HEALTH CARE
RECONCILIATION ACT SIGNED INTO LAW
On March 30, 2010, President Obama
signed the Health Care Reconciliation Act into law. The Health
Care Reconciliation Act alters a number of tax and revenue provisions
that were passed as part of the Patient Protection and Affordable
Care Act.
This article updates our previous
alert dated March 24, 2010 by incorporating the changes brought about
by the Health Care Reconciliation Act. The alert focuses on key
provisions of the Patient Protection and Affordable Care Act, as
amended by the Health Care Reconciliation Act, with respect to
employers and their health plans.
· Employers are not required to
provide group health insurance to employees, but not offering
coverage comes with a price, depending on employer size.
Effective Calendar Year 2010:
· The first phase begins for
qualified small employers to receive a tax credit of up to 35% of
their employee health care coverage expenses. A "qualified
small employer" is an employer that does not have more than 25
employees with average annual compensation levels not exceeding
$50,000. (In 2014, when exchanges are operational, tax credits
will increase up to 50% of premiums.)
Effective for tax years
beginning after December 31, 2010:
· Employers will be required to
report on W-2s the cost of employer sponsored health coverage that is
excludable from an employee's gross income.
Effective for tax years
beginning after December 31, 2012:
· The employer tax deduction for
employees who receive Medicare Part D drug subsidies is
eliminated.
Effective January 1, 2014:
· Employers with more than 200
employees must automatically enroll employees in health insurance
coverage offered by the employer; however, employees may opt out of
employer coverage (opting out will trigger a tax to the employer).
· If an employer with greater
than 50 employees (a "large employer") does not offer
"essential" health insurance coverage and such employer has
at least one full-time employee receiving a premium tax credit, then
the employer will be assessed an additional fee of $2,000 (up from
$750) per full time employee. However, the first 30 employees
are not counted in payment calculations.
· Employers with greater than 50
employees that offer "essential" health insurance coverage
and such employer has at least one full-time employee receiving a
premium tax credit, will pay the lesser of $3,000 for each employee
receiving a premium credit or $2,000 for each full-time
employee.
· Employers offering coverage
will be required to provide a "free choice" voucher to
employees with incomes less than 400% of Federal Poverty Level
("FPL") whose share of the premium cost exceeds 8%, but is
less than 9.8% of their household income. Such employees will
be permitted to obtain health insurance coverage from the health
insurance exchange created by the legislation. The free choice
voucher amount will be equal to what the employer would have paid to
provide coverage to the employee under the employer's plan.
Accordingly, the voucher will be used to offset the premium costs for
the plan in which the employee is enrolled. Employers providing
free choice vouchers will not be subject to fines or penalties for
employees that receive premium credits in a state based health insurance
exchange.
· Employers that offer health
insurance coverage will be required to offer an "essential"
health benefits package. This means that each employer plan
offered must meet certain minimum health plan coverage requirements
including a health plan that provides a comprehensive set of
services, covers at least 60% of the value of the covered benefits,
limits annual cost-sharing to the current HSA
limits ($5,950 / individual and $11,900 / family in 2010), and is not
more extensive than the typical employer plan. Additionally, in
2014, all qualified health benefit plans, including those offered
through the exchanges and those offered in the individual and small
group markets (except grandfathered plans) must meet the requirements
of an essential health benefits package.
· Large employers will have
additional reporting requirements to the IRS regarding plan
enrollment, waiting periods, and plan cost information.
· For employer plans offering
health coverage to early retirees ages 55 to 64 who are not eligible
for Medicare, a temporary reinsurance program will be available to
reimburse plans up to 80% of the cost of individual benefits in
excess of $15,000, but below $90,000. These reimbursements
received by a plan are required to be used to lower participant costs
(i.e. reduce premium costs, co-pays, etc).
Effective for plan years
beginning on and after September 23, 2010:
· Group health plans offering
dependent coverage must make coverage available for unmarried
children up to age 26.
· Group health plans are
prohibited from placing lifetime limits on the dollar value of
benefits for any participant or beneficiary.
· Group health plans are
prohibited from discriminating in favor of highly compensated
individuals.
· Group health plans are required
to disclose the percentage of premiums spent on clinical services,
quality and other costs and provide a rebate to participants if the
group health plan does not spend a minimum of 80% (small group or
individual plans) or 85 % (large plans) on clinical services and
quality (the requirement to provide a rebate becomes effective
January 1, 2011).
· Mandates that the Secretary
establish a process of reviewing increases in health plan premiums
and will require plans to justify unreasonable premium increases, as
well as require states to report on trends in premium increases and
recommend whether certain plans should be excluded from the state
based insurance exchange based on unjustified premiums.
· Pre-existing condition
exclusions for children are prohibited (Note: there has been
controversy over the effective date of this provision. The
Department of Health and Human Services is expected to issue guidance
soon.)
· Group health plans must provide
coverage for, and not impose any cost sharing requirements (i.e.
deductibles) for: (1) specified preventive items or services;
(2) recommended immunizations; and (3) recommended preventive care
and screenings for women and children.
· Requires reductions in the
maximum limits for out-of-pocket expenses for individuals enrolled in
"qualified health plans" whose incomes are between 100% and
400% of the poverty limit.
Effective for tax years
beginning after December 31, 2010:
· A "Simple Cafeteria
Plan" becomes available to provide a vehicle through which small
businesses can provide tax-free benefits to their employees by easing
the administrative burdens of sponsoring a cafeteria plan. This
provision also exempts employers who make contributions for employees
under a "Simple Cafeteria Plan" from nondiscrimination
requirements.
Effective January 1, 2011:
· Health Savings Accounts ("HSA"), medical savings accounts, and health
flexible spending accounts ("FSA")
must exclude the cost of over-the-counter drugs not prescribed by a
doctor from reimbursement.
Effective January 1, 2013:
· The law caps the maximum amount
of contributions per health FSA to $2,500
per year (adjusted annually).
Effective January 1, 2014:
· Group health plans are
prohibited from placing annual limits on the dollar value of benefits
for any participant or beneficiary (restricted annual limits for plan
years beginning prior to January 1, 2014 are permitted).
However, group health plans may place annual limits on covered
benefits that are not "essential health benefits" to the
extent that such limits are otherwise permitted by the
Secretary.
· The law attempts to enhance
wellness program provisions by increasing reward limits, providing
technical guidance, and providing grants to small employers that
establish wellness programs.
· Waiting periods for health
insurance coverage will be limited to 90 days.
· Group health plans will be
prohibited from containing pre-existing condition exclusions for any
individual (Note: Effective June 23, 2010, a temporary national
high-risk pool will be established to provide health coverage to
individuals with pre-existing medical conditions who have been
uninsured for at least six months. Eligible individuals will
receive subsidized premiums. This temporary national high-risk
pool will remain in effect until 2014.)
Effective January 1, 2018:
· The law imposes an excise tax
on insurers of "Cadillac" health plans with aggregate
values that exceed $10,200 for individual coverage and $27,500 for
family coverage (indexed annually), provided higher thresholds apply
for retirees age 55 and over not eligible for Medicare (and subject
to additional special limits) and employees in high risk
professions. The excise tax will equal 40% of the value of the
plan that exceeds the threshold amounts. The aggregate value of
the health insurance plan includes reimbursements for health FSAs or health reimbursement arrangements ("HRA"), employer contributions to an HSA, and coverage for supplementary health
insurance coverage.
As health reform becomes a reality, it
will have a significant impact on employers whether or not they offer
health insurance benefits. Evaluating and implementing the
employer requirements of health reform will be a monumental
task. There will be questions and issues for employers that may
not have immediate answers, or may not even be contemplated due to
the magnitude of this legislation.
As your organization evaluates the
effect of certain health reform measures on labor agreements,
fully-insured health plans, self-insured plans, and other employer
based obligations, please feel free to contact the authors of this
Alert or your Clark Hill attorney.
*
* *
NOTE: All articles are also
posted on the Clark Hill Website for future reference and can be
accessed by visiting www.clarkhill.com or www.clarkhill.com/HealthCare.aspx.
|
