Health Reform Law Overview

ith the passage of the Health Reform Law, health insurance and the delivery of medical services will become more complex. The new legislation will have numerous regulations and require employers to provide added administration and compliance.

Because of the complexity and sheer number of provisions, federal and state governments will develop additional rules and guidance on how the law is to be interpreted and implemented. Envision Benefit Specialists is committed to keeping you informed throughout this process.

Below is a timeline and overview of some of the major provisions of the Health Reform Law. Most of the provisions will not take effect for several years. For those provisions that affect employer-sponsored health care plans in 2010, the provisions will not go into effect until the next annual renewal. 

2010

Small Business Health Care Tax Credit – provides a maximum credit of 35% of employers’ insurance premiums for groups with under 25 employees and average annual wages under $50,000.

Dependent Coverage – insurers required to cover children up to age 26 on their parent’s plan.

Temporary Federal High-Risk Insurance Pool – provide coverage to adults with pre-existing conditions if they have been uninsured for six months.

Pre-Existing Conditions – children under age 19 with pre-existing conditions cannot be excluded from group plans.

Lifetime Benefit Plan Limits – plan limits on essential benefits are removed, annual limits will be restricted (will be determined by the Dept. of Health and Human Services (HHS)).

2011

Preventative Care – policies must cover the full cost of preventative care for adults and children as determined by HHS.

Spending Accounts – participants can no longer use funds from their Health Saving Accounts or Flexible Spending Accounts to pay for over-the-counter medicine unless prescribed by a doctor.

Reporting Requirement – employers required to disclose the full value of all health insurance benefits on employee’s annual W-2.

CLASS Act – employers must enroll employees in a national long-term care (LTC) insurance program through payroll deductions unless employee waives coverage.  LTC benefits are very limited.

2012

Comparative Effectiveness Fee - new fee imposed on individual and group health plans to fund comparative effectiveness research ($1 per participant through 2013; $2 per participant through 2019).

2013

Flexible Spending Account – employee contributions limited to $2,500 a year.

Medicare Payroll Tax – increase by 0.9% for those with earned income above $200,000 for individuals or $250,000 for a couple.

2014

Individual Mandate – individuals must buy insurance or pay an annual tax penalty of $95 or 1% of income (whichever is greater).  In 2016, the penalty rises to $695 or 2.5% of income.

Employer Mandate – employers with more than 50 employees must offer health insurance coverage to their employees or pay a $2,000 per employee annual tax. The total number of employees includes both full-time and part-time (30 hours/week minimum).

Pre-Existing Conditions – insurers cannot impose any pre-existing condition exclusions.

Annual Plan Limits – annual limits on essential benefits are removed.

Guaranteed Issue – insurers must offer coverage to anyone wanting a policy.

Health Insurance Exchanges – state required to establish an exchange for federally-approved health insurance. Subsidies for both individual and small businesses purchasing insurance will be available in the form of tax credits and cost-sharing assistance.

Health Plan Wellness – expands Wellness Program incentives up to 30% of total coverage cost.

2018

New Premium Insurance Excise Tax – impose a new 40% tax on high-value “Cadillac” insurance plans.  Definition of a “Cadillac” plan to be determined by HHS.

The Bottom Line

While many of these provisions are good for consumers — the waiver of pre-existing condition clause, elimination of annual and lifetime limits, expansion of dependent coverage to age 26, and the creation of equal premium levels for those who are sick or healthy — there will certainly be a dollar cost to all these benefits. Health insurance costs will start increasing in 2010 and skyrocket by 2014. By 2014, insurers may no longer charge individuals and small businesses higher premiums or deny coverage based on pre-existing conditions. Healthy individuals will subsidize the premium cost for unhealthy individuals. This will drive health insurance costs up dramatically. 

Moving forward, I will communicate more details about specific provisions as they change or become implemented. If you have questions about any part of the Health Reform Law, please contact me. I strive to stay updated and attend many seminars and webinars, and subscribe to health industry newsletters where the latest information is disseminated. I also belong to many online industry groups where ideas and health insurance news are discussed on a daily basis.

More Employee Benefits and Human Resources

can now provide resources and materials for your company’s Employee Benefits and Human Resources needs. If you would like to produce an employee handbook, need information on labor laws and compliance, or would like new hire forms and checklists, contact me for the resources you need to produce these documents!

If you know of any colleagues that would benefit from this information, please contact me.