Updated March 9, 2011 Health Care Reform Update Health Care Reform Timeline for Employer-Sponsored Plans This timeline provides some of the key dates associated with the Patient Protection and Affordable Care Act. It is not exhaustive and primarily focuses on compliance for employer-sponsored plans. 2010 IMMEDIATE REFORMS January March June Small Business Tax Credits A tax credit of up to a 35% of health care premium costs is available for small businesses (no more than 25 employees, average annual wage of no more than $50,000) when the employer contributes at least 50% of the premium costs. Grandfathered Status Plans in existence on or before March 23, 2010 are considered grandfathered. Expanded Tax Treatment of Children under Age 27 in the Taxable Year Effective March 30, 2010, health benefits provided to an employee s child who has not attained age 27 in the taxable year (January 1 December 31) will not be included in the employee s gross income for federal tax purposes. Reinsurance Program for Early Retiree Plans A temporary government reinsurance program is available for employer-provided retiree plans. Early retirees are between the ages of 55 and Medicare eligibility. May reimburse up to 80% of the cost of claims between $15,000 and $90,000. Program is available until the earlier of January 1, 2014 or when funding expires. Market reforms effective for plan years beginning on or after September 23, 2010 (January 1, 2011 for calendar-year plans) Lifetime Limits All group health plans are prohibited from imposing lifetime dollar limits on essential benefits offered under the plan. 1
Annual Maximums All group health plans are prohibited from imposing annual dollar limits below certain prescribed thresholds on essential benefits. 1 All annual limits on essential benefits will be prohibited for the first plan year that begins on or after January 1, 2014. Certain plans may qualify for a waiver from the annual limitation requirement before January 1, 2014. Cover Children to Age 26 All group health plans that offer dependent coverage must extend eligibility to cover children up to age 26. Until 2014, grandfathered plans may exclude children who have coverage under another employer-based plan that is not coverage provided by a parent (e.g., coverage from the child s own employer, or the child s spouse s employer). No Rescissions of Coverage All group health plans are prohibited from rescinding coverage (retroactively cancelling health plan coverage) except in cases of fraud or intentional misrepresentation of material fact. Pre-Existing Condition Exclusions and Individuals under 19 All group health plans are prohibited from imposing pre-existing condition exclusions on individuals under age 19. As of 2014, all pre-existing condition exclusions will be prohibited. Preventive Care Non-grandfathered group health plans must cover specific preventive care items and services at 100% in-network. Discriminatory Plan Designs Non-grandfathered group health plans are subject to nondiscrimination rules similar to the rules contained in Code Section 105(h). Enforcement and applicable penalties for noncompliance are currently delayed until issuance of regulatory guidance. Patient Protections All non-grandfathered group health plans that impose a primary care physician (PCP) designation must allow participants to elect any available PCP in-network including pediatricians and OB/GYNs. A non-grandfathered plan may not impose prior authorizations for emergency services and must treat emergency services as covered in-network even if received out-ofnetwork. Appeals and External Review Processes All non-grandfathered group health plans will be subject to enhanced claims, appeals and external review processes. 1 Prior to 2014, a group health plan may apply restricted annual limits on essential benefits provided such limits are no less than the amounts in the following schedule: For plan years beginning on or after September 23, 2010 but before September 23, 2011, $750,000; For plan year beginning on or after September 23, 2011, but before September 23 2012, $1,250,000; and For plan years beginning on or after September 23, 2012, but before January 1, 2014, $2,000,000. 2
2011 2012 Medical Loss Ratios All insured plans are required to maintain certain medical loss ratios. Briefly, this means carriers will be required to spend 85% of premium dollars received on medical care and activities to improve health care quality (80% for small plans). Rebates are available to enrollees if these thresholds are not satisfied. Optional W-2 Reporting Reporting the value of health plan coverage on an employee s W-2 is optional for tax year 2011. Flexible Spending Accounts As of January 1, 2011, over-the-counter (OTC) medicines and drugs can no longer be reimbursed through the health FSA, HRA or HSA unless prescribed by a doctor. HSA Tax Penalty As of January 1, 2011, a 20% penalty tax applies to distributions made from the HSA that are not for qualified medical expenses. Simple Cafeteria Plans These plans will be available to small businesses with no more than 100 employees. Small Employer Workplace Wellness Grants Grants become available to certain eligible employers 2 that establish Comprehensive Workplace Wellness Programs beginning fiscal year 2011. W-2 Reporting Employers will be required to report the value of health plan coverage provided to employees (and their family members) for the benefits received in 2012 (generally reported on the W-2 issued in 2013). Benefit Summary Insurers and plan sponsors will need to provide a 4-page summary of benefits to plan participants, due by March 23, 2012. Any material changes made to the benefit summary will require 60-day advance notice. Quality Reporting to HHS Non-grandfathered plans will be required to provide an annual report to HHS on specific quality improvement features of a group health plan. 2 The term eligible employer means an employer that (1) employs less than 100 employees who work 25 hours or more per week and (2) did not provide a workplace wellness program as of March 23, 2010. 3
2013 2014 Flexible Spending Accounts $2,500 cap will be imposed on the health FSA. Medicare Tax The Medicare Hospital Insurance (HI) tax rate will increase from 1.45% to 2.35% on earnings over $200,000 for individuals taxpayers, and $250,000 for joint filers. Further, a new 3.8% HI tax will be added on unearned income of these same high-income tax-payers. Fee on Health Plans Health plans will be assessed a fee to fund a Patient-Centered Outcome Research program. In the first year, the fee generally reflects $1 multiplied by the average number of lives covered under the group health plan. In the following years, the fee increases to $2. This provision expires September 30, 2019. Retiree Prescriptions The employer deduction for retiree prescription drug expenses will be reduced by the amount of the excludible federal subsidy payment received for Part D prescription drug plans for retirees. CLASS Program Federally-administered long-term care program open to enrollment by working individuals. Employers may participate by automatically enrolling employees (with employee opt-out) or may elect to not participate in the program. Exchanges Individual and Small Group Options A new marketplace, called an Exchange, will be established where individuals and small groups (1 100 employees or 1 50 employees, depending on state law) may go to purchase health insurance coverage. Premium credits and cost-sharing subsidies will be available to lowerincome individuals to assist in the purchase of insurance through the Exchange. Rating Community rating modified for individual and family coverage in the small group market. Individual Mandate Individuals will be fined, beginning in 2014, for not having approved health care coverage. Employer Mandates o Employers with 50 or more employees will face penalties if full-time employees 3 receive government assistance through the Exchange. o Employers must offer free-choice vouchers to certain qualified employees. o Automatic enrollment into the group health plan coverage will be required for employers with more than 200 employees, with employee opt-out opportunity. 3 The statute defines full-time employee as an employee who is employed on average at least 30 hours per week. 4
o o o Tax credits increase for small employers who provide health plan coverage through the Exchange for 2 years. Employers must provide notice to employees of the existence of the Exchange. Employers must provide notice to the IRS and participants with information detailing the coverage under the employer-sponsored health plan. Wellness Programs Wellness program incentives may increase to 30% of the cost of coverage for a reward based program. Health Insurance Carriers New fees imposed on health insurance carriers. Market reforms effective for plan years beginning on or after January 1, 2014 2017 2018 Pre-Existing Conditions All group health plans are prohibited from imposing pre-existing condition exclusions on any covered participant or beneficiary. Benefit Waiting Periods All group health plans are prohibited from imposing waiting periods in excess of 90 days. Annual Dollar Limits All group health plans are prohibited from imposing annual dollar limits on essential benefits. Cover Children to Age 26 Grandfathered group health plans must now cover children up to age 26 regardless of their other employer-based coverage. Clinical Trials Non-grandfathered group health plans must provide coverage to certain individuals participating in approved clinical trials. Mandated Coverage Non-grandfathered group health plans and Exchange plans must meet certain mandated levels of coverage including out-of-pocket cost sharing (tied to HSA qualified plan limits). Exchanges States may open Exchanges to larger employers (100+ employees or 50+ employees, depending on state law). High Cost Health Plans 40% excise tax imposed on high-cost health plans (above $10,200 for single coverage and $27,500 for family coverage). 5
USI is a leading provider of employee benefit programs, commercial insurance, and retirement plan services operating nationally with 77 offices. In today's climate of escalating healthcare costs, USI has the knowledge and resources to support your company's critical employee benefits decisions. We offer strategic cost containment solutions, integrated wellness programs, compliance services, and administration and communication services. Please contact your USI representative or call (877) 470-9100 for additional information. Disclaimer: This Health Reform Update is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws, regulations or to address specific client situations. 2010 USI Insurance Services LLC. Please contact us if you have any questions regarding the content of this 555 Pleasantville Road Suite 160 South Briarcliff Manor, NY 10510 914.747.6300 www.usi.biz Copyright 2010 USI Insurance Services. All Rights Reserved. 6