Health Care Reform Legislation

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HealthCare Reform Legislation General Summary and Implementation Deadlines

In March of 2010, the House and Senate approved the new health care reform package of HR 3590, which President Obama signed into law. To better assist you in understanding this historical piece of legislation, we are providing you with a general summary, highlighting in particular some areas that may affect you as an employer.

This new legislation will extend coverage to roughly 32 million uninsured Americans, at an estimated cost of $938 billion to the nation, over the next ten years.

In 2014, those that remain without insurance will face stiff penalties, and employers who do not offer health insurance to their employees will face equally harsh fines.

In 2018, a 40% levy on high-cost health insurance plans will take effect.

The Department of Health and Human Services (HHS) will be charged with the implementation of the majority of the changes outlined in the new bill. Over the next half year, HHS will have to write, vet and implement the new insurance regulations – such as rules to require insurers to allow dependents to stay on parents’ plans until age 26; preventing existing plans from placing annual or lifetime limits on patients’ care; and prohibiting them from rescinding patients’ coverage (except in cases of fraud). 

Changes from the current year through 2018 will take effect as follows:

2010

• Businesses employing less than 50 workers will get tax credits covering 35% of their health care premiums. This will increase to 50 percent by 2014.
  
• A temporary reinsurance program will start to help companies maintain health coverage for early retirees (ages 55 to 64).
  
• Young adults will be able stay on their parents' insurance until their 27th birthday.
  
• Insurers cannot exclude coverage to children with pre-existing conditions or rescind policies to avoid paying medical bills when a person becomes ill.
  
• Lifelong limits on benefits and restrictive annual limits will be prohibited.
  
• Senior citizens will receive a $250 rebate to help fill the Medicare "doughnut hole" in prescription drug coverage. This covers the area between the $2,700 initial limit and when catastrophic coverage kicks in at $6,154.
  
• New insurance plans must provide coverage for preventive services without co-payment. By 2019, all plans must comply.
  
• New plans will be required to implement an appeals process for determinations and claims on coverage.
  
• Adoption tax credit and assistance exclusion will increase by $1,000. The bill makes the credit refundable and extends it through 2011.
  
• A temporary high-risk pool will be set up to cover adults with pre-existing conditions.
  
• In 2014, health care exchanges will eliminate the program.

2011

• Employers will be required to disclose the value of health benefit plans on employees' W-2 IRS forms.
  
• A plan will be created providing the means for small businesses to offer tax-free benefits. This would ease the small employers’ administrative burden of sponsoring a cafeteria plan.
  
• The Medicare payroll tax will increase from 1.45% to 2.35% for individuals earning more than $200,000 (or $250,000 for married filing jointly).
  
• Medicare will begin to provide free annual “wellness” visits and personalized prevention plans.
  
• Beginning October 1, states can offer home- and community-based services to the disabled through Medicaid rather than through institutional care.
  
• Medicare will provide 10% bonus payments to PCPs and general surgeons.

2013

• Employers will lose the tax deduction for subsidizing prescription drug plans for Part D-eligible retirees.
  
• Contributions to flexible savings accounts (also known as medical spending accounts) will be limited to $2,500 per year.
  
• A 2.9% excise tax on the first sale of medical devices will be established.
  
• The hospital insurance tax will increase 0.9% for those earning more than $200,000 (or $250,000 for married filing jointly), and it includes net investment income.

2014

• Companies with 50 or more employees must offer coverage to employees or pay a $2,000 penalty per employee after their first 30 if at least one of their employees receives a tax credit. Waiting periods before insurance takes effect is limited to 90 days. Employers who offer coverage but whose employees receive tax credits will pay $3,000 for each worker receiving a tax credit.
  
• Everyone will be required to have acceptable medical coverage, or pay a penalty of $95 in 2014; $325 in 2015; and $695 (or up to 2.5% of income) in 2016. Families will pay half the amount for children, up to a limit of $2,250 per family.
  
• Insurers will no longer be allowed to refuse selling or renewing policies because of an individual's health status.
  
• Health plans will be prohibited from imposing annual limits on coverage.
  
• Health insurance exchanges will open in each state to individuals and small employers to allow comparison-shopping for standardized health packages.

2018

• Taxing "Cadillac" Plans – An excise tax will be imposed on high-cost, employer-provided health plans beyond $27,500 for family coverage and $10,200 for single coverage; it will increase to $30,950 for families and $11,850 for individuals, retirees and employees in high-risk professions.