Volume 35: Healthcare Reform - Ready or Not, Here It Is

We all know that on March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, better known as Healthcare Reform. This controversial legislation was heavily debated and continues to be the cause for political divisiveness, but it is law nonetheless, so what happens now?

Intended to provide healthcare coverage to some 32 million currently uninsured Americans by raising taxes and imposing steep fees on healthcare-related industries, this sweeping legislation will have far-reaching implications for individual taxpayers and big business alike. At G&A Partners, however, we’re primarily concerned with the elements of the new legislation that are likely to have the greatest and most immediate impact on the businesses we serve, most of which tend to be moderately-sized but growing companies.

Volumes of valuable information is being distributed through cyberspace at light speed by insurance and tax experts, but the data can be daunting if you are not fluent in insurance or tax-speak. Below we break down the reform legislation by answering some of the most commonly asked questions.

As an employer, am I required to provide health coverage for my employees?
No. The reform law does not require employers to provide health coverage to employees. However, beginning in 2014, tax penalties will be imposed on certain employers with at least 50 full-time employees who fail to provide health benefits. Full-time employees are defined as those employees working 30 or more hours per week.

How much might I have to pay in penalties?
Beginning in 2014, a business with 50 or more full-time employees that does not provide healthcare coverage will be required to pay a tax penalty of up to $2,000 annually per worker. However, the first 30 employees are subtracted from the penalty calculation and part-time employees are counted under an hours-based formula.

In light of this legislation, I am considering establishing a plan. Is that the right decision?
Choosing to provide healthcare for your employees is a managerial decision that should be based upon a deep-rooted desire to extend those benefits, the goals you have set for your business, and your company’s ability to pay for those benefits. If you are unsure, conduct a thorough financial analysis, taking into consideration the expense of healthcare versus the cost of any tax penalties your company would incur. You might discover that it is less costly for your company to pay penalties than healthcare premiums. However, healthcare coverage remains an appealing benefit that can help your company attract and retain topnotch employees, so the advantages of providing a quality health plan may offset the added cost.

Can my company keep its existing health insurance plan?
For the most part, employers who wish to keep their current plan may do so. The new law contains “Grandfather” provisions that exempt existing health plans from having to implement extensive changes to their coverage, however those plans will be required to enact certain changes, such as increasing coverage to include dependants up to the age of 26. Grandfathered rules apply for individuals who were enrolled in a plan as of March 23, 2010 as well as for family members and new employees who subsequently join a plan.

What’s changing under the healthcare reform law?
This reform legislation is designed to extend better quality healthcare benefits and reduce the number of uninsured or under-insured people in our country. To that end, there are several key provisions within the new law.

• Dependent Coverage Until Age 26 – The law will require health plans to cover dependents until they reach age 26.
• Pre-existing Condition Exclusions – In the near term, the law will prohibit the application of pre-existing condition exclusions for children under age 19. After January 1, 2014, this prohibition will be applied to all individuals.
• Prohibition on Rescissions - Health plans will be prevented from rescinding health coverage once an individual is covered under the plan, unless the individual acts fraudulently or misrepresents a material fact intentionally.
• Preventive Services - Health plans will be required to cover certain preventive services, such as immunizations and infant preventive care and screenings, at no cost to the employee.
• Lifetime Maximums - The law prevents health plans from applying a lifetime maximum on benefits.
• Annual Maximum - Soon health plans will only be able to impose restricted annual limits on essential health benefits, and eventually they will be unable to impose any annual limits.

When will these changes take effect?
Reform provisions will be rolled in over time, with some becoming effective as early as six months after the date of the law’s enactment (March 23, 2010) and others not taking effect until 2014 or later. It will be important that employers and plan providers monitor schedules to be sure they are adhering to implementation deadlines.

Is there help available for small businesses struggling to provide coverage for their employees?
For years 2010 through 2013, small businesses will be eligible to qualify for a credit of up to 35 percent the lesser of (1) the employer’s non-elective contributions for premiums paid for health insurance coverage; or (2) the average premium for the small group market in the employer’s state.

After 2013, small businesses could be eligible for a credit up to 50 percent the lesser of (1) the employer’s aggregate contributions towards premiums paid to the qualified health plan offered by the employer through an exchange; or (2) the aggregate contributions the employer would have made if the employee had enrolled in a qualified health plan having a premium equal in value to the average premium for the small group market in which the employee enrolls.

To qualify for this credit, a business must have no more than 25 full-time equivalent employees, pay average annual wages of less than $50,000, and provide qualifying coverage. The full amount of the credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000.

Will there be additional reporting requirements for employers under the new law?
The reform legislation does impose new reporting requirements on employers. For example, beginning in 2011, W-2 statements issued to employees must include the aggregate cost of employer-sponsored health benefits, and if an employee receives coverage under multiple plans, an employer must disclose the aggregate value of all coverage. These new reporting requirements will significantly increase the amount of information companies have to compile and report. To ensure compliance, it will be critical that businesses implement processes and procedures to consistently capture and accurately maintain data.

**As an employer, I find the idea of implementing these changes overwhelming. Where do I start? **
It is understandable that you might feel overwhelmed. You are certainly not alone. You should feel comfortable contacting your plan provider. Even if you aren’t sure what questions to ask, your plan provider should be developing a sound understanding of the new and capable of explaining changes required for your plan.

Admittedly, these answers barely scratch the surface. We encourage you to learn more about the changes that will result from this healthcare reform legislation and the impact those changes will have on you, your company and your employees. If you need additional assistance or direction, G&A is here to help - contact us at www.gnapartners.com/contact-us for more information!