We all know that health care reform legislation is upon us. But how many of us can name the health plan changes required of businesses in 2010? A gold star to those who can come up with the short list.

Now here come the trickier questions: What about the changes required for 2012? Or 2016? Or 2018?

“Based on what I’ve been hearing from clients, I think the easiest way to sum up the sentiment out there is that most businesses know whatever they need to do is going to cost more money, but they don’t exactly know how much yet,” says William Wertz, CPA, MST, a managing partner in the Strategic Tax Group and market leader in Baker Tilly’s Milwaukee office. “The changes are so numerous and so complicated that the focus for many businesses really has been on the immediate needs versus the long-term changes.”

Wertz also says that larger companies, which inherently tend to have greater resources and a larger staff pool, also seem to have a clearer idea of the health care changes ahead than the smaller and middle-market businesses.

“But that’s to be expected,” he notes. “There are some businesses out there, like the insurance providers, that are devoting entire staff pools to understanding what the health care requirements now require of businesses. In fact, it would not surprise me at all if we saw a boutique health care consulting industry spring up to help small businesses properly implement the health care legislation.”

While many of the new health care requirements are breaking new ground, there’s another element in place that is confounding the issue, adds Wertz.

“As with most legislation, things have a tendency to remain in flux, and the health care bill is no exception,” he says. “In my specialty area, for example, some of the tax provisions are deferred until 2013. To that point, no one is really focused on those provisions right now. There is some shoulder shrugging going on, but that’s because this bill still has so many moving parts to it.”

Still, Wertz says it is prudent to have a balanced approach, whether your company has the internal resources to manage the necessary changes or is in the process of outsourcing the work.  As the first few provisions are now in place, it’s a good time to see what your company needs to do now to be in compliance as well as plan for the future.

One way to do this is to sit down with the actual bill — all 2,409 pages of it can be found at http://thomas.loc.gov — or obtain a condensed timeline of the major provisions. WPS Insurance has compiled a thorough and regularly updated timeline of the bill’s provisions that can be accessed and downloaded at www.wpsic.com/reform-updates/index.shtml.

As not all federal health care reform changes apply to businesses, here’s a quick timeline of select elements  that your businesses needs to be aware of through 2018. Do note that this is not a comprehensive list and only highlights some of the more notable changes:

2010
Early provisions of the Patient Protection and Affordable Health Care Act and Education Affordability Reconciliation Act include a focus on dependents and children:

• Young adults may stay on or come on to their parents’ health plans up to age 26, effective for plan years beginning on or after Sept. 23, 2010.  Health plans or employers cannot charge a higher premium or offer fewer benefits to adult children than they do for young children, and coverage must be extended to married children, but not their spouses or children.

• Families with children under the age of 19 who suffer from chronic health problems or other preexisting medical conditions can no longer be turned down for coverage or excluded from a health care plan, effective Sept. 23, 2010. This does apply to group grandfathered plans.

• Preventative care measures kick in, which now require qualified health plans to provide at a minimum coverage without cost-sharing for preventive services, including screening for certain cancers and health conditions, tobacco cessation counseling, routine vaccinations, and children’s vision and hearing screenings.  

• From 2010 until 2013, small employers can also qualify for tax credits to offset the cost of health care premiums under certain conditions. This credit does phase out as firm size and average wages increase.

2011
Starting in tax year 2011, the Affordable Health Care Act requires employers to report the value of the health insurance coverage they provide to employees on each employee’s annual W-2 form. The reporting is for informational purposes only. The amount reported does not affect tax liability as the value of the employer contribution to health care coverage continues to be excludible from an employee’s income and is not taxable.

Beginning on Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from FSAs, HRAs and HSAs arrangements unless a prescription is obtained, except for insulin. 

Employer health plans will need to reflect more changes in 2011, including a mandate of emergency services at in-network levels, regardless of the provider. While this applies to individual and group plans, it does not apply to grandfathered plans.

Small employers will have the option of adopting a “simple cafeteria plan” of health care. In exchange for satisfying minimum participation requirements, these new plans will be treated as meeting the non-discrimination requirements that would otherwise apply to the cafeteria plan.

Wellness grants will be available, for up to five years, to small employers (less than 100 employees) who do not currently provide wellness programs. Interested companies will be required to submit a wellness grant proposal.

2012
A limited number of provisions are targeted for implementation in 2012, with limited effect on businesses. During this calendar year, a set of quality improvement reporting requirements will be applied. Insurers also will be required to use standardized definitions and policies when explaining coverage.

2013
 State-based health care choice compacts or co-ops are expected to be established in 2013. All employers will be required to inform their employees of their existence.
This is a year with significant tax changes for employers and some employees:

• A new federal premium tax on fully-insured and self-insured group plans will kick in, and the funds collected will be used to fund a comparative effectiveness research program. The annual fee on private plans is equal to $1 for each individual covered the first plan year ending after Sept. 12, 2012; $2 the following year; and anticipated to adjust in subsequent years.

• Higher-income earners will see an increase in the Medicare Part A payroll tax (hospital insurance tax) and a 3.8-percent assessment on unearned income.

• The tax deduction for employers who receive Medicare Part D retiree drug subsidy payments ends.

• Contributions to flexible medical spending accounts will be limited to $2,500 per year and increase annually beginning in 2014, based on cost of living adjustments.

2014
Many of the changes implemented in the fourth year are focused on health care plans. Adoption of operating rules for health insurance administration and compliance with these standards are required or health plans will face a penalty of no more than one dollar per covered individual.

Health care plans will also be prohibited from placing annual limits on the dollar value of coverage. This applies to self--insured employer plans and grandfathered group plans. Most health care plans are also now prohibited from excluding individuals based on preexisting conditions or health status, and waiting periods will be limited to 90 days. Group health plans, including self-insured plans, can no longer exclude individuals participating in clinical health trials from routine medical care.
Employers with more than 200 employees will be required to automatically enroll their employees into employer-provided health care plans, though employees can opt out of coverage. 

Two situations in which employers can face penalties regarding health care coverage also begin this year:

• Employers with more than 50 employees that offer coverage but have at least one full time equivalent (working 30 or more hours per week) employee that receives a premium assistance tax credit to purchase subsidized exchange coverage will pay a $3,000 fine per employee with an aggregate limit of $2,000 times the total number of employees.

• Employers with 50 or more workers who do not offer coverage face a fine of $2,000 (indexed) for each employee, if any worker receives subsidized insurance on a state-based insurance exchange. The first 30 employees are excluded from the assessment.

The partial tax credit now available to small employers (25 employees or less full-time equivalent) in 2010 will be expanded for tax years 2014 and later. The credit is available for two years and phases out as firm size and wages increase.

Employers will also have the option to offer coverage cost rewards to employers who participate in or meet certain wellness standards.

2016-2017
The majority of changes during the next two years related to the national efforts to follow the establishment of state health care exchanges. Insurance providers will also have the option to sell policies in any state participating in the respective contracts. At this point, states are given the option of expanding the exchanges to include larger employers.

2018
A 40-percent excise tax will be imposed on “Cadillac” or high-cost employer-provided plans beginning in 2018. The threshold for qualifying as a Cadillac plan are: Family coverage in excess of $27,500 and $10,200 for individual coverage, though these values will be indexed to the Consumer Price Index for urban consumers beginning in 2010. The threshold may be adjusted upwards prior to 2018 if health care costs rise more than anticipated prior to implementation. The tax will be based on the value of the plan that exceeds the threshold and will be imposed on the issuer of the plan.

By Laurie Arendt

Laurie Arendt is editor of CRW. She can be reached at crweditor@crwmag.com

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