Health Care Reform Update

Health Care Reform
IMPORTANT LEGISLATIVE UPDATE In the quest for health care reform, the recent duo of new legislation has enacted the most sweeping changes in U.S. social policy in over a half century. On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (H.R. 3590). It’s partner bill, The Health Care and Education Reconciliation Act of 2010 (H.R. 4872), which includes “fixes” to the first bill, has also been approved by both the House and Senate and is expected to be signed into law by the President this week. What Employers Need To Know The health care reform legislation enacted brings new responsibilities for employers as early as this year, as well as future considerations for employers offering company-sponsored health benefits. Here is a brief timeline of some important dates and the key provisions that will have the greatest impact to employers, large and small. 2010…Within 6 months from enactment Coverage will be extended to dependent children up to age 26 on their parents’ policies Lifetime limits will be prohibited; annual limits will be limited, the prohibited beginning 2014 90 days after enactment, a temporary reinsurance program will be launched to reimburse employer plans for 80% of the cost of benefits provided to retirees age 55 through 64 in excess of $15,000 and below $90,000; program will end by 2014 or when the limited funding of $5 billion is exhausted Various new disclosure and reporting requirements will become effective Early withdrawal penalty of 20% will become effective for using HSAs for non-health care expenses 2011… Out-of-pocket limits tied to HSA maximums Over-the-counter products will not qualify for pre-tax payment from an FSA, HRA or HSA Pre-existing conditions exclusions will be prohibited on children under age 19 Insured plan medical loss ratio maximum/rebate provision Employers will be required to report the aggregate value of medical benefits, vision, dental and supplemental insurance coverage; requirement expected to apply to Forms W-2 for the year 2011 that are made available to employees in January 2012 2013… Medicare surtax on high-income employees Taxation of Medicare Part D Subsidy payments to employers FSA annual deferral maximum will be $2,500 2.3% Excise Tax on medical device manufacturers 2014… Maximum new hire waiting period of 90 days following date of employment Pre-existing condition exclusions are prohibited Health Insurance Exchange established Guarantee issue required Fines to employers with 50+ full-time employees equal to $2,000 per employee for those not insured under the employer’s plan New employee auto-enrollment for groups with more than 200 full-time employees Employee vouchers available from employers Wellness incentives Government fees imposed on health insurers Individual health coverage mandate Federal subsidies for “lower-income” individuals Annual benefit maximums prohibited 2018… Excise tax on “high-value” benefits plans   Frequently Asked Questions   Q: What provisions of the new legislation should we focus on?   A: Your main focus right now should be awareness. We encourage you to continue reading updates and becoming familiar with the different provisions and how they will affect the administration of health care benefits to employees. MFI will assist you in adapting new mandates per the implementation timeline to be compliant.   Q: How will the changes affect health care costs?   A: We believe the provisions will cause a short-term increase in employer costs. We saw this validated prior to the legislation passing with increasing trends in renewals. Now that the health care bill is in effect, we anticipate this trend will continue. And that it will ultimately lead to a rise in premiums even more significant than those we’ve experienced in previous years.   Q: How will the extended coverage to age 26 for dependents affect employers?   A: There will be increased administrative costs associated with administering coverage for dependents up to the age of 26, represented in either the premium on a fully-insured basis, or in administration services only (ASO) fees if the employer is self-funded. In addition employers will need to revise plan summaries to reflect the new mandates. MFI can help you make the necessary changes to these documents, as well as assist them in updating various other employer and partner communications.   Q: How will the new legislation affect self-funded plans?   A: It is our initial interpretation of the legislation that self-funded plans will have to offer the same mandates as fully insured plans.   Q: Is it true that 90 days is the recommended waiting period for employers who want to bring somebody new onto their plans and that employers could be fined for making individuals wait longer?   A: Yes. According to the new law, employers with waiting periods that exceed 90 days will be fined as much as $100 for each employee who’s denied access to coverage; this is $100 for each day over the 90 days each individual is not able to join the plan. As it stands now, this provision and its requisite penalties will go into effect in 2014.   Q: Does the legislation require employers to offer medical coverage to part-time employees?   A: Yes. Employers will have to provide coverage to non-seasonal part-time employees. That includes those who work more than 120 days and less than 30 hours a week. Under the new legislation, each is now considered (on a pro-rata basis) the equivalent of a full-time employee.   Q: With no more pre-existing condition limitation, will late and/or special enrollees be allowed to enroll in the plan at any time during the year?   A: No. Our understanding is that they’d still be subject to the Section 125 qualifying event rules and couldn’t just enroll at any time.   Q: How does the reduction in Health Care Flexible Spending Account (FSA) limits affect employers?   A: Currently, employers decide how much their employees can contribute to health care FSAs (dependent care accounts are not affected by the new bill); they can set the annual plan year maximum as high or low as they want. Under the newly passed Reconciliation bill, as of 2013, employers will only be permitted to establish health care FSA plans with an annual plan year maximum no higher than $2,500. They’ll need to effectively communicate this change to employees to help them understand this new limitation.     This update is meant to present information in an easy-to-understand manner. Specific details on how the new legislation affects you and your company will be provided by your M. F. Irvine representative. We are also in the process of posting additional information on our website. Meantime, we encourage you to share your comments with us by emailing them to Lauren Irvine at lirvine@mfirvine.com or by calling 610-862-4348.