Health Care Reform: Employer Information
Under the recently enacted Patient Protection and Affordable Care Act ("PPACA") and the Health Care and Education Reconciliation Act of 2010, employers will be expected to make a variety of changes with respect to health care coverage. Below is a summary of some of the changes that will affect employers.
- A tax credit will be available for eligible employers who provide health insurance to their employees. An eligible employer is one with no more than 25 employees and annual average wages of no more than $50,000.
- Beginning within 90 days of enactment of the PPACA, the federal government will offer reimbursement to employer plans for the cost of benefits provided to retirees between 55 and 64 years of age. The reimbursement will consist of 80% of the cost of benefits between $15,000 and $90,000. This is a temporary program that will expire at the end of 2014 or the exhaustion of the federal funds set aside for the program.
- Employers with more than 200 employees are required to automatically enroll employees in health care coverage. If an employee does not want health care coverage through the employer, he or she must actively opt out of the coverage. Employers must provide notice and an opportunity for employees to opt out. It is likely that employers will be required to comply with this as soon as regulations are issued.
Effective for Plan Years Beginning On or After September 23, 2010
- Plans that offer dependent coverage will be required to offer health care coverage to adult children under the age of 26. This applies whether the child is married or not married. Plans will not be required to offer coverage to the children of such adult children.
- Plans will be prohibited from imposing lifetime limits on essential benefits. Certain restricted annual limits may be permitted in accordance with regulations issued by the Secretary of Health and Human Services. Regulations will further define essential benefits, but under the PPACA, essential health benefits include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services including oral and vision care.
- Plans may not impose pre-existing condition exclusions or limitations on children under 19 years of age.
- Plans may not rescind coverage for individuals who are enrolled in the plan, except in cases of fraud or intentional misrepresentation.
- Fully insured group health plans will be required to satisfy the Internal Revenue Code Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals. These rules previously applied only to self-insured plans.
- First dollar coverage must be provided for preventive care (including preventive care for infants, children and adolescents and for women) and certain immunizations.
- Plans may not require prior authorization for emergency room services or for obstetrical or gynecological care.
- ERISA plans will be required to give participants additional appeal rights. Claimants must be permitted to present testimony as part of the appeals process and will be able to continue receiving coverage during the process.
For Plan Years Beginning on or after January 1, 2011
- Employers will be required to include on employees' W2s the cost of employer-provided health care coverage.
- Over-the-counter medicines and drugs will no longer be reimbursable by a health FSA, HSA or HRA without a prescription.
- The tax on HSA distributions for non-qualifying medical expenses will be increased from 10% to 20%.
- Small employers (those with 100 or fewer employees) will be able to offer "Simple" cafeteria plans. These plans must meet certain contribution, eligibility and participation requirements and will be treated as meeting the nondiscrimination rules for cafeteria plans.
For Plan Years Beginning on or after January 1, 2012
- Plan administrators (or the insurer in the case of insured plans) will be required to provide a summary of benefits and coverage in paper or electronic format to all applicants and enrollees at the time of initial enrollment and at annual enrollment. The summary must be written in easily understandable language and will be limited to four pages in length. Further guidance on the summary will be provided by March 23, 2011 and employers will be required provide the summary by 3/23/2012.
For Plan Years Beginning on or after January 1, 2013
- Salary reductions for health FSAs will be limited to $2,500 each year. This cap will be indexed for inflation.
- At the time of hiring, employers will be required to notify each employee of the existence of the health insurance exchanges available to the employee and that the employee may be eligible for a subsidy under the exchange if the employer's share of the cost of benefits is less than 60%. The employer must also notify the employee that if the employee purchases coverage through an exchange without the employer providing a voucher, the employee may lose the employer contribution to any health benefits offered by the employer.
For Plan Years Beginning on or after January 1, 2014
- Plans may not impose any pre-existing conditions or limitations.
- Plans may not provide annual dollar limits on essential health care benefits.
- Plans may not impose waiting periods in excess of 90 days.
- Employers who employ at least 50 full time employees and who do not offer certain minimum levels of coverage, will be charged a penalty. Additionally, employers with at least 50 full time employees who offer minimum levels of coverage but who have at least one full-time employee who receives subsidized health coverage in a health insurance exchange will be charged a penalty.
- Employers who offer and contribute to health care coverage will be required to offer certain employees the choice of enrolling in the employer's plan or using a voucher to purchase health care insurance on an exchange. Eligible employees include those with a household income of not more than 400% of the federal poverty level and whose required contribution under the employer's plan is between 8 and 9.8% of income.
- Employers will be required to make an annual report to the government. The report will include a statement about whether the employer offers minimum essential coverage to its full time employees, the length of any waiting period, the lowest cost options in each enrollment category under the plan, the employer's share of the total cost of benefits under the plan and the total under and names of employees receiving health care coverage.
We await further guidance on many of these requirements and will continue to provide updates as information is available.
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