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Published byPeregrine Cannon Modified over 8 years ago
1 Health Care Reform Health Care Reform Overview On March 23, 2010 President Obama signed the Patient Protection and Affordable Care Act (PPACA). The law puts in place comprehensive health insurance reform that will roll out over the next four years and beyond with most changes taking place in 2014. President Obama went to great lengths to promise that if you liked your current medical plan you could keep the plan under the new regulations and be considered a grandfathered plan. We believe that the reality is that very few groups will be able to maintain their grandfathered status over the next two years. This is because the rising cost of healthcare in a struggling economy will force changes to be made to these health plans that will cause them to lose their status. In order to qualify as a grandfathered plan, the plan must have been in place on March 23, 2010. any group who has changed their health insurance carrier since that time, even if they made no changes whatsoever to their benefits, has already lost this status. However plans will have a “grace period” during which they may revoke the changes and go back to their original plan and then have their grandfathered status back. However some carriers will NOT retain any grandfathered plans and status will be automatically lost at the next renewal. The real question is does it matter? Will the employer or the employees lose much when and if they lose grandfathered status? In most cases, the answer is no, because so much of the regulation pertains to all plans regardless of grandfathered status. By keeping the grandfathered status, plans will not have to make some benefit changes like emergency services always being covered at in network levels, new appeals procedures and non discrimination testing. This last provision will be the most significant reason to keep the grandfathered status. If a plan stays grandfathered they will be able to continue to be able to discriminate in favor of “highly- compensated individual” with regard to both contribution and plan design. This means an employer can have different waiting periods for different classes of employees and/or varying employer premium contributions for different classes of employees. Also plans that offer two or more plans will not have to worry if the highly compensated employees that make up the majority of enrollment on the better plan. This is important to those employers that wish to continue to use health benefits to attract key employees. Other benefits of keeping the grandfathered status is if the plan is currently age rated and most of the employees are young, then rates are lower. The new plans will not be age rated and more likely then not, the rates will be increased. Another option that will not be available on the new plans will be deductibles of $2,000 or more, so if this is important then the grandfathered plan needs to be retained. Actions Taken After March 23, 2010 That Will Result in a Loss of Grandfathered Status Entering into a new policy, certificate or contract of insurance under an insured arrangement Eliminating benefits for a particular condition Increasing a coinsurance percentage by any amount Increasing a deductible or OOP maximum by more than 15% adjusted for medical inflation Increasing a copayment by more than the greater of $5 or 15% adjusted for medical inflation Decreasing employer contributions in any tier of coverage by more than 5% Adding or decreasing an annual dollar limit
2 Health Care Reform Health Care Reform Timeline Health Care Reform Provisions Immediately Effective –Establishment of the “Early Retiree Reinsurance Program” to help companies maintain health coverage for retirees between the ages of 55 and 64. Program set to expire in 2014. –Rollout of new small business tax credit program for eligible employers with less than 25 employees. –Coverage of an employee's child is tax-free through the end of the year of the child’s 26th birthday, even if the child is not a tax dependent. –“Simple Cafeteria Plan” rules created for employers with less than 100 employees. Mandates for All Group Health Plans (effective for plan years beginning on or after 9/23/10) –Pre-existing condition exclusions are prohibited for enrollees under age 19. –Lifetime dollar maximums are prohibited. –Annual dollar maximums on “essential health benefits” must meet statutory thresholds. –Must continue coverage for children until age 26 (regardless of marital or student status), but only if no other coverage is available to the children. –Rescissions of coverage are prohibited except in cases of fraud or intentional misrepresentation. –60-day advance notice of benefit changes required. Additional Mandates for Non-Grandfathered Plans (effective for plan years beginning on or after 9/23/10) –New standards for internal appeals and external review procedures. –No cost sharing on minimum preventive care services. –New patient protections related to OB/GYN, emergency care and pediatric services. –Must continue coverage for children until age 26 (regardless of marital or student status), even if other coverage is available to the children. –Insured plans are subject to nondiscrimination testing rules and potential excise taxes. A health plan is "grandfathered" if it was in existence prior to March 23, 2010 and the plan sponsor does not make significant changes to its benefits or employer contribution amounts after that date. 2011 Mandates –Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs) cannot reimburse for over the counter (OTC) drugs (excluding insulin), unless prescribed. –Penalty for non-qualified HSAs distributions increases from 10% to 20%.
3 Health Care Reform 2012 Mandates –Employers are required to disclose the value of health benefits on W-2 forms. First applies to value of coverage provided in 2011 and reported in 2012. For reporting purposes only (value is not taxable). –Plan participants must receive a uniform summary of benefits and coverage explanation. 2013 Mandates –The threshold for claiming medical expenses on itemized tax returns is raised from 7.5% to 10% of income. The threshold stays at 7.5% for the elderly through 2016. –The Medicare payroll tax will be raised to 2.34% from 1.34% for individuals earning more than $200,000 and for married couples with incomes over $250,000. –FSA contributions will be capped at $2,500. –Employees must be provided with a notice regarding state Exchanges, eligibility for premium tax credits and related information. 2014 Mandates –State health insurance Exchanges are open for small businesses and individuals. –Individuals are required to maintain health coverage or face a tax penalty. Certain exceptions apply for low income individuals. –Tax credits are available for people with incomes of up to 400% of the federal poverty level (approximately $88,000 for a family of four) to help them purchase coverage. –Pre-existing condition exclusions are prohibited on all participants. –Waiting periods over 90 days are prohibited. –Employers with 50 or more full-time employees (FTEs) must offer coverage to all FTEs and their dependents or face a tax penalty of $2,000/FTE if at least one FTE obtains subsidized insurance through an Exchange. FTE is defined as someone working an average of 30 hours per week. Part-time employees are counted on a pro-rated basis. –Employers providing "inadequate" or “unaffordable” coverage to their FTEs face a tax penalty of $3,000 for each FTE that obtains subsidized insurance through an Exchange. "Unaffordable” is generally defined as a plan with employee contributions that exceed 9.5% of an employee’s household income. –Employers of any size that offer health coverage and pay a portion of the cost must provide certain low-income employees with a “Free Choice Voucher” (a value equal to the amount the employer would have paid for their coverage) that employees can use to purchase health insurance coverage through an Exchange. 2018 Mandates –Excise tax is imposed on “Cadillac Plans,” which are generally defined as self- only coverage with a value of more than $10,200 or family coverage with a value of more than $27,500. Penalty is a 40% tax on the value exceeding these thresholds.
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