WORKPLACE LAW - Health Care Reform

Question:

I am confused about the new health care reform law and what it means to employers. I understand the law will be implemented over time, but what does a small business owner need to know about this new law now?

Answer:

President Obama signed The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 into law in late March, 2010. This sweeping legislation will change many aspects of our nation’s healthcare system.

Some of the provisions of the law take effect upon enactment, with numerous changes scheduled to occur each year through 2020. Certain “grandfathered plans” that were in effect on March 23, 2010, will not be subject to some of the health care reform changes. A sampling of the provisions that will affect employers for health plan years beginning January 1, 2011 are:

  • Expansion Of Dependent Coverage- Health plans that provide dependent coverage will be required to provide coverage to dependents up to age 26. There is no requirement that the dependent be enrolled in school, or that the child be unmarried.
  • Prohibition on Lifetime Limits- The law prohibits insurers from imposing lifetime limits on the dollar value of benefits.
  • Pre-existing Condition Exclusions- Group health plans may not impose pre-existing condition exclusions on plan participants under 19 years of age. The ban on pre-existing exclusions for plan participants age 19 or over is effective January 1, 2014.
  • No Rescission of Coverage- Insurers are prohibited from rescinding coverage except in cases of fraud or intentional misrepresentation.
  • Tax Credits for Small Employers- A qualifying employer must have less than the equivalent of 25 full time employees, excluding owners and family members. To be eligible, the small employer must pay at least 50 percent of the cost of health care coverage for its employees (employee only coverage), and pay average annual wages below $50,000. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent. For more information about the tax credit, visit http://www.irs.gov/newsroom/article/0,,id=220809,00.html
  • Nonprescription medicine- Over-the-counter medicines (except insulin) are ineligible for reimbursement in flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) or health spending accounts (HSAs) without a prescription.
  • Coverage of Preventative Health Services- A group health plan must provide coverage for preventative care services and immunizations recommended by the Center for Disease Control, some preventative services for children, and women’s preventative care recommended by the Health Resources and Services Administration.
  • W-2 Reporting of Health Coverage- Employers must report the value of employer-provided health coverage on each employee's Form W-2.
  • Notice Requirements- The Secretary of Health and Human Services must develop a standard summary explanation of coverage within twelve months of enactment of the legislation. Beginning in March 23, 2012, insurance plans and insurers will be required to distribute the standard summary explanation of coverage to participants.

You may have read that this law imposes limits on flexible spending accounts, but these changes do not go into effect until 2012. The changes will place a cap of $2,500 per year on employee contributions to a flexible spending account.

Additional changes that are slated to take effect in 2013-2014 include minimum health insurance coverage requirements, optional participation in health insurance exchanges, and automatic enrollment of employees in health care plans (with opt-out provisions allowed), excise taxes, and changes to wellness program guidelines. These provisions are complex, and may be modified before implementation. In fact, some commentators are anticipating constitutional challenges to the health care reform legislation that may delay enactment or modify its provisions. In the meantime, work with your health insurance provider to make necessary changes to your plan for 2011.
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