What to Expect in 2010
 

With the recent signing of the Patient Protection and Affordable Care Act (PPACA) the following changes will be effective for plan years beginning six months after the legislation’s enactment (September 23, 2010):

This bill is only the beginning.  There are still many issues that need to be addressed in the coming years as the phases of this plan roll out.

Existing individual and employer-sponsored health plans will be allowed to remain essentially the same; except they will be required to comply with the following:

• Lifetime and annual limits on coverage, based upon dollar value of benefits will be prohibited.
• Prohibits cost sharing (for example: copays, deductibles, co-insurance) for certain preventive services.
• For plans not in existence prior to March 23, 2010, mandates coverage for preventive services specified by the US Preventive Services Task Force; immunizations recommended by the Advisory Committee on Immunization Practices of the CDC; and preventive services and screenings as provided for in guidelines supported by the Health Resources and Services Administration.
• Young adults to age 26 will be allowed to continue on their parent’s family health insurance if the plan provides dependent coverage.
• Ensure access to a parent’s health plan for children with pre-existing conditions and prohibits limitations on pre-existing conditions for children to age 19.
• Prohibits health plans from rescinding once a plan has been issued, except in cases of fraud or misrepresentation of material fact.
• Waiting periods for coverage will be limited to no more than 90 days.

To review a full outline of provisions of the bill effective in 2010 go to http://www.kff.org/healthreform/upload/8023-R.pdf.   

Health Insurance Exchanges

The new law provides for the development of health insurance exchanges that will facilitate the coverage of millions of Americans.  Each state will create a health benefit exchange where individuals and small businesses can purchase insurance.  These new marketplaces will promote consumer transparency so Americans are able to make informed decisions about their health care.

The concept of exchanges promotes healthy competition within a marketplace and puts all insurance products on a level ground financially so that consumers can base their health care purchases on quality, service, and value.

Exchanges will:

• Make premium and cost-sharing subsidies available for more affordable coverage.
• Be limited to US citizens and legal immigrants.
• Be available to small businesses with up to 100 employees, and in some states up to 50 employees.
• Require plans participating in the exchange to offer benefits that meet a minimum set of standards.
• Offer varying levels of standard coverage offered by each plan that vary based on premiums, out-of-pocket costs, and benefits beyond the minimum required plus a catastrophic coverage plan.
• Allow individuals and employees to select from competing plans once an employer has selected a standard benefit package.

Additional information on exchanges is available at http://waysandmeans.house.gov.  

Impact on Employers  

Small Employers:

Starting in 2011 (2010 Tax Year), small businesses (an employer who employs 25 or fewer qualified employees during the taxable year, and the average employee compensation does not exceed $50K) will be eligible for Health Care Affordability Tax Credits worth up to 35 percent of their contribution to their employees’ health insurance plans.  In 2014, when Small Business Health Options Programs (SHOP) exchanges are established, tax credits will increase to 50 percent of employers’ contributions. 

To qualify for the tax credit, businesses must cover at least 50 percent of employee premium costs.  Tax-exempt employers would get a 25 percent credit against payroll taxes.  Employers with 10 or fewer employees and average wages of less than $25K would get 100 percent of the credit.

Large Employers:

While there is no employer mandate, beginning in 2014, a large employer (an employer that employed an average of at least 50 full-time employees during the preceding calendar year) who fails to offer its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an employer-sponsored plan for any month is subject to a penalty if at least one of its full-time employees is certified to the employer as having enrolled in health insurance coverage purchased through a state exchange with respect to which a premium tax credit or cost-sharing reduction is allowed or paid to such employee or employees.  The penalty for any month is an excise tax equal to the number of full-time employees over a 30-employee threshold during the applicable month (regardless of how many employees are receiving a premium tax credit or cost-sharing reduction) multiplied by one-twelfth of $2,000.

Large employers that offer coverage will be required to automatically enroll employees into the employer’s lowest cost premium plan if the employee does not sign up for coverage or does not opt out of coverage.

A large employer that does not offer coverage for all its full-time employees, offers a minimum essential coverage that is unaffordable, or offers minimum essential coverage that consists of a plan under which the plan’s share of the total allowed cost of benefits is less than 60 percent, is required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee.

Frequently Asked Questions

Q: Young adults to age 26 will be allowed to continue on their parent’s family health insurance if the parent’s plan provides dependent coverage.  Does this mean through a rider?

A: As long as there is a family policy, young adults to age 26 are considered part of the family unit and can remain insured.  This provision is effective for plan years that begin after 9/23/10.  Any plan renewing prior to 9/23/10 will not be impacted by this provision until the following year/renewal. 

Q: Lifetime and annual limits on coverage, based upon dollar value of benefits will be prohibited.  Doesn’t the law only state lifetime coverage on limits?

A:The law states both lifetime and annual limits on coverage will be prohibited.  However, for plan years before 2014, annual limits may only be established with respect to the scope of benefits that are considered essential health benefits.  Both the scope of the annual limits and the essential benefits are yet to be specified by the Health and Human Services Secretary. 

Q: Will the prohibition of cost sharing (copays, deductibles, coinsurance) for certain preventive services in traditional plans be applicable to services conducted in a hospital setting?

A: We are still waiting on guidance and direction regarding the prohibition of cost sharing for preventive measures conducted in a hospital setting. 

Q: The law states, if I pay 50 percent of my employee’s health bill, I can get 35 percent back.  When does this incentive to into effect?  Will it be effective for the 2010 tax year?

A: This provision applies to what is filed in 2011 for 2010.  We suggest speaking further with a tax advisor for more guidance.

Timeline for Change

Most provisions of the health care bill won’t go into effect until 2014, with some provisions not going into effect until 2015 or beyond.  See our link to the Health Reform Implementation Timeline.