Have you been pulling your hair out for the past several months trying to determine what health care reform means for your organization? This article will provide you with a good starting point by outlining many of the major provisions of the health care reform package (the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010) that go into effect this year or in 2011.
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Effective in 2010
Small-business tax credits. Beginning this year, certain small employers that contribute at least 50 percent of their employees’ health care premiums are eligible to receive tax credits. The credits are available to small businesses with no more than 25 employees, and the amount of the credit is based on the number of employees and the average annual employee compensation. Small businesses could receive credits of up to 35 percent (or up to 50 percent starting in 2014) of their premiums.
Early Retiree Reinsurance Program . The U.S. Department of Health and Human Services is accepting applications for the Early Retiree Reinsurance Program created by the new health care reform legislation. The program will provide $5 billion for employer health plans that offer coverage to early retirees who are ages 55 to 64. Reimbursement will be made to plans on behalf of early retirees and their spouses, surviving spouses, and dependents for up to 80 percent of certain claims between $15,000 and $90,000. The program will end in 2014 (unless the $5 billion program limit runs out before then), and assistance will be offered on a first-come first-served basis.
Tax exclusion for coverage of adult children. The health care reform legislation expands the income tax exclusion for employer-provided health coverage to include employees’ children who are under age 27. The legislation did this by extending the definition of “dependent” to include children who will not turn 27 at any time during the applicable tax year.
Adoption assistance. The legislation also increases the adoption assistance tax exclusion from $10,000 to $13,170.
Health insurance reforms
The legislation contains several health insurance reforms that are effective for the first plan year beginning on or after September 23, 2010. (For calendar-year plans, the reforms will generally be effective on January 1, 2011.) A crucial consideration to whether these reforms apply to your plan depends on whether your plan is grandfathered. A grandfathered plan is a group health plan that was in effect on March 23, 2010, and has not made any changes that would cause it to lose its grandfathered status.
The following insurance reforms apply to all plans, including grandfathered plans:
- Elimination of lifetime limits. Plans are prohibited from imposing lifetime limits on “essential health benefits.”
- Restriction of annual limits. Plans may place restricted annual limits on “essential health benefits” only until January 1, 2014, when annual limits on such benefits are completely prohibited.
- Prohibition on rescissions. Plans may not rescind coverage in most circumstances. They may do so only in cases of fraud or intentional misrepresentation.
- Coverage for adult dependent children. Plans that cover dependent children must extend coverage to adult children until they turn 26. Grandfathered plans aren’t exempt from this requirement, but until January 1, 2014, they don’t have to extend such coverage to dependent children who are eligible for other employer-sponsored coverage.
- Elimination of preexisting condition exclusions for children. Plans may not impose preexisting condition exclusions or limitations on health plan participants who are under the age of 19.
The following insurance reforms apply only to new plans and do not apply to grandfathered plans:
- Preventive care coverage. New health plans must cover certain evidence-based preventive care without cost sharing. In other words, plans can’t charge patients copayments, coinsurance, or deductibles for such services (if a network provider supplies the services).
- Nondiscrimination rules. The nondiscrimination rules for “highly compensated” employees that previously applied only to self- insured health plans will now apply to fully insured group health plans.
- Patient protections. Nongrandfathered plans are also subject to requirements relating to an individual’s choice of health care professional (including primary care providers and pediatricians) and access to obstetrical and gynecological care and emergency services.
- Claims and appeals process. Plans are required to create and maintain a claims and appeals process that includes not only an internal review but also an external review. The new process will allow individuals to appeal decisions made by their insurance companies or health plans.
- Miscellaneous other provisions. Nongrandfathered plans will also be subject to requirements regarding cost reporting and rebates, transparency, and ensuring quality of care.
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Effective in 2011
There are a couple of other health care reforms that become effective in 2011, which are outlined below.
Health care account changes. The health care reform legislation limits distributions for qualified medicine under health savings accounts (HSAs), Archer medical savings accounts (MSAs), health flexible spending arrangements, and health reimbursement arrangements to prescription drugs and insulin. Additionally, the legislation increases the additional tax on distributions from HSAs and Archer MSAs that aren’t used for qualified medical expenses to 20 percent of the disbursed amount.
Simple cafeteria plans for small businesses. The health care reform legislation provides certain eligible small employers with a new safe harbor from the nondiscrimination rules for cafeteria plans. To be eligible for the safe harbor, you will have to meet certain requirements.
Employer action required
Since the provisions discussed in this article are ones that become effective soon (or are already effective), these are some of the issues you need to concentrate on and tackle first. You should review your current health and benefits plans to get an idea of what changes you may have to make to be in compliance with the new health care reform provisions that go into effect this year and in 2011.