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healthcare reform
Click each title below to read the corresponding article.
- Healthcare is evolving. Are you keeping up with the changes?
- More and more businesses are finding healthcare as a compelling reason to enter into a partnership with a Professional Employer Organization (PEO). PEOs can provide valuable guidance on the multitude of benefit options, relieve employers of administrative burden, and help to mitigate costs. Healthcare is evolving, we all have to keep up with the changes.
A PEO Should:
• Help your business secure affordable and sustainable healthcare options
• Offer creative solutions that fit your specific needs
• Keep you in compliance with the multitude of new regulations that have arisen since Healthcare Reform
• Offer turn-key administration of your benefit programs with specialized support teams
• Offer Fortune 500 Supplemental programs such as dental, vision, life & 401k offerings
• Offer robust options and flexibility
- THE SMALL PRINT
- We know about the major provisions of Healthcare Reform under the Reconciliation Act, signed into law on March 30, but as is the case with most legislation, there are several lesser-known mandates included. Possibly overlooked fine points of the Reconciliation Act include:
Protection for Nursing Mothers. Workplaces are now obligated to allow “reasonable break time” for an employee to express breast milk for her nursing child for one year after the child’s birth, as well as a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public. Companies with less than 50 employees may be exempt from this provision if it would cause “significant difficulty or expense.”
Tanning Taxed. Effective July 1, 2010, indoor tanning services will be imposed with a 10% tax. The tax only applies to ultraviolet tanning, and does not include sunless tanning products or sprays.
Nutritional Labeling Guidelines. Vending machines and restaurant chains with more than 20 locations must display nutritional information for each standard item on the menu, menu board for drive-through restaurants, or near the selection buttons in the case of vending machines.
On March 23, 2010, the Patient Protection and Affordable Health Care Act (HR 3590), also known as the “Affordable Healthcare Act,” was signed into law. This comes after a year of debate, and may still be overturned or amended in the very near future by the Health Care and Education Reconciliation Act of 2010 (HR 4872), also known as the “Reconciliation Act.”
Here is a look at changes set to occur in 2010 under the Affordable Healthcare Act and how they will affect both Employers and Employees. Please keep in mind that these mandates may be modified in the near future.
- EMPLOYER HIGHLIGHTS
- Effective later this year: Tax credits for small businesses that provide health insurance to employees. Businesses with 25 or fewer employees who earn average annual wages of $50,000 or less may receive a tax credit of up to 35% of the employer’s contribution towards health insurance costs if the employer pays at least 50% of the total premium cost. Tax credits will phase to higher amounts through 2013 and will vary based on employer size and wages.
- EMPLOYEE HIGHLIGHTS
- Effective within 90 days: High-risk pool for pre-existing conditions. Adults with pre-existing conditions who have been uninsured for at least six months may gain health insurance through a federally-subsidized high-risk pool.
Effective in 6 months: Dependent coverage through age 26. If an adult child is not eligible to enroll in his or her own employer-sponsored plan, he or she can remain on parents’ insurance until age 26.
Effective in 6 months: No exclusion for children with pre-existing conditions. Insurers may not deny coverage to children under age 19 based on pre-existing medical conditions.
Effective in 6 months: No lifetime caps or rescinding coverage. Insurance companies would be barred from setting lifetime limits or restrictive annual limits on coverage, and from rescinding coverage except in cases of fraud.
Effective later this year: Rebate for Medicare prescription drugs. Medicare patients in the “donut hole” gap in prescription drug coverage will receive a one-time rebate of $250, with changes in the plan to bridge the gap in the coming years.
There are additional mandates set to occur in the next few years which may be amended or cancelled by additional pending legislation. Nextep will remain alert for the most up to date legislation to ensure compliance and to keep our clients informed of the latest developments.
- THE RECONCILIATION ACT & HEALTHCARE REFORM
On March 30, President Obama signed into law the Healthcare and Education Reconciliation Act of 2010 (H.R. 4872), also referred to as the “Reconciliation Act.” This comes just days after the March 23, 2010 enactment of the Patient Protection and Affordable Health Care Act (“PPACA”) (H.R. 3590).
Provisions have been made for employers in a PEO relationship. All business tax credits, employer mandates, and non-discrimination testing apply at the client level. In other words, your relationship with Nextep will not be a factor; the mandates will apply at the client level and thus allow each client to be eligible for tax credit benefits.
The Reconciliation Act cements the government’s plans for Healthcare Reform and sets into motion sweeping changes to occur over the next several years. Below is a timeline of plan highlights.
Tax Credit for Small Businesses. Businesses with 25 or fewer employees who earn average annual wages of $50,000 or less may receive a tax credit of up to 35% of the employer’s contribution towards health insurance costs if the employer pays at least 50% of the total premium cost. Tax credits will phase to higher amounts through 2013 and will vary based on employer size and wages.
No Exclusion for Children. Insurers may not deny coverage to children under age 19 based on pre-existing medical conditions.
Extended Dependent Coverage. If an adult child is not eligible to enroll in his or her own employer-sponsored plan, he or she can maintain dependent coverage on parental insurance until age 26, regardless of tax-dependent status.
Preventive Care Covered. All new plans must provide first-dollar coverage for preventive services, such as immunizations and screenings for infants, children, adolescents and women. Group health plans that were in place on or before March 23, 2010 are considered to be grandfathered in and are not subject to this requirement.
Emergency Services. Under certain circumstances, out of network emergency room care must be covered as an in-network service. Grandfathered plans are not subject to this requirement.
No Lifetime Caps or Rescissions. Insurance companies will be barred from setting lifetime limits or restrictive annual limits on coverage, and from rescinding coverage except in cases of fraud.
Medicare Part D Rebate. Medicare patients in the “donut hole” gap in prescription drug coverage will receive a one-time rebate of $250, with changes in the plan to bridge the gap in the coming years.
Coverage for Pre-Existing Conditions. Temporary provision in which adults with pre-existing conditions who have been uninsured for at least six months may gain coverage that does not impose restrictions.
Premium Cost Containment. Health insurers must report on annual dollars spent towards medical care to ensure that less goes towards administration and profit. If the medical loss ratio is more than 80%, or 85% for large group market, policyholders must receive a rebate of the overage.
Medicare Part D Discounts. Prescription drugs in the Medicare “donut hole” are discounted 50%. Additional discounts phase in to completely close the hole by 2020.
W-2 Reporting. Form W-2 will show the employer contribution to the employee’s health plan.
FSA Drug Limitations. Over the counter drugs will no longer be a tax-exempt qualified expense under a flexible spending account (FSA) or health savings account (HSA) unless accompanied by a doctor prescription.
HSA Tax Penalties. Money taken out of an HSA for a non medically-qualifying expense will incur a 20% penalty tax (increased from the current penalty of 10%). This does not apply to people over age 65.
Hospital Reform. 2012 is largely dedicated to hospital; reform, including development and use of integrated health systems, tracking of hospital readmission rates for certain high-volume or cost events or conditions, and financial incentives to prevent readmissions.
FSA Reduction. Annual FSA contributions and expenses are limited to $2,500 and adjusted for inflation in subsequent years.
Plan Standardization. Health plans must implement uniform standards and rules for the electronic exchange of information in order to promote paperlessness and reduce administrative cost.
Medicare Tax Increase. Medicare tax will be increased by 0.9% on wages for individual taxpayers with an adjusted gross income of $200,000 ($250,000 filing jointly). This tax is just assessed to employees and does not increase the employer portion of Medicare tax.
Health Insurance Exchange. Each state will create health insurance exchanges to individuals and small employers. Members can comparison shop four levels of standardized health packages (bronze, silver, gold, and platinum) with increasing amounts of coverage and cost, including a catastrophic/preventive only plan for individuals up to age 30. Individuals may qualify for tax credits to assist with the cost of coverage if they earn more than Medicaid eligibility and less than 400% of the federal poverty level.
Company Group Coverage. Companies that don’t offer qualified health insurance, have more than 50 employees, and have at least one employee who receives a federal subsidy will pay a $2,000 tax penalty for every employee. The company will be exempt from paying the penalty on the first 30 employees. If the company does provide health insurance, but it is either unaffordable (more than 9.5% of household income) or has an actuarial value of under 60% (the plan must pay at least 60% of covered expenses), that employee may also be eligible for a federal subsidy. In this case, the company will be assessed a $3,000 penalty, but only for those employees who receive the subsidy.
Individual Coverage. Individuals who do not obtain acceptable health care coverage must pay a penalty of $95 in 2014, increasing in steps up to $695 or 2.5% of income in 2016. Families will pay half of the amount for children, up to a cap of $2,250 per family. If affordable coverage is not available to an individual, there will be no penalty.
Free Choice Vouchers. If an employee’s company plan is between 8 and 9.8% of his or her income and s/he earns less than 400% of the federal poverty level, then that employee may take the employer health insurance contribution in the form of a “free choice voucher” and apply this money to an exchange plan.
Automatic Enrollment. Companies with more than 200 employees must automatically enroll employees into the group’s health plan. Employees may then opt out of the plan. While there is no official deadline for this provision, it is widely believed to be effective 2014.
Waiting Periods Restricted. Employers may not impose more than a 90 day waiting period to obtain coverage through the company’s health plan.
Insurance Regulations. Health plans may not impose annual limits on a patient’s amount of coverage. Insurance companies also may not refuse to sell or renew policies based on a member’s health status, cannot exclude treatments for pre-existing conditions, and are limited in their ability to charge higher rates based on member demographics such as gender and health status. Geography, tobacco use, family size, and age may continue to be factors in premium cost.
“Cadillac Plans” Penalized. High-priced health plans costing more than $10,200 annually for individuals and $27,500 for family coverage will incur an excise tax.
- ADDITIONAL CHANGES POSSIBLE
- While this is the “final” version of Healthcare Reform, changes and clarifications are likely to occur in the coming months and years.
As of March 31, 15 state General Attorneys (including Texas and Florida) have pending suits to block reform. These suits will be resolved by the courts, but until then, all states are subject to the federal Healthcare Reform laws.
There is a good chance that some of these mandates may be modified or dissolved in the future. Nextep will remain alert for the most up to date legislation to ensure compliance and to keep our clients informed.
- HEALTHCARE MANDATE UPHELD BY THE SUPREME COURT
In 2010, the Patient Protection and Affordable Care Act was enacted in an effort to increase the number of Americans with health insurance and to decrease the overall cost of health care. One aspect of the Act was an individual mandate, which would require most Americans to maintain "minimum essential" health insurance coverage. Twenty-six states filed suit the day the Act was signed into law stating that a mandate for individuals to purchase health insurance was unconstitutional.
Today, by a 5-4 vote, the Supreme Court upheld the mandate under Congress' constitutional authority "to lay and collect taxes". The provision will go in to effect in stages beginning in 2014. In 2016, individuals who do not obtain acceptable health care coverage must pay a penalty of $695 for an individual and $2,085 for a family, or 2.5% of income, whichever is larger. Certain provisions waive the penalty if affordable coverage is not available.
In addition to upholding the individual mandate, the Supreme Court also ruled that the federal government's power is limited with regard to Medicaid expansion. The federal government plans to expand Medicaid, and cover the majority of the costs. The remainder of the costs would need to be funded by the states. Under the original provisions of the PPACA, the federal government could threaten to withdraw all Medicaid funding if a state did not contribute towards the cost. The Supreme Court ruled that the federal government could expand Medicaid as long as it did not threaten states with the withdrawal of all Medicaid funding for not contributing to the cost.
Click here to read the full Supreme Court decision issued June 28, 2012.
Nextep will continue to monitor the latest developments regarding health care reform and ensure our clients have the most recent news as it is available.
To learn more, contact Nextep's HR Department.
- HEALTH CARE REFORM AND PCORI FEES
Health care reform's Affordable Care Act (ACA) includes a provision in which fees are collected to fund research conducted by the Patient-Centered Outcomes Research Institute (PCORI). The research will evaluate effectiveness, risks, and benefits of medical treatments or services to allow the public to make more informed choices.
The fee will be assessed for plan years ending after September 30, 2012, through 2019. It is assessed at a rate of $1 per covered life for the first year, $2 per covered life the second year, then will be indexed to national health expenditures until it phases out in 2019. The fees must be reported to the IRS annually on Form 720 by July 31 of the calendar year immediately following the last day of the plan year.
Because the health plans of Nextep's clients are fully-funded (rather than self-insured), the insurance provider will be solely responsible for calculating, reporting, and paying these fees. No further action is needed by plan sponsors.
For additional questions, please contact Nextep's Benefits Department.
- HEALTH INSURANCE EXCHANGES IN OKLAHOMA AND TEXAS
The Affordable Care Act (ACA) includes a provision in which health insurance exchanges are to be set up to provide affordable health coverage to individuals and small businesses. Each state was given the option to either develop a state-based exchange using federal grants, create a partnership exchange in which the state and federal governments each handle specific tasks, or to decline and fall under the federal exchange.
States are required to communicate their intentions by December 14, 2012. As of December 12, 19 states have declared their intentions to create state-based exchanges, six states are planning for partnership exchanges, 21 states will fall under the federal exchange, and five states are undecided, according to statehealthfacts.org.
Both Oklahoma and Texas have declined to create state-based health exchanges. Therefore, Oklahoma and Texas will fall under the federal government's health insurance exchange.
Next Steps:
In March 2013, employers will be required to provide employees with information regarding the health exchanges. This deadline is expected to be extended as the government works through the details of the plans.
In January 2014, state, partnership, and federal health insurance exchanges are expected to be operational. Blueprints of these plans are currently being reviewed by government agencies.
No action is needed by Nextep clients at this time.
Nextep will continue to monitor the situation closely and relay information as it is released by various governing agencies. For more information on health insurance exchanges, including a summary of each state’s decision, please visit statehealthfacts.org.
- MEDICARE TAX TO INCREASE FOR HIGH WAGE EARNERS IN 2013
The Affordable Care Act (ACA) includes a provision in which high wage earners will be subject to increased Medicare taxes once an earnings threshold has been met.
Employee wages are currently subject to a 1.45% Medicare tax rate, paid by both the employee and the employer. Effective January 1, 2013, the employee portion of Medicare tax withholding will increase from 1.45% to 2.35% once the employee has earned $200,000 in the calendar year.
Only wages earned over $200,000 in a calendar year are subject to the increased tax rate; all wages earned before the threshold is met will be taxed at 1.45%. If married filing jointly, the Medicare tax threshold amount increases to $250,000. In accordance with the IRS, this variation will be reconciled on the individual's tax return rather than through paycheck deductions.
Example: An employee and spouse each earn $150,000 per year. Since they individually earn less than $200,000, neither will have increased Medicare taxes deducted from their paychecks. However, their combined income is $300,000, so $50,000 of those earnings will be subject to additional taxes when filing their joint tax return.
This increase affects the employee only; the employer portion will remain unchanged at 1.45% regardless of the employee's earnings.
Nextep has already made necessary changes to comply with this law and ensure that all employees will be properly taxed. No further action is needed by Nextep clients at this time.
For additional information, please refer to the IRS guidance or contact Nextep's Payroll Department.
- PROPOSED RULE ON 90-DAY WAITING PERIODS OPEN FOR COMMENTS
The federal government has opened its proposed rule on 90-day waiting periods for public comment.
The Affordable Care Act (ACA) includes a provision in which, beginning in January 2014, employers must limit waiting periods to 90 calendar days. Amendments have already been made to the Employee Retirement Income Security Act (ERISA) and the IRS's Internal Revenue Code to accommodate this regulation. The proposed rule will also amend the Health Insurance Portability and Accountability Act (HIPAA) to incorporate the provision.
The proposed rule also clarifies that an eligible employee or his or dependents may not be made to wait longer than 90 calendar days to enroll in the employer's group health plan. Late or special enrollments are not included in this waiting period.
Those wishing to submit comments may do so using one of two methods:
| Web |
Click here or visit regulations/gov. |
| Mail |
Office of Health Plan Standards and Compliance Assistance
Employee Benefits Security Administration, Room N-5653
U.S. Department of Labor, 200 Constitution Avenue NW
Washington, DC 20210
Attention: Waiting Periods
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All comments are due no later than May 20, 2013.
- PRE-EXISTING CONDITIONS TO BE ELIMINATED UNDER HEALTHCARE REFORM
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One of the upcoming provisions of the Affordable are Act ACA) eliminates pre-existing conditions for all members of health insurance plans.
This provision allows instant access to health benefits. Coverage certain services in a health insurance plan will no longer be excluded for any member, regardless of age, previous health insurance coverage (or lack thereof), or health conditions existing prior to joining the plan. Members with pre-existing conditions will also no longer be charged higher premiums.
The pre-existing exclusion has been eliminated for children under age 19 since 2010.
For questions regarding healthcare reform, your plan's compliance, or the solution provided by Nextep's plan design, please contact Nextep's Benefits Department.
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