The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act are known collectively as the new health-care reform legislation. Employers should consult their legal counsel regarding the full implications of health-care reform, but the following summarizes the key changes that take effect right away.
Effective as of the plan year that begins on or after October 1, 2010*, group health plans must comply with the following requirements:
- Lifetime Limits – Plans may not impose a lifetime dollar limit on essential health benefits such as emergency services, hospitalization, ambulatory services, maternity and newborn care, and prescription drugs for any participant or beneficiary.
- Annual Limits – Similar restrictions apply with respect to annual limits. However, for plan years beginning before January 1, 2014, group health plans may impose restricted annual dollar limits on essential health benefits if allowed by the federal government. The government will allow annual limits provided that access to necessary services is made available with only a minimal impact on premiums.
- Coverage of Dependent Children – Plans must allow participants to cover adult dependent children under age 26 (regardless of student or marital status). However, if a group health plan was in existence on the date health care reform was enacted in March 2010, it is known as a grandfathered plan. Grandfathered plans are not required to follow this new rule if the older child is eligible to enroll in another employer-sponsored health plan.
- Pre-existing Condition Exclusions – Plans may not impose a pre-existing condition exclusion against a child under age 19 (applies to adults in 2014).
- Rescission – Plans may not rescind the health coverage of any covered participant except in cases of fraud or intentional misrepresentation.
*Collectively bargained plans must comply by the termination date of the last collective bargaining agreement ratified before March 23, 2010.
Effective for 2010, a tax credit will be available for eligible small employers (with not more than 25 full-time employees and average annual wages of not more than $50,000) who contribute at least 50 percent toward the cost of employees' health insurance premiums. The maximum credit is 35 percent (25 percent for tax-exempt eligible small employers) of the lesser of an employer's aggregate non-elective premium contributions or a benchmarked amount, and it decreases for employers with more than 10 employees or with average annual wages of more than $25,000. The maximum credit increases to 50 percent (35 percent for tax-exempt eligible small employers) in 2014.
Effective January 1, 2011, consumer-directed health plans, i.e., medical flexible spending accounts, health reimbursement arrangements, and health savings accounts, may reimburse over-the-counter medications only if a health-care provider prescribes them (with the exception of insulin). Further, the penalty for withdrawing funds from a health savings account for nonqualified expenses will increase from 10 percent to 20 percent.
Finally, effective for 2011 and later tax years, employers must begin disclosing the aggregate cost of employer-sponsored health coverage on the Form W-2 of each covered employee.
Major elements of this legislation are forthcoming in 2014, such as individual mandates, subsidies, and a health insurance exchange, and ASR will continue to inform our clients of the necessary compliance steps, both on our Website and in direct mailings. If you have specific questions about health reform and how it applies to your health plan or your consumer-directed health plan, please contact ASR Health Benefits at (616) 957-1751 or (800) 968-2449 and ask for Maggie Tueth.