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Health Care Reform Bill Summary:

What Employers Can Expect

On March 23, 2010 President Obama signed the Patient Protection and Affordable Care Act, which passed the House just two days prior. Both Houses of Congress passed the Health Care Education and Affordability Reconciliation Act on March 25, 2010 and is anticipated to be signed into law by the President today, Friday, March 26th. The following information is based on the signed Act as well as the anticipated changes from the Reconciliation Act as noted below. These events mark the beginning of reform to our current health care system which will have major ramifications for employers, insurance companies, administrators, brokers, consultants and taxpayers across the country.

Further guidance must be provided to fully understand how this week's events will truly impact the delivery of health care to Americans over the next decade and beyond. We can safely outline the high level issues which will be addressed. Landmark understands that this week's events will raise countless questions, many of which cannot be answered today. Our firm is committed to delivering timely, accurate and actionable information to our clients. We are providing the following overview based on what we know today. We will continue to advise our clients as new information becomes available and further guidance is provided. In the meantime, please do nto hesitate to contact us should you have any questions.

The First Year

Dependent Coverage:
  • Prior to January 1, 2014 the bill would require within six months of passage that children who do not have a choice of coverage from an employer must stay on their parents' plan until age 26. (Reconciliation Bill)
  • The bill will require by 2014 all existing and new plans to allow children to stay on their parents' insurance plans through age 26.
Subsidies to Employers:
  • Employers with 25 or fewer employees and average wages of $50,000 or less would qualify for tax credits.
  • Employers with 10 or fewer employees and wages less than $25,000 would get the full credit - up to 35% of the premium costs between 2010 and 2013 and 50% thereafter.
  • The credit will phase out as firm size and average wage increases.
  • The federal government will cover 80% of the cost of a retiree's medical claims of more than $15,000 through 2013, with a cap at $90,000 - at which point the employer's plan would pay the balance. (A retiree in this paragraph refers to a retired person covered on the employer's plan who is over the age of 55 but not yet eligible for Medicare.)
Insurance Regulation:
  • Ban of lifetime limits on all existing health plans within six months of the passage of the bill. (Reconciliation Bill)
  • Ban on annual limits and exclusions based on medical conditions on all employer-sponsored health plans by 2014.
Insurance Exchange:
  • Within one year of enactment, States will form their own insurance exchanges or join together to form a regional exchange. The exchanges will be open to people who do not have qualifying coverage through an employer or a public program. Employees who earn less than 400% of the federal poverty level can enroll in one of the insurance exchange plans. Employers will pay a "tax" if employees purchase coverage through the exchange and receive government subsidies. The exchange will also be open to employers with less than 100 employees. The exchanges are anticipated to allow employers with more than 100 employees in 2017. The individual and group exchanges will be separate.

January 1, 2011

W-2 Reporting:
  • Employers will be required to include employer provided health care on an employee's W-2 to satisfy the new "Cadillac" plan tax burdens which are effective January 1, 2018.
Salary Based Contribution Restrictions:
  • Employers will be restricted from certain salary based eligibility, contribution and benefits discrimination.
FSA Taxation:
  • Beginning in 2013 the bill will place a $2,500 annual limit on what people may set aside from their paychecks on a pretax basis for health care expenses. (Reconciliation Bill)
Medicare Part D:
  • Effective January 1, 2013 the tax deduction for employers who receive the Medicare Part D retiree drug subsidy payments will be eliminated.

January 1, 2014

Defining Benefits:
  • The proposal will limit out-of-pocket expenses to the IRS Health Savings Account (HSA) limits. HSA limits for 2010 are $5,950 per year for an individual and $11,900 for a family. This requirement is for new policies both inside and outside the insurance exchange. Existing individual and employer-sponsored plans will not be required to meet the new benefit standards.
  • The proposal limits deductibles for health plans in the small group market to $2,000 for individuals and $4,000 for families. All employer sponsored health plans waiting periods may not exceed 90 days.
Employer Contribution:
  • Employers with 50 or more full-time employees will pay a penalty if they do not offer health benefits if any of the employees obtain subsidized coverage through the new health insurance exchanges. The penalty is $2,000 per employee. The employer's first 30 employees are not counted towards calculating the penalty.
  • Employers with more than 50 employees who offer coverage would also pay a penalty if any of the employees obtain subsidized coverage. The penalty is $3,000 per employee who obtain subsidized coverage.
  • Employers who offer coverage will be required to provide vouchers - equal to what the employer would have paid under the employer's plan - to low and middle income workers to obtain insurance on their own through the exchanges if the employer's plan - to low and middle income workers to obtain insurance on their own through the exchanges if the mployer's plan requires employee contributions between 8.9% and 9.8% of the employee's income. These employers will not be subject to penalties if any of the employees receive subsidies.
  • Employers with more than 200 employees must automatically enroll employees into health insurance plans offered by the employer. Employees may op out of the coverage.
  • The legislation defines a full-time employee as working an average of at least 30 hours per week. Part-time employees average hours are summed up to equal full-time employees.
Subsidies for Individuals:
  • The bill will provide refundable and paid-with-advance premium on a sliding scale for incomes up to 400% of the Federal poverty level.
  • Households who are below 150% of the Federal poverty level will only pay 2% to 4.6% of total income on premiums.
  • Households with the highest income group eligible for subsidies (350% to 400% of Federal poverty level) will pay 9.8% of total income on premiums.
  • Individuals and families receiving the subsidy must enroll through the state exchanges. If employees have income less than 400% of the Federal poverty level, an employer who offers a medical plan must also offer a "free choice voucher" to employees if their share of the premium exceeds 8%, but is less than 9.8% of their income and if the employee chooses to enroll in the exchange.

January 1, 2018

Cadillac Tax / Excise Tax
  • Beginning 2018 there will be a 40% tax on employer sponsored group health plans with premiums over $10,200 for individual coverage and $27,500 for family. (Reconciliation Bill)
  • Beginning in 2020 the thresholds will rise by the inflation rate.
  • Dental and vision plans are exempt and will not be counted in the total cost of a plan.
  • For retired individuals age 55 and older who are not eligible for Medicare and for those employees engaged in high risk professions the tax threshold will be increased to $11,850 for individuals and $30,950 for families.

Contact Information:

Landmark Insurance Associates, Inc.

5388 East Mountain Street
Stone Mountain, GA 30083

Tel: 770-498-6969
Fax: 770-498-1969