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Health Care Reform: Impact on employers

With the signing of the Patient Protection and Affordable Care Act and the passage of the Health Care & Education Affordability Reconciliation Act of 2010, there is one thing for certain, health care reform is here. Yet, many issues surrounding how the law is enforced and how employers will comply with these changes have yet to be decided.

Here is a calendar of some pertinent provisions of the law that affect employers:


Year 2010
All group health plans must allow the qualified child of a participant to remain eligible for coverage under the plan until the end of the tax year in which the qualified child turns 27.
June 2010: a temporary high-risk pool will be set up to cover adults with pre-existing conditions. Health care exchanges will eliminate the program in 2014.
July 2010: 10% tax on indoor tanning sessions.
September 2010: all existing insurance plans will be barred from imposing lifetime caps on coverage. Restrictions will be posed on excessive waiting periods (90 days or more).
Elimination of the ability of insurance companies to cancel coverage, except in cases of fraud.
New plans must cover checkups and other preventative care without co-pays. All plans will be affected by 2018.
Health Insurers cannot deny children health insurance because of pre-existing conditions. A ban for adults will take effect in 2014.
A temporary reinsurance program will help offset costs of coverage for companies that provide early retiree health benefits for those ages 55 to 64.
Chain restaurants will be required to provide a "nutrient content disclosure statement" alongside their items. Businesses affected will be posting calories both on in-store and drive-through menus.
Small business tax credit: Businesses, that offer health insurance coverage to their employees, with 10 or fewer employees earning less than $25,000 on average qualify for up to a 35% tax credit and businesses with 25 or fewer employees with an average wage $50,000 or less qualify for a smaller tax credit. The reconciliation bill would further increase this tax credit up to 50% in 2014.


Year 2011
For tax years post Dec. 31, 2010, employers have to disclose the value of the health care benefit provided by them for each employee's health insurance coverage on the employee's annual Form W-2.
January 1: eliminates the ability of employers to exclude from taxation (Medicare Part D) the subsidies they receive for maintaining retiree drug coverage for their Medicare-eligible retirees.


Year 2013
January 1: contributions to employee flexible spending accounts will be limited to $2,500 per year (indexed to CPI) and reimbursements for non-prescription drugs will no longer be allowed.
January 1: imposes an increase on the employee's share of the Medicare (hospital insurance) tax rate of an additional 0.9 percent (in addition to the existing 1.45 percent) for individuals with a modified adjusted gross income of $200,000 or $250,000 in the case of married couples filing jointly. The Reconciliation Act also modifies the Medicare tax to include net investment income in the Medicare tax base, which would be taxed at 3.8 percent, for individuals who file jointly with a modified adjusted gross income of $250,000 or $200,000 in the case of a single return.
The current Form 1099 information reporting requirement for compensation paid for services to individuals and partnerships is extended to payments made to corporations and to payments made for goods as well as services.
An annual excise tax of 2.9% on medical device makers.


Year 2014
Group health plans will be barred from implementing annual benefit caps or denying coverage based on pre-existing conditions.
States must have established Small Business Health Options Programs (SHOPs), which will enable small businesses (defined as 100 employees or less) to pool their resources to buy insurance.
Employers with 50 or more full-time employees (FTE) will be required to provide their full-time employees with group health insurance or pay a tax penalty, currently $2000 per non-covered full-time employee per year. Waiting periods are limited to 90 days. Employers that offer health benefits but have at least one employee who applies for a federal subsidy to purchase individual health care insurance would also be subject to penalty. Employer health care coverage must have an actuarial of at least 60 percent or penalties are assessed. Employers with more than 200 employees must automatically enroll employees in health plans, giving employees the right to opt out.
An employer with more than 50 FTEs that requires a waiting period before an employee can enroll in health care coverage will pay $400 for any full-time employee in a 30-60 day waiting period and $600 for any full-time employee in a 60-90 day waiting period in 2014. Exempts employers with 50 or fewer employees from any of these penalties.
Each individual must obtain health care insurance either from his/her employer or through a private provider by 2014 or pay a tax penalty. Any employee who meets income requirements set by the law will have the option of purchasing health insurance through health care exchanges, created by the new law. Employers will provide a “free choice voucher”, equal to the amount paid to provide coverage for participants in the company’s health plan.
Health Insurers cannot deny adults health insurance because of pre-existing conditions.

Year 2018
January 1: 40% excise tax on insured and self-insured group health coverage that is above a threshold of $10,200 for single coverage and $27,500 for family plans (11,850 and $30,950 for retirees and high-risk professionals) and may increase upward if healthcare costs unexpectedly rise prior to 2018. The tax is owed by insurers of insured plans and the employer or administrator in the case of self-insured plans.

The content of this article is intended to provide a general guide to the subject matter and is subject to frequent change. Legal advice should be sought about your specific circumstances.