April 2010 Regulation Update

There has been a tremendous amount of dialogue regarding the provisions of the recently passed Patient Care and Affordable Care Act, signed into law last week, along with amendments contained in the Health Care and Education Reconciliation. There are some provisions in the Act that are very clear, with definite implementation deadlines and requirements. Others are still vague and require the actual regulations to be written for clarification.

Valley Forge Benefits Consulting wants to help you formulate your first steps in response to this legislation. Following is a timeline of the changes created by the Patient Care and Affordable Act as well as the Health Care and Education Tax Credit Reconciliation.

Communication to your employees will be key. Citizens across the country have questions about what impact this legislation has on their benefits in both the immediate and long term. A priority is to let your employees know that nothing is changing with regard to their coverages for 2010. In fact, if any of your plans are collectively bargained, those plan designs will remain in effect until the end of the agreement.

January 1, 2011 (for calendar year plans)

• Removal of lifetime limits and no restrictive annual limits
• First dollar coverage of preventative care, including well child care and certain immunizations
• Coverage of unmarried children to age 26
• No pre-existing condition exclusions/limitations for children under age 19. Grandfathered plans must remove pre-existing condition clauses by 2014
• OTC drugs will require a written script to be reimbursed under Medical Savings Accounts – FSAs/HSAs
• Employers must add the value of health care to the employee W-2s
• Non-medical distributions from HSAs will have an increase penalty of 20%
• Small employers with less than 25FT employees (defined as working 30 hours per week) are eligible for  tax credits based on their subsidy of employee healthcare
• Early retiree reinsurance pool is available through 2014 to offset expensive claims incurred by retirees age 55 - 64

January 1, 2013

• Tax reporting of amounts attributed to Medicare Retiree Part D subsidy is discontinued and no longer serve as a deduction.
• Cap on FSA contributions of $2,500
• New .09% Medicare Tax on highly paid employees - $200,000 individual / $250,000 married

January 1, 2014

• Individual mandate requires people to buy coverage or pay an income tax penalty. This penalty will increase annually, starting at the greater of $95 or 1% of income.
• Employers of 50 or more FT employees who fail to provide health coverage must pay a penalty with respect to each FT employee in any month that there is even 1 employee receiveing a subsidy for the exchange. The penalty is 1/12 of $2,000 for each eligible FT employee that month, less the first 30 employees. This is known as the “free rider.”
• Employers of 200 or more FT employees will need to auto enroll all new employees, and provide an opt out opportunity
• Employers must provide each employee at the time of hire, information regarding the exchange and subsidies that may be available
  • The subsidy is available in the exchange if the employer’s share of the total cost of benefits is < 60%
  • The employee who purchases a policy through the exchange (except under instances of free choice vouchers) will lose the employer contribution to any health benefits.
  • Employers that offer minimum essential coverage and make a contribution must offer “free choice vouchers” to any qualified employees for the purchase of qualified health plans through the exchange. The free choice voucher must be equal to the contribution the employer would have made to its own plan. To qualify for the voucher, the employee total household income cannot exceed 400% of the federal poverty limit and they must be required to contribute more than 8-9.8% of their income towards the premium of the employer plan.
• Waiting days can not exeed 90 days
• Removal of all annual limits
• Transparency reporting to HHS, including claims payment policies and data, financial disclosures,enrollment/disenrollment data and cost-sharing
• Increased incentive for wellness from 20% of the COBRA equivalent to 30%
• Cost sharing limitations – Any cost sharing requirements must be satisfied such that the out-of-pocket expense does not exceed that applicable to HSA related coverage, and deductibles do not exceed $2,000 for single coverage and $4,000 for family coverage.

January 1, 2018

• 40% excise tax on high cost coverage, which is classified as $10,200 individual/ $27,500 family coverage excluding dental and vision benefits.