While the Patient Protection and Affordable Care Act (PPACA) required significant changes for group health plans in the past 20 months, some additional implementations are still required for 2012 and beyond.
Brief overview of the 2010-2011 events pertaining to healthcare reform:
- Rate Review – The US Department of Health and Human Services (HHS) must now review, on an annual basis, “unreasonable” increases in medical insurance premiums.
- Consumer Information – HHS established an awarding grant program for states to provide health insurance assistance for consumers. The assistance includes filing complaints and appeals, educating consumers regarding health coverage rights and responsibilities, assistance with enrollment, etc.
- Temporary Reinsurance for Early Retirees – This program was temporarily created to reimburse eligible employers that sponsor retiree coverage for 80% of claims (between $15K and $90K). Only individuals who are not active workers or dependents of an active worker – and not eligible for Medicare – may be reimbursed.
- Small Business Tax Credit (35%) – Up to 35% of employer costs for employees’ health insurance is provided as a tax credit for small employers.
- Grandfathered and Non-grandfathered Plans Reforms – Effective for plan years beginning on or after September 23, 2010 all plans must not impose exclusions for preexisting conditions for enrollees under 19 years old; extend coverage for adult children to age 26 (unless child is eligible for coverage with elsewhere); annual or lifetime limits restrictions on essential health benefits.
- Non-grandfathered Plans Reforms – Effective for plan years beginning on or after September 23, 2010, these plans must not discriminate in favor of highly compensated individuals for insured health plans; cover emergency services without pre-authorization; allow designation of obstetrician, gynecologist or pediatrician as primary care provider; cover immunizations and preventive care in full.
- HSA, FSA and HRA Changes – Medical expense for these accounts was amended to exclude over-the-counter medicine, unless obtained with a prescription. An additional 20% tax will now be charged on the portion of HSAs that are not used for qualified medical expenses.
- Medicare Part D Discounts – Enrollees who enter the lapse in coverage (also known as the “donut hole”) that occurs when an individual reaches the coverage limit under Medicare Part D (Prescription Drug Coverage) will be provided a $250 rebate.
Key Provisions Requiring Attention in 2012:
- Summary of Benefits- A Summary of Benefits and Coverage format set by HHS, using uniform definitions, must be used by insurers and plan sponsors of self-insured health plans and provided to all participants and applicants prior to enrollment or re-enrollment. Distribution date starts on March 23, 2012.
- W-2 Reporting- Employers must report the aggregate cost of applicable employer-sponsored coverage on an employee’s Form W-2 starting January 2013 for the 2012 tax year.
2013 and Beyond:
- Health Flexible Spending Account Limit – On January 1, 2013, healthcare FSA contributions will be limited to $2,500 per year.
- Employer Notice Requirement– By March 1, 2013 employers will be required to provide written notices to inform employees of the upcoming health insurance exchanges to be established by all states in 2014.
- Retiree Drug Subsidy Deduction – Effective January 1, 2013 the deduction for the portion of healthcare expenses that are reimbursed to the employer through the Medicare Part D subsidy program will no longer be available.
- Medicare Tax – An additional 0.9% of Medicare tax on wages and self-employment income will be taxed to individuals earning more than $200K ($250K if married filing jointly).
- Automatic Enrollment – Expected to be in effect in 2014, employers with more than 200 employees will be required to automatically enroll new full-time employees in health coverage, with the opportunity to opt out.
- Individual Mandates and Subsidies – Starting in 2014, individuals will be required to obtain minimum essential coverage. Noncompliance penalty will be the greater of $95 per individual or 1% of household income. Financial subsidies will be made available to individuals who qualify due to low income.
- Employer Provisions – 2014 – Minimum essential coverage must be offered to employees by employers with more than 50 employees.
- Health Insurance Exchanges – 2014 – State-based medical benefits will be available for individuals and small employers to purchase.
- Individual Mandates Penalty Increase – 2015/2016 – Increase will be of $325 or 2% in 2015 and $695 or 2.5% in 2016.
- Large Employers in Health Insurance Exchange – 2017 – States will make purchase of coverage available to large employers.
- Tax on High-Cost Plans – 2018 – An excise tax of 40% will be imposed on employer-sponsored health plans with aggregate expenses that exceed $10,200 for individual coverage and $27,500 for family coverage.