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The Health Care Reform Legislation: Changes that apply to small employers and group plans
4/22/2010
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The recent passage of healthcare reform legislation will undoubtedly forever change healthcare and healthcare coverage as many of us know it; however, as we noted in our last communication on healthcare reform, the most monumental changes won’t occur for years to come. For now, we wanted to focus on those changes that apply to small employers and group plans that will affect you in the near future. We’ve included a summary that we hope will help you better understand them.*
- Effective immediately for 2010-2013 Tax Years—Small employer business tax credits. The new health reform law gives a tax credit of up to 35% to certain small employers that have fewer than 25 full-time equivalent employees (FTEs) for the tax year. The average annual employee wages must be less than $50,000 per FTE and the employer must have paid not less than 50% of the cost of employee only coverage; however, the cost of this coverage will be capped based on the average premium for the small group market in the state where the employer offers the coverage. This average will be published by the IRS by the end of April. Employers must also pay premiums under a “qualifying arrangement.” The IRS recently posted a number of Q & As that address this issue and others on it’s website, which is available at the following link: http://www.irs.gov/newsroom/article/0,,id=220839,00.html
- Effective for plan years on or after 6 months following enactment**—Increased coverage for dependent children. This provision increases the age of a dependent for health plan coverage to up to age 26. Child dependents can be married, and the group health insurance income tax exclusion would apply to the value of the benefits provided for these dependents. Some questions remain about this provision of the law, including that of the definition of child. The U.S. Department of Health and Human Services (DHHS) is expected to issue further guidance on this provision.
- Plan years beginning on or after six months after date of enactment—Coverage of preventative care. Health plans must provide at a minimum 100% paid coverage for preventative services rated an A or B by the U.S. Preventative Services Task Force, recommended immunizations, preventative care for infants, children, and adolescents, and additional preventative care screenings for women. As the time draws near, HROI will be working with your insurance carrier to keep you up-to-date on the specifics of these plan changes.
- Effective for plan years on or after 6 months following enactment—No pre-existing condition plan exclusions for children on health plans. Specifically, the term “children” applies to dependents age 19 and younger and applies to group and individual plans; however, because the law is not clear about whether insurers in the individual market have to offer coverage for children with preexisting conditions, this has become a controversial provision. Federal guidance is forthcoming.
- Effective for plan years on or after 6 months following enactment—Lifetime and annual limit changes. No lifetime limits may be imposed on health plans. Restrictions (as determined at a future time by DHHS) will be placed on annual limits.
- Effective for taxable years beginning in 2011—Employer requirement to report benefits on W-2 Forms. Employers will need to include on W-2s the aggregate cost of employer-sponsored health benefits for informational purposes only. If employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of this coverage, but exclude contributions to HSAs and salary reduction contributions to FSAs.
- Effective for taxable years beginning in 2011—FSA/HRA/HSA and Cafeteria Plan Changes. The new law changes the definition of medical expenses for employer-provided coverage so that over-the-counter medications are no longer reimbursable except when doctor prescribed. Small employers will be allowed to adopt “simple” cafeteria plans in 2011 that bypass nondiscrimination requirements; however, they must satisfy minimum participation and contribution requirements. IRS guidance is forthcoming.
HROI’s goal is to keep you in compliance with the law, while at the same time, provide solutions that are cost effective, efficient, and affordable.
*Much of the information from this article taken from National Association of Health Underwriters Timeline of Health Insurance Reforms.
**Note that the enactment date is the date that President Barack Obama signed the healthcare reform bill into law on March 23rd.
