Health Reform
On Tuesday, March 23, 2010, President Obama signed HR 3590, legislation known as "Patient Protection and Affordable Care Act", into law. The new law was closely followed by passage of the reconciliation bill, HR 3590, the "Health Care and Education Reconciliation Act of 2010" which was signed by President Obama on Tuesday, March 30, 2010. The legislation makes extensive changes to employer-sponsored benefit plans. The effective dates of the provisions are staggered with some provisions effective as soon as June 2010.
2010
Small Employer Tax Credit
For years 2010 through 2013, businesses with fewer than 25 employees and average wages of less than $50,000 are eligible for a tax credit of up to 35 percent of the employer's contribution toward the employee's health insurance premium if the employer contributes at least 50 percent of the total premium cost or 50 percent of a benchmark premium. Tax-exempt businesses meeting the requirements above are eligible for the tax credits but are entitled to a maximum credit of 25 percent of their contribution toward the employee's health insurance premium. The tax credit will increase to 50 percent in 2014 (will remain at 35 percent for tax-exempt employers).
Nursing Mothers
Effective March 23, 2010, employers must provide a reasonable break time for employees who are nursing mothers to express breast milk for a period of one year following the birth of the child. The employer must provide a place that is shielded from view and free from intrusion of co-workers and the public for use by the employee. A bathroom is specifically excluded as an appropriate place. Employers are not required to pay employees during the time they are expressing breast milk unless mandated under State law. Also, employers with less than 50 employees may be exempt from this requirement if this causes an "undue hardship" by causing "significant difficulty or expense." These terms have not yet been defined.
June, 2010
Temporary Retiree Reinsurance Program
Ninety days after enactment, a federal reinsurance program will be available for employers providing insurance for retirees over age 55 years of age, who are not eligible for Medicare. The program will reimburse employers for 80 percent of claims incurred for the retirees between the ages of 55-64 for costs between $15,000 up to $90,000.
September, 2010
Dependent Coverage to Age 26
For plan years beginning six months after the date of enactment, plans would be required to provide coverage for adult children up to age 26. Until 2014, grandfathered plans are only required to provide such coverage if the dependent does not have access to other employer-sponsored coverage. The Reconciliation Act amends Section 105 of the Internal Revenue Code and states that the cost of health coverage for dependent children through age 26 is excluded from taxable income. Thus, the coverage is nontaxable even if the child is not the employee's "dependent" for tax purposes. There is no requirement that the individual be a student to qualify for coverage under this provision.
Lifetime/Annual Limits
For plan years beginning six months after the date of enactment, new and existing fully-insured and self-funded plans are prohibited from having lifetime limits on coverage or restrictive annual limits. Annual limits will be allowed until 2014 only on Health and Human Services (HHS) defined non-essential benefits.
Pre-existing Conditions
For plan years beginning six months after the date of enactment, there can be no pre-existing limitation for coverage of children under age 19, although insurers could still reject those children outright for coverage in the individual market until 2014. Applies to new and grandfathered plans.
Preventive Care Mandate
For plan years beginning six months after the date of enactment, both fully insured and self funded plans must provide coverage for certain preventive service with no cost sharing for participants. This applies to new plans.
Non-discrimination
For plan years beginning on or after six months after enactment, a plan sponsor of a group health plan may not establish rules relating to the health insurance coverage eligibility (including continued eligibility) of any fulltime employee that are based on the total hourly/annual salary of the employee; the plan sponsor also may not establish eligibility rules that have the effect of discriminating in favor of higher wage employees in any manner. This requirement is similar to the rules already in existence for self funded plans and qualified benefits under a cafeteria plan.
PCP Designation and Emergency Services
For plans years beginning on or after six months after the date of enactment, fully-insured group and individual health plans and self-funded group plans must cover emergency services at in-network levels, regardless of provider, without prior authorization. Also enrollees must be permitted to designate any in-network doctor as their primary care physician (including an OB/GYN or pediatrician).
FAQs
What is meant by "grandfathered plan"?
"Grandfathered" plan refers to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act. Renewal of the plan after such date of enactment does not alter the grandfather status of the plan.
With respect to a grandfathered plan that is renewed, family members are permitted to enroll in such plan or coverage if such enrollment is permitted under the terms of the plan in effect as of such date of enactment. A grandfathered plan may also permit new employees (and their families) to enroll in such plan . However, the grandfathering provision is silent with respect to the impact of plan changes made subsequently, so it is unclear how such plan changes will impact grandfathered status. Some experts believe that if an individual changes his or her level of deductible or co-insurance, then the plan is no longer grandfathered. We will watch for additional guidance in this area.
The legislation requires coverage for certain preventive care services and prohibits plans from imposing any cost-sharing requirements. May an employer charge a co-payment for these services?
No, under the new law, a plan may not charge a participant a co-payment for one of the mandated preventive care services. HR 3590 defines "cost sharing" for purposes of the mandated preventive requirements as including: (i) deductibles, coinsurance, copayments, or similar charges; and (ii) any other expenditure required of an insured individual which is a qualified medical expense with respect to essential health benefits covered under the plan. There are certain exceptions to "cost-sharing," which include premiums, balance billing amounts for non-network providers, or spending for non-covered services.
What is defined as an eligible small employer for purposes of the tax credit?
A small employer is defined for purposes of the tax credit as an employer with no more than 25 full time equivalent (FTE) employees FTE employee is determined by dividing the total number of hours of service for which wages were paid by the employer during the taxable year by 2,080, rounded to the next lowest whole number. If an employee works in excess of 2,080 hours of service during any taxable year, the excess is not taken into account.
The employer's average wage amount is also relevant for determining whether a small employer is eligible for this tax credit. The tax credit applies to employers with an average annual wage amount of $50,000 or less for years 2011, 2012 and 2013. Subsequent years will be adjusted according to a cost of living adjustment. The average wage amount is determined by dividing the aggregate amount of wages which were paid by the employer to employees during the taxable year by the number of FTE employees. Thus, an eligible small employer is one that has 25 FTE employees or less and has an average annual wage amount of $50,000 or less.
In determining the number of FTE's and the average annual wage, leased employees should be included in the calculations, but two percent shareholders of an S Corporation, more than 5 percent owners in other business types, partners in a partnership, and sole proprietors are not included in the calculations.
Lastly, the employer must contribute at least 50 percent of the total premium cost to be eligible.
Additional Resources