2010 Health Care Reform Legislation Provisions – Effective Dates 2013 and Onward
FOR ALL EMPLOYERS
Health FSA contribution limit. There is a $2,500 limitation on health FSA contributions (Effective: 2013)
Coverage waiting period. There is no employee waiting period longer than 90 days to obtain coverage. (Effective 2014)
Voucher requirement. Employers offering coverage must also offer a voucher to any employee with an income less than four times the federal poverty level whose share of the premium is greater than 8 percent but less than 9.8 percent of their income, and who chooses to enroll in a state exchange rather than participate in the employer’s group health insurance plan. The voucher amount must be equal to what the employer would have paid in premiums for that employee, and can be applied by the employee toward his/her premiums in the exchange plan. (Effective 2014)
FOR SMALL AND MIDSIZE EMPLOYERS
Increased tax-credit percentage. The new tax-credit percentage of up to 35 percent for 2010-2013 previously discussed will increase to a maximum of 50 percent for employers with 25 or fewer full-time equivalent employees who purchase insurance coverage for their employees through a state exchange. Employers with 10 or fewer employees and average wages of less than $25,000 will receive the full 50 percent credit for up to two consecutive years. (Effective 2014)
Exchanges and other programs. All states must establish an exchange to facilitate the purchase of qualified health plans and establish a Small Business Health Options Program (SHOP) that will assist employers with up to 100 employees in obtaining group coverage. A Consumer Operated and Oriented Plan (CO-OP) program will be developed to facilitate the creation of not-for-profit, member-run health insurance companies. (Effective 2014)
FOR LARGER EMPLOYERS
Automatic employee enrollment. Employers with more than 200 employees must automatically enroll employees in the health insurance plans they offer. They also must notify employees of the automatic enrollment and give them the ability to opt out of coverage. (Effective: Date not yet established)
Penalties for no coverage or inadequate coverage. Applicable large employers with an average of at least 50 employees that do not offer coverage for all full-time employees, or offer inadequate coverage, are required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange to which a tax credit or cost-sharing reduction is allowed or paid to the employee. The number of employees is based on the average employee count from the previous calendar year. (Effective 2014)
State exchanges. Employers with more than 100 employees will be able to join state exchanges, at the state’s discretion. (Effective 2017)
Medicare tax changes. Medicare taxes increase by 0.9 percent to 2.35 percent on wages of more than $250,000 for joint returns, $125,000 for married filing separate or $200,000 for other individuals. Also, a 3.8 percent Medicare tax will be imposed on the lesser of investment income (interest, dividends, royalties, rents, etc.) or modified AGI more than $250,000 for joint returns or $200,000 for other individuals. (Effective: 2013)
Unreimbursed medical expenses. The itemized deduction threshold for unreimbursed medical expenses will increase to 10 percent of AGI. However, through 2016 it remains 7.5 percent if an individual (or the individual’s spouse) has turned age 65 before the close of the tax year. (Effective: 2013)
Premium assistance credit. A refundable tax credit helps cover the premium cost for health insurance purchased through a state health benefit exchange. The Treasury Department will pay the premium assistance credit amount directly to the enrollee’s insurance plan. Individuals will pay the dollar difference between the premium tax credit amount and the total premium charged to the plan in which they are enrolled. Alternatively, individuals may pay the full premium out of pocket and claim the credit on their tax returns. To be eligible, household incomes must be between 100 percent and 400 percent of the federal poverty level based on family size and health insurance is not available through an employer or a spouse’s employer. The credit amount is based on the excess premium over a threshold amount. The threshold rises from 2 percent of income for those at 100 percent of the federal poverty level to 9.5 percent of income for those at 400 percent of the federal poverty level based on family size. The threshold amounts are adjusted for inflation after 2014. (Effective: Years ending after Dec. 31, 2013)
Parties for no insurance. All individuals must carry insurance or pay penalties – the great of $95 or 1 percent of income over the filing threshold in 2014, $325 or 2 percent in 2015 and $695 or 2.5 percent in 2016 and beyond. A penalty also is due for each dependent who does not have coverage (fee is half of the adult amount for those younger than 18). The penalty will not be imposed on those for whom the cost of the least-expensive insurance exceeds 8 percent of their income. It also will not be imposed on incarcerated individuals, member of American Indian tribes, individuals not legally present in the United States and those who can claim a religious-conscience exemption. No criminal penalties will be assessed against those who do not pay the penalty, and the IRS cannot use liens or seizures to enforce the penalty. (Effective: 2014) NOTE: Employers might consider offering this information as a service to employees.
Current health coverage. There are special rules for grandfathered health plans (any group health plan or individual coverage that was effective March 23, 2010, the date of the new legislation’s enactment). Employers can maintain current health coverage for individuals already enrolled in plans and for subsequently enrolled family members and new hires. This coverage will not negate the grandfathered status as long as the plan allowed for dependent/family coverage March 23, 2010.
Collective bargaining. Collectively bargained agreements are grandfathered until the date on which the last of the collective bargaining agreements relating to the grandfathered coverage terminates.
Key provisions. Grandfathered plans generally are able to avoid many of the new legislation’s requirements, but still are subject to the following key provisions: pre-existing conditions, dependent coverage, elimination of coverage rescissions, coverage limits and, in 2014, excessive waiting periods.
Temporary reinsurance for retirees older than 55. Health and Human Services (HHS) established a temporary reinsurance program for employers to provide health coverage to retirees older than age 55 but are not yet Medicare-eligible. This government-funded reinsurance program reimburses employers for 80 percent of claims with amounts between $15,000 and $90,000. The funding for this program is $5 billion for the entire period. (Effective: Until Dec. 31, 2013)
The Road Ahead
Amid the looming uncertainty surrounding health care reform, one reality has emerged – health care reform must be viewed as a process rather than an event. The laws should not be regarded as the final word. Additional health care reform initiatives will be proposed and perhaps implemented. Initiatives that already have passed may be adjusted or withdrawn as a result of ongoing legal challenges.
Similar to other times of significant upheaval and change, businesses or all sizes, as well as individuals, will seek professional guidance from their advisers and consultants, including CPAs. The experts advising them should remain fully informed of the impact of current health care reform legislation, as well as future proposals and initiatives.
If you would like additional information or have questions regarding health care reform, please reach out to us (407) 425-4636 or email@example.com.