Health Care Reform: Intermediate Range Impact on Employers and Group Health Plans (as presented by the i.2 International Law Firm of Calfee.
"Each day we learn more about how the health care reform law impacs businesses and their employees. This First Alert focuses on those porvisions of the law that become effective in 2012 and 2013 and provides highlights of newly released guidance about the small employer tax credit, the taxability of health care coverage for adult children and the early retiree reinsurance program. Longer-term impacts will be discussed in future First Alerts" (Calfee on-line News Letter).
Items that become effective in 2012 and 2013
* W-2 Reporting
"Effective for taxable years beginning after December 31, 2010, the cost of employer-sponsored health coverage must be included on each employee's W-2 form. Since W-2 forms generally must be porvided to employees by January 31 of the year following the year of payment, the value of employer-sponsored health coverage must first be reflected on the W-2 forms due by january 31, 2012.
* Explanation of Coverage
Beginning in 2012, health insurers and sponsors of self-insured group health plans must porvide a uniform summary of benefits to applicants and enrollees. This summary, which cannot exceed four pages, must describe benefits and cost-sharing provisions such as deductibles, co-payments and coinsurance, as well as renewability and continuation of coverage provisions; it is in addition to the summary plan description. If there is a material modification to the terms of a plan or coverage, insurers and sponsors must notify enrollees at least 60 days before the change will become effective.
By March 1, 2013, employers must porvide employees a written notice that informs employees of the existence of health insurance exchanges, the availability of premium tax credits and cost-sharing reductions. Employers also must include in the written notice the possible loss of employer contributions (if any) toward any health benefit plan offered by the employer if employees obtain coverage through exchanges.
* Per Participant Fee
In 2013, sponsors of self-insured group health plans must pay a tax of $1 per participant to help fund comparative clinical effectiveness research. In 2014, this tax increases to $2 per participant and can increase annually thereafter based on a specified formula. Insurers must pay the fee for insured plans.
*Cap for HFSAs
for tax years beginning on and after January 1, 2013, annual health fexible spending arrangement contributions will be limited to $2,500 per employee. This cap is indexed for inflation. Currently, there is no legally mandated limit.
Updates and new information items
> Small Business Health Care Tax Credit
The government has issued guidance about how to claim the small business health care tax credit. The guidance provides rules for the calculation of full-time equivalent employees (may not exceed 25 to be eligible for the credit) and approves the use of certain equivalencies for hours of service used for the calculation of the number of full-time equivalent employees and for the calculation of average annual wages (which may not exceed $50,000 to be eligible for the credit). Receipt of state credits and subisdies will not affect eligibility for the federal credit but may reduce the amount of the federal credit. The requirement that an employer pay a unifirm percentage of employees premiums is effectively modified for 2010; an employer will be deemed to pay at least 50% of the premiu for an employee if it pays 50% of the premium for single (employee-only) coverage for 2010.
> Health Coverage for Adult Children
Plans must provide a 30-day special enrollment opportunity for all children uder age 26 by the first day of the first plan year beginning on or after September 23, 2010. This date will be January 1, 2011, for calendar year plans. The special enrollment must include a written notice of the opportunity to enroll and the coverage must begin by the first day of the plan year. Terms of the coverage for adult children, including premium rates, cannot vary based on age. The IRS has confirmed that both coverage under and payments from a plan providing coverage to an adult child that has not attained age 27 in a taxable year do not result in taxable income. Employers may immediately permit employees to make pre-tax salary reduction contributions for health insurance coverage under a cafeteria plan and health flexivle spending arrangement for adult children under age 27 during the taxable year. However, retroactive amendments to plan documents reflecting this change must be made by December 31, 2010.
> Reinsurance Program for Early Retiree Medical Coverage
Finally, the government has issued rules for the early retiree medical coverage reinsurance program. The program will become effective on June 1, 2010 and last through 2013. Applications for participation will be processed on a first come, first served basis. Since a finite amount of funds ($5 billion) have been earmarked for this program, interested employers should act very quickly. Although applications for participation are not expected to be available until late June, the information required to complete an application is listed in the new rules, so employers can start gathering the information now.
Reimbursement payments must be used to reduce the sponsor's health benefit premiums or health benefit costs or reduce health care costs for retired or active participants (e.g. premium contributions, co-payments, deductibles, coinsurance or other out-of-pocket costs. However, a sponsor must 'provide at least the same level of contribution to support' their plans. So it appears that the primary benefit of the program for plan sponsors will be to keep their premium and cost at current level."
God help us!