As seen in the May 28th issue of Business Lexington.
Together, the Patient Protection and Affordable Care Act (PPACA)
and Health Care and Education Tax Credit Reconciliation Act of 2010
represents widespread health care reform which will be implemented
over a number of years to come. Moreover, given the law's 2,500
pages, there are many questions that will not be answered until the
implementing federal regulations are issued. Nonetheless, employers
should understand that several PPACA provisions were immediately
effective, or effective six months from the date of enactment
(March 23) and take note of what is in store in 2014.
W-2 Reporting Requirements
For taxable years beginning after December 31, 2010, employers
must report on their employee's W-2 form the full premium value
of their employee health coverage, including but not limited to,
the value of prescription drug plans and employee assistance
programs. This means that payroll systems need to be updated for
this change by January 2011.
Reinsurance Program for Early Retirees
This program provides $5 billion for temporary financial help
for employer plans to continue to provide coverage to retirees, age
55 and older, who are neither active employees nor eligible for
Medicare. The program subsidizes 80% of a retiree's costs
between $15,000 and $90,000. It is effective June 23, 2010, but
payments are retroactive for a plan year so employers can take
immediate advantage of the program.
Mandatory Break Periods for Nursing Mothers
Effective immediately, employers must provide reasonable break
time for an employee to express breast milk for her nursing child
for one year after the child's birth; and a place, other than
bathroom, that is shielded form view and free from intrusion from
coworkers and the public to express breast milk. Employers with
less than 50 employees are exempt if compliance imposes an undue
hardship.
Small Business Tax Credit or Wellness Grant
The new law gives a tax credit to certain small employers that
provide health care coverage to their employees, effective with tax
years beginning in 2010. To be qualified, employers must (1) have
fewer than 25 full-time equivalent employees, (2) the average
annual wages of its employees for the year must be less than
$50,000 per full-time equivalent, and (3) the employer must pay the
premiums under a "qualifying arrangement". In addition,
the PPACA authorizes $5 billion to provide grants to small
businesses for up to five years to create wellness programs for
employees.
HSAs, FSAs, and HRAs
Unless prescribed by a doctor, over-the-counter drugs other than
insulin will no longer qualify for reimbursement under a health
reimbursement account or flexible savings account (FSA) or under a
health savings account (HSA) or an Archer medical savings account
(MSA). Starting December 31, 2010, the tax on distributions from
HSAs and MSAs that are not used for qualified medical expenses is
increased to 20%.
Grandfathered Plans
The PPACA places new requirements on group health insurance
plans relating to coverage, often referred to as market reforms.
Examples include: expanded non-discrimination requirements,
limitations on when insurance can be rescinded, no lifetime limits
on the dollar value of essential health benefits, choice of primary
care physician, no pre-existing limitations for children under 19,
coverage of preventive health services without any cost-sharing and
new appeals processes.
Significantly, grandfathered health plans (GHP) are exempt from
many of these new requirements. A GHP is a plan in which an
individual was enrolled on the date of enactment (March 23, 2010).
Having a GHP gives employers some breathing room with respect to
the PPACA's market reform provisions, but it is not a free
pass. Even GHPs must comply with the following:
- no restrictions on lifetime limits on the value of certain essential benefits,
- prohibition on recessions (only for fraud or misrepresentation),
- no pre-existing condition exclusions for enrollees who are under 19, and
- adult children covered up to age 26 regardless of marital or student status.
January 1, 2014 and beyond
January 1, 2014 is a significant date for employers and States.
By that date, each State must establish an "American Health
Benefit Exchange" to facilitate the purchase of qualified
health plans ("Exchange") by individuals and a Small
Business Health Options Program ("SHOP Exchange") to
assist small employers in enrolling their employees in qualified
health plans.
Also effective in 2014 is the "pay or play" mandate for
employers. Employers with 50 or more full-time equivalent employees
are required to provide their employees with "essential health
coverage" or pay a non-deductible penalty if at least one
employee obtains a low-income premium subsidy in Exchange. The
penalty is equal to $2,000 times the number of full-time employees
less the first 30 employees.
If the employer provides "minimum essential coverage" but
its health insurance plan is not affordable and an employee enrolls
in Exchange and receives a low-income subsidy, the employer must
pay a penalty of $3,000 per employee with a subsidy.
In addition, starting in 2014, employers who offer, and at least
partially pay for, minimum essential coverage will be required to
provide a "free choice voucher" to any employee (1) whose
premium is between 8% and 9.8% of the employee's household
income, and (2) whose income is below 400% of the poverty level, to
be used to purchase coverage through the Exchange.
Employers who have 200 or more full-time employees and who offer at
least one health care plan are required to automatically enroll new
employees into a plan.
The foregoing is not exhaustive, it is an overview of PPACA
provisions that relate to employers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.