Forgive me, pros. I’m a little bleary-eyed today, since I stayed up until after midnight to get the official vote tally (219-212, by the way) and real-time analysis of Sunday’s House vote on health care reform.
It was standard punditry fare; if you opted for sleep instead, you didn’t miss an awful lot. However, click here to read who voted yes, who voted no, who in the world shouted “baby killer!” and all the reaction/analysis your eyeballs can handle.
Punditry aside, I wanted to make sure I stayed tuned in to get you answers to the question we were all asking this morning: Now what?
While there’s still a ways to go before the Patient Protection and Affordable Care Act (H.R. 3590) becomes law and effective, keep reading to find much-needed info, from what changes now, to what changes later and what the heck to tell employees — even as you’re still trying to understand it yourself. Very extra special thanks to Segal, CCH, Wolters Kluwer and Benz Communications for their assistance. It’s long, so bear with me. But I figured it beats reading 2,000+ pages.
What changes now, or in 2011?
Although existing group health plans will be "grandfathered," several requirements will now be effective for plan years beginning six months after the date of enactment.
Changing between now and next year:
* No lifetime benefit limits and only limited annual benefit limits
* Coverage for dependent children up to age 26, as long as they do not have access to other employer-sponsored health coverage (the reconciliation bill also assures that this coverage can be provided on a tax-free basis)
* No preexisting conditions for children under age 19
* No cancellation of health coverage, except in cases of fraud (primarily an individual insurance policy issue)
Other items that are immediately effective include a Medicare Part D provision that provides that beneficiaries who are in a Prescription Drug Plan and who reach the doughnut hole in 2010 would receive a one-time $250 rebate, as well as a reinsurance program for pre-Medicare retirees (more on changes to retiree plans below).
In 2011, FSAs, HRAs and HSAs can only reimburse participants for over-the-counter drugs with a prescription written by their health care provider.
What changes in 2014 and beyond?
* The Health Insurance Exchanges, individual mandates, subsidies to purchase insurance coverage take effect.
* The employer "free-rider" mandate begins, requiring that employers with over 50 employees with an employee that obtains subsidies for coverage in an Exchange pay a financial penalty. The penalties, detailed in the senate summary, are changed and increased in the reconciliation bill.
* In 2018, the excise tax on health plans above a certain threshold would take effect.
Keep reading for more on the changes to your plans and who pays below.
How will this affect my plan and how much it costs?
Employers are not required to provide health insurance coverage. However, automatic enrollment in health insurance plans sponsored by large employers is mandated.
Large employers (50 or more employees) that fail to offer minimum essential coverage during any month for which a full-time employee has enrolled in a qualified plan and receives a premium assistance tax credit or cost-sharing reductions will be liable for an additional tax. That penalty will equal the product of the applicable payment amount (defined as, with respect to any month, 1/12 of $750) and the number of full-time employees employed by the employer during such month.
Large employers offering coverage to employees who qualify for premium assistance tax credits or cost-sharing reductions also will be liable for an additional tax equal to the product of the number of full-time employees for the month and 400 percent of the applicable payment amount. Large employers with extended enrollment waiting periods (generally those exceeding 90 days) will be liable for an additional tax of $600 for each full-time employee for whom the extended waiting period applies. Special rules would apply to construction employers.
The reconciliation legislation would improve the transition to the employer responsibility policy for employers with 50 or more full-time equivalent workers by subtracting the first 30 full time employees from the payment calculation (e.g., a firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount).
The provision would also change the applicable payment amount for firms with more than 50 full-time workers that do not offer coverage up to $2,000 per full-time employee. It would also eliminate the assessment for workers in a waiting period, while maintaining the 90-day limit on the length of any waiting period beginning in 2014.
Information returns. Employers and other entities providing minimum essential coverage will be required to file information returns with the IRS identifying the individual, the coverage and the amount of premium, if any, paid by the individual. Penalties will be imposed for failure to file an information return.
Flexible spending arrangements. FSAs contributions are capped at $2,500 (indexed for inflation). The use of FSA funds for over-the-counter medications is not allowed. These changes apply to distributions and reimbursements for taxable years beginning after December 31, 2010.
The Reconciliation bill would delay the implementation of the limitations on FSAs until December 31, 2012. To prevent an end-run around the new FSA restrictions using cafeteria plan rules, the measure provides that, if a benefit is available under a cafeteria plan through employer provided contributions to a health FSA, the benefit will not be treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for any taxable year to have salary reduction contributions in excess of $2,500 made to the arrangement.
Health savings accounts. Individuals under age 65 must pay an additional tax for nonqualified distributions from a health savings account (HSA) and increases the additional tax from 10% to 20%. (The additional tax on Archer medical savings accounts would increase from 15% to 20%.)
Cafeteria plans. The cafeteria plan rules are relaxed under the Affordable Care Act to encourage more small employers to offer tax-free benefits to employees, including those related to health insurance coverage. A safe harbor is carved out from the nondiscrimination requirements for cafeteria plans for qualified small employers.
What changes for retiree medical plans?
* Retiree reinsurance program: A program that will take effect within 90 days of enactment will reimburse plan sponsors for 80% of claims between $15,000 and $90,000 for pre-Medicare retirees age 55-64. The program is funded with $5 billion and is designed to be a bridge to the exchanges in 2014.
* Medicare Part D: Beneficiaries who are in a Prescription Drug Plan and who reach the doughnut hole in 2010 would receive a one-time $250 rebate. In 2011, the reconciliation bill provides a 50% discount on brand-name drugs in doughnut hole for retirees in a Prescription Drug Plan; 75% discount on generics. The measure is designed to eliminate the doughnut hole by 2020.
For employers with a tax liability, the Retiree Drug Subsidy will become taxable in 2013. These employers should immediately consult with their actuaries and accountants as to the implication of this tax change. This change will not generally affect multiemployer plans or governmental plans.
Plan sponsors will need short-term and long-term strategies to address health care reform, Segal stresses. The comprehensive nature of the reforms will likely reach every aspect of plan operations: first, benefit design and cost, and later eligibility rules and the impact of the system reforms on health care costs, including items such as taxes on health insurers and certain manufacturers, and the impact of health insurance exchanges on the health marketplace. Once the reconciliation bill is approved by the Senate, plan sponsors will be able to determine exactly which provisions apply to their benefits, and begin compliance efforts.
What should I tell employees?
"For the past year, you’ve been conveniently hiding out from employees, waiting for a decision from Congress, hoping that you could go on making small talk about Nancy Pelosi’s suits,” Jennifer Benz, president of Benz Communications says. And although she knows “it may be too soon to know all the implications of the new legislation, or to have even had time to read the whole bill, you can’t wait any longer to say something to your employees.”
She’s not leaving you on the river without a raft, though. Click here to read Benz’s post on what employees need to know, complete with a ready-to-send template memo. Just plug in your company info and you’re all set.
Stay tuned to ebn.benefitnews.com for e-mail and blog updates on health care reform over the coming days and weeks.
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