% of their household income toward the cost of coverage; employers providing free choice vouchers will not be subject to penalties for employees that receive a voucher
• Prohibits waiting periods in excess of 90 days
• Establishes standards for qualified coverage, including mandated benefits, cost-sharing requirements, out-of-pocket limits and a minimum actuarial value of 60%
• Imposes an individual mandate with a penalty for non-compliance equal to a flat dollar amount ($95 in 2014, $325 in 2015, $695 in 2016) or a percentage of the individual’s income (1% in 2014, 2% in 2015, 2.5% in 2016), whichever is greater
• Requires health plans to provide coverage documentation to both covered individuals and the IRS
• Increases the value of workplace wellness incentives from 20% to 30% of premiums; gives HHS the ability to increase the differential to 50%
• Provides small employers purchasing coverage through a state exchange with no more than 25 employees and average annual wages of less than $50,000 with a tax credit of up to 50% of the employer’s contribution for employee health coverage if the employer contributes at least 50% of the total premium cost (Phase II of small employer tax credits available in tax year 2014, and for no more than 2 consecutive taxable years)

Effective in 2017
• Allows groups 100+ into the exchanges if state elects

Effective in 2018
• Levies 40% excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for singles and $27,500 for families; includes reimbursements from FSAs, HRAs and employer contributions to HSAs; does not include stand alone dental and vision

No comments:

Post a Comment