On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (“PPACA”), as amended by the Health Care and Education Reconciliation Act of 2010 into law. This new law changes the provision of healthcare in the United States more than any recent legislation. The impact and implementation of this new law will take place over the next several years. This blog post (prepared by my partner, Paul Drey of Brick Gentry, P.C.) highlights the significant changes resulting from this law, the implementation or effective date of the change, and the potential impact on your business. Please be aware that many of these changes call for rules and regulations to be created so as to fully implement the change. These rules and regulations are still being drafted in many cases, and only after their approval will one really understand the full impact of this new law. In the interim, we hope you find this blog post helpful as you prepare for these changes. (For full details and the specific impact on your business, please be sure to consult your business attorney, accountant or other advisor).
Reform that occurred immediately upon enactment:
- Retroactive to January 1, 2010, a new tax credit would cover up to 50% of small businesses’ healthcare premium costs for up to two years; more specifically, the tax credit would apply to companies with fewer than 25 employees and average wages of no more than $50,000 (a recent report from Families USA and Small Business Majority, a business advocacy group, showed that 51,100 Iowa businesses would be eligible) [under the law, two half-time workers count as one full-time worker];
- Grandfathered status of a current policy may allow for the addition or deletion of a new employee and any new dependents or changes resulting from a collective bargaining agreement only (however, most provisions apply to all policies, including grandfathered policies); and
- Access to insurance for uninsured individuals with a pre-existing condition.
Reform that occurs in 2010:
- Insurers will be barred from excluding children 19 and under from coverage because of a pre-existing condition;
- Group plans and individual plans must allow young adults to stay on their parents’ coverage until the age of 26 instead of 19 (through 2014 grandfathered group plans only need to cover dependents who do not have another source of coverage);
- Lifetime coverage limits will be eliminated and annual limits will be restricted;
- Insurance companies will be barred from dropping people when they get sick;
- Group plans will not be able to discriminate in favor of highly compensated individuals within six months of enactment;
- Temporary reinsurance for early retirees over age 55;
- For businesses employing more than 50 workers, health coverage rescissions will be prohibited except for fraud or intentional misrepresentation;
- Employers must provide nursing mothers a private space available during working hours for breast-feeding or expressing milk;
- Grants may be available for small employers who provide wellness programs to their employees; and
- Group and individual plans will need to cover specific preventive care services.
Reform that occurs in 2011:
- Medicare beneficiaries will be able to get an annual free wellness visit and personalized prevention plan service;
- New expanded tax requirements on business owners;
- Small employers (with less than 100 workers) may adopt new “simple cafeteria plans”;
- New health plans will be required to cover preventive services with little or no cost to patients;
- Employers would be required to enroll employees in a new national long-term care program, unless the employee opts out; and
- Employers will be required to disclose the value of health benefits on employees’ W-2 tax forms.
Reform that occurs in 2012:
- Provision to insureds who are enrolling or re-enrolling in a health plan of a summary of benefits and an explanation of coverage that is no more than four pages long;
- Annual submission of reports with information concerning health outcomes (HHS is still establishing the details of this submission);
- Encouragement of “Accountable Care Organizations”; and
- Incentive program to improve the quality outcomes of acute care hospitals.
Reform that occurs in 2013:
- Pilot program on bundling of medical services to encourage doctors, hospitals, and other care providers to better coordinate patient healthcare;
- Threshold for claiming un-reimbursed medical expenses on itemized tax returns will be raised to 10% of AGI from 7.5% of AGI;
- Medicare payroll tax will be raised to 2.35% from 1.45% for individuals earning more than $200,000 and married couples with incomes over $250,000;
- Annual contribution limit for the FSA goes from $5,000 to $2,500, with an annually indexed cap for future years;
- Auto-enrollment of new workers for businesses of more than 200 workers into an employer-sponsored health plan (unclear as to the actual effective date for this requirement); and
- Employers will need to provide notice to all employees of the state-based exchanges that will be available in 2014.
Reform that occurs in 2014:
- State-based health insurance exchanges and Small Business Health Option Program (“SHOP”) exchanges for small businesses and individuals will open no later than January 1, 2014 (business with less than 100 workers would be eligible);
- Most people will be required to have health insurance or pay a fine;
- Health plans will no longer be able to exclude people from coverage due to pre-existing conditions;
- Prohibitions on discrimination based on health status;
- Expansion in wellness programs and incentives for businesses;
- Free-choice voucher program for workers commences;
- For businesses with waiting periods for coverage for new workers, the waiting period cannot exceed ninety days;
- Employers with 50 or more workers who do not offer health coverage will face a fine of $2,000 per employee if any worker received subsidized insurance on the exchange. (The first thirty employees are not counted for purposes of the fine.); and
- Employers with 50 or more workers who do offer health coverage and have at least one worker whom received subsidized insurance will pay the lesser of $3,000 for each of the workers receiving the subsidy or $2,000 for each worker total.
Reform that occurs in 2015:
- Incentive programs promoting and rewarding quality of care rather than quantity of services.
Reform that occurs in 2016:
- In general, an excise tax on high cost employer-provided plans will be imposed. The first $27,500 of a family plan and $10,200 for an individual plan will be exempt from the tax; and
- Businesses with more than 100 workers may be allowed to purchase coverage through the state exchanges (SHOP).
Reform that occurs in 2018:
- Proposed Cadillac tax goes into effect.
- By 2019, PPACA is estimated to provide an additional 32 million Americans access to basic healthcare insurance. The expected cost is now estimated to be $938 billion, a number which many expect to be higher.
A big thanks to Paul for all his hard work on preparing the information contained in this post. If you have questions or would like additional information regarding the impact of healthcare reform on your business, please contact Paul Drey at firstname.lastname@example.org or at 515-274-1450.