Summary

Health Care Reform Central

Welcome to Benefit Pro’s Health Care Reform Information Center

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 provisions rolling out on a timeline, starting as soon as 2010.

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January 1, 2010

Small Employer Tax Credit (All Plans)

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).

 

June 25, 2010

Temporary Retiree Reinsurance Program (All Plans)

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 23, 2010

Adult Children Coverage (All Plans)

For plan years beginning 9/23/2010, health plans would be required to provide coverage for adult children up to age 26. There is no requirement that the individual be a student to qualify for coverage under this provision. 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.

Lifetime and Annual Limits (All Plans)

For plan years beginning 9/23/2010, new and existing fully-insured and self-funded plans are prohibited from having lifetime limits on coverage or restrictive annual limits on “essential health benefits”. Some restricted annual limits may be allowed until 2014, if the Health and Human Services (HHS) defines which of such benefits are permitted.

Pre-existing Conditions (All Plans)

For plan years beginning 9/23/2010, there can be no pre-existing condition limitations for children under age 19. Insurers can still reject those children outright for coverage in the individual market until 2014. Preventive Care Coverage (Does not apply to Grandfathered Plans)

For plan years beginning 9/23/2010, both fully insured and self funded plans must provide coverage for certain preventive service with no cost sharing for participants. This provision applies to new plans. Non-discrimination (Does not apply to Grandfathered Plans)

For plan years beginning 9/23/2010, a plan sponsor of a group health plan may not establish rules relating to the health insurance coverage eligibility (including continued eligibility) of any full-time employee that are based on the total hourly or 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.

Emergency Services (Does not apply to Grandfathered Plans)

For plan years beginning 9/23/2010, 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).

Provider Choice (Does not apply to Grandfathered Plans)

For plan years beginning 9/23/2010, enrollees must be permitted to designate any in-network doctor as their primary care physician (including an OB/GYN or pediatrician), and not require authorization or referral for a participating OB/GYN.

 

FAQs

The new legislation requires full coverage, with no copays or deductibles, for certain preventive care services. Can an employer charge a higher premium contribution for plan enrollment?

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. However, certain changes to contributions may affect the plans “grandfather” status.

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 and contributes at least 50 percent of the total premium cost. 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.

To calculate the amount of eligible tax credit, click: Small Business Majority - Healthcare Tax Credit Calculator