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Health Reform Overview 2010-2014

Preventative Care

For policies with effective dates of September 23, 2010 preventative care is covered 100% by the carrier. This includes wellness visits, routine exams, flu shots, mammograms, colonoscopy (without polyps), diabetes, cholesterol screenings etc.

Plans that were effective prior to September 23, 2010 may not have preventative care included at 100% until they renew. (Ex. Policy effective 8/1/2010 won't have preventative care at 100% until 8/1/2011 renewal)

Implementation: September 23, 2010

Small Business Tax Credits

Provides tax credits to small employers with no more than 25 employees and average annual wages of less than $50,000 that provide health insurance for employees. Phase I (2010-2013): tax credit up to 35% (25% for non-profits) of employer cost; Phase II (2014 and later): tax credit up to 50% (35% for non-profits) of employer cost if purchased through an insurance Exchange for two years.

(See handout)

Implementation: January 1, 2010

Pre-Existing Condition Insurance Plan

Creates a temporary program to provide health coverage to individuals with pre-existing medical conditions who have been uninsured for at least six months. The plan will be operated by the states or the federal government.

* In Florida a person must have a pre-existing condition, been denied coverage by at least one carrier and uninsured for a period of 6 months.

Website: www.healthreform.gov

Adult Dependent Coverage

Extends dependent coverage for adult children up to age 26 for all individual and group policies.

*Note this was previously in place in Florida.

Implementation: Plan or policy years beginning on or after September 23, 2010

Minimum Medical Loss Ratios for Insurers

Requires health plans to report the proportion of premium dollars spent on clinical services, quality, and other costs and provide rebates to consumers if the share of the premium spent on clinical services and quality is less than 85% for plans in the large group market and 80% for plans in the individual and small group markets.

Implementation: Requirement to report medical loss ratio effective for 2010; requirement to provide rebates effective beginning January 1, 2011

Closing the Donut Hole for Medicare Drug Coverage

Requires pharmaceutical manufacturers to provide a 50% discount on brand-name prescriptions filled in the Medicare Part D coverage gap beginning in 2011 and begins phasing-in federal subsidies for generic prescriptions filled in the Medicare Part D coverage gap.

Implementation: January 1, 2011

FSA and HSA accounts

Excludes the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through a Health Reimbursement Account or health Flexible Spending Account and from being reimbursed on a tax-free basis through a Health Savings Account. Over the counter items may only be purchased if there is a prescription written by a physician.

Increases the tax on distributions from a health savings account that are not used for qualified medical expenses to 20% of the amount used (formerly 10%).

Implementation: January 1, 2011

Lifetime Limits, Consumer Protection and Children's policies

Prohibits individual and group health plans from placing lifetime limits on the dollar value of coverage, rescinding coverage except in cases of fraud and from denying children coverage based on pre-existing medical conditions or from including pre-existing condition exclusions for children. Restricts annual limits on the dollar value of coverage (and eliminates annual limits in 2014)

Implementation: Plan or policy years beginning on or after September 23, 2010 (annual limits eliminated in 2014)

Grants for Wellness Programs

Provides grants for up to five years to small employers that establish wellness programs. Grants totaling $200 million over five years for small companies that start wellness programs focused on efforts such as nutrition, smoking cessation, physical fitness and stress management. Companies with fewer than 100 employees qualify for the grants, which will be administered by the Department of Health and Human Services, but only new wellness initiatives - those launched after March 23, 2010, the date the heath reform bill was enacted - are eligible." In addition, starting in 2014, employers can offer health insurance coverage reward payments to workers who meet health benchmarks. Some groups see this as a positive while others are concerned about tying financial incentives via insurance discounts to prevention programs

Implementation: Funding authorized beginning in fiscal year 2011

** Application processes are still being determined.

2012 / 2013 Changes

Changes in 2012 and 2013 are largely related to electronic health records and Medicaid.

Individual Requirement to have insurance

Requires U.S. citizens and legal residents to have qualifying health coverage (there is a phased-in tax penalty for those without coverage, with certain exemptions).

Many States including Florida are currently fighting in courts to overturn this.

Implementation: January 1, 2014

Free Choice Vouchers

Requires employers that offer coverage to their employees to provide a ‘free choice voucher' to certain employees. Vouchers are available to employees with incomes less than 400% of the federal poverty level and meet other financial criteria to enroll in a plan in a health insurance Exchange.

Implementation: January 1, 2014

Individual and Small Business Health Exchange

Creates state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which individuals and small businesses with up to 100 employees can purchase qualified coverage. Exchanges will have a single form for applying for health programs, including coverage through the Exchanges and Medicaid and CHIP programs.

Implementation: January 1, 2014

Guaranteed Insurance

Requires guarantee issue and renewability of health insurance regardless of health status and allows rating variation based only on age (limited to a 3 to 1 ratio), geographic area, family composition, and tobacco use in the individual and the small group market and the Exchanges.

Implementation: January 1, 2014

Employer Requirements

Assesses a fee of $2,000 per full-time employee, excluding the first 30 employees, on employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit. Employers with more than 50 employees that offer coverage but have 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, excluding the first 30 employees.

Implementation: January 1, 2014

 

Health Reform - Employer Tax Requirements

Key Items:

1. Reporting the employee insurance cost does NOT cause the excludable employer coverage to become taxable (no refund impact for the employer)

2. The employee will not be taxed on the amount reported on their W-2 (no refund impact for the employee)

3. Reporting in 2011 is optional

4. Reporting in 2012 is mandatory (W-2's mailed January 2013)

5. The IRS has issued guidance on the new requirement. We have a copy of that in Salesforce under the ‘Health Reform' page if any of our clients are interested.

Small Employer Wellness Grants

Starting in 2011, small employers (those with fewer than 100 employees who work 25 or more hours a week) may apply for grants that help pay for wellness programs that meet specific requirements.

HHS is expected to release detailed criteria about programs that are eligible for grant funding in 2011. Only wellness programs started after the health care reform law was enacted (March 23, 2010) will be eligible for grant funding.

Employer's reporting of health insurance on employee's W-2

The IRS finally issued long-awaited guidance (Notice 2011-28) regarding new Form W-2 requirements under health care reform that require employers to report the cost of coverage under an employer-sponsored group health plan. Highlights of the guidance are as follows:

Effective Date and Purpose

  • The guidance generally applies beginning with 2012 Forms W-2 that employers must provide to employees in January 2013. Forms W-2 provided to employees terminating during 2012 and requesting a Form W-2 prior to the end of the calendar year need not comply with the new requirements. This exception also applies to future years, until further IRS guidance is issued.
  • Employer-provided health coverage will remain non-taxable to employees (except for special situations, such as domestic partner or other non-dependent imputed income).
  • The purpose of the new W-2 information is to provide employees information on the cost of their health care coverage.
  • There are exceptions for certain tribal governments, churches and small employers (required to file fewer than 250 Forms W-2). Multiemployer plans are exempt from the reporting requirement until further guidance.

Scope of Health Plan

  • Employers can exclude the value of health reimbursement accounts and separate dental and vision plans when they report for 2012 - and future years - until the IRS issues further guidance.
  • Also excluded are health flexible spending accounts and HSAs. However, any employer contributions (not salary reduction) made to the health flexible spending account would be included.

Amount Reported

  • The amount reported on Form W-2 must include both the employer and employee paid portions of health care coverage, whether pre-tax, after-tax or taxable.
  • The reportable cost includes any portion of the cost of coverage that is includible in an employee's income (for example, domestic partner coverage or taxable executive benefits coverage).
  • The reportable cost for self-funded plans is generally calculated using the COBRA premium method (that is, the value of coverage equals the COBRA premium applicable to that coverage for that period). Also, in any case when the employer subsidizes the value of COBRA, the employer does not need to use the subsidized COBRA premium, but can make a reasonable good faith estimate of the COBRA applicable premium that would apply absent the subsidy.
  • The notice did not include any new guidance regarding how to calculate COBRA premiums.
  • Insured plan cost can be reported as equal to the premium charged by the insurer for that employee's coverage (single, family, etc., as applicable).
  • The reportable cost for an employee receiving coverage under the plan is the sum of the reportable costs for each period, such as a month, during the year, as determined under the method used by the employer. The employer can use different methods for different plan options, but must use the same method for all employees covered by a particular plan option.
  • If the reportable cost changes during a calendar year (which it likely will for non-calendar year plans), the reportable cost must reflect the increase or decrease for the periods to which the increase or decrease applies. If the change in coverage occurs during a period (for example, in the middle of a month where costs are determined on a monthly basis), the employer may use any reasonable method to determine the reportable cost for the period, such as using the reportable cost at the beginning or the end of the period, or averaging or prorating the reportable costs. The only requirement is that the same method must be used for all employees with coverage under the plan.
  • The cost of health care will be reported in box 12 of Form W-2 using code DD.
  • The total of the aggregate reportable costs attributable to employees does NOT need to be reported on Form W-3, Transmittal of Wage and Tax Statements.

Scope of Recipients

  • The employer will NOT be required to report health care coverage value to retirees or other former employees to whom the employer does not normally issue a Form W-2.
  • The employer will NOT be required to report health care coverage value to surviving dependents.
  • For employees who terminate employment during the plan year and do not get a Form W-2 until the end of the calendar year, the employer can apply any reasonable method of reporting the cost of coverage, so long as it is used consistently for all employees in that situation. For example, the employer may decide to report only the cost of coverage provided to the employee while in active employment, or may decide to include the cost of any COBRA coverage elected by the employee. Either is reasonable, so long as whichever method is chosen is consistently applied.
  • If an employee is employed by more than one related entity during a calendar year, whichever employer is the common paymaster for employee wage reporting must report to the employee the aggregate reportable cost of health coverage provided to the employee by all the related entities.

 

Questions? Please call our office at 800-275-1891