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1. Major Illness
2. Routine Checkups
3. Emergencies
4. Prescriptions
5. High Cost of Treatment
2. Routine Checkups
3. Emergencies
4. Prescriptions
5. High Cost of Treatment
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Health-Care Reform Changes Affecting Employers
The 2010 health-care reform legislation is in many ways little more than a
framework for change. Regulation and guidance is anticipated in the coming
months and years, and will ultimately shape this initiative. The following is a
brief overview of some of the health-care reform provisions that employers
should be aware of.
Small employer tax credit
Beginning in 2010, if you employ fewer than 25 full-time equivalent employees
(FTEs) with average annual wages of less than $50,000, and you contribute
at least 50% toward the cost of your employees' health insurance, you may
qualify for a small employer tax credit. Through 2013, the credit is up to 35% (25% for tax-exempt eligible small employers) of
the lesser of your actual cost for health insurance coverage, or the amount of contributions you would have made during the
taxable year if each employee had enrolled in coverage based on a benchmark premium.
The full credit is available if you have 10 or fewer FTEs with average annual wages below $25,000. The credit is reduced if
you have more than 10 FTEs (but less than 25 FTEs) and/or pay average annual wages greater than $25,000 (but less than
$50,000).
For taxable years beginning after 2013, the maximum credit increases to 50% (35% for qualified charitable employers), but
only if you purchase health insurance through a state-sponsored health insurance Exchange, and it is only available for two
consecutive years thereafter.
Play or pay
While employers are generally not required to offer health insurance to employees, effective January 1, 2014, if you're a large
employer (you have an average of at least 50 full-time employees) and do not offer health insurance to your employees, you
may have to pay a monthly fee of $166.67 ($2,000 per year) per full-time employee (excluding the first 30 employees) for any
month coverage is not offered. The fee applies if at least 1 of your full-time employees enrolls in a state-sponsored health
insurance Exchange and qualifies for a premium tax credit or cost-sharing reduction. Part-time employees are included when
determining if you have 50 employees, based on the total hours worked per month divided by 120.
Even if you do offer coverage, you'll be assessed a fee for each month that at least 1 full-time
employee enrolls in an Exchange and qualifies for a premium tax credit or cost-sharing
reduction, because your plan's share of total cost is less than 60%, or as a result of the
coverage you provide being considered unaffordable for that employee. In this case, the
monthly fee is equal to the lesser of $250 ($3,000 per year) per full-time employee receiving a
credit or reduction, but no more than the fee you would be subject to if you offered no health-
care insurance at all.
In addition, large employers that provide employee health insurance and pay a portion of the
premiums must offer a free choice voucher to employees who elect to enroll in an Exchange
plan. The value of the voucher is equal to the amount you would have paid to cover the
employee under the plan. Employees may enroll in an Exchange plan if the employee's income
is less than 400% of the Federal Poverty Level and the employee's cost to participate in the
employer's health plan is between 8% and 9.8% of the employee's household income. The
voucher can be used to offset the employee's cost to participate in the Exchange.
Also beginning in 2014, employers with more than 200 full-time employees that offer health
insurance must automatically enroll new full-time employees, subject to a waiting period of no
longer than 90 days.
Other employer incentives
By 2014, in an effort to promote wellness and decrease health insurance costs, employers will be able to offer employees
rewards, such as premium discounts and added benefits, for participating in wellness programs and meeting certain health-
related standards. The value of the rewards can equal as much as 30% of the cost of coverage and may even reach 50% in
some cases.
Employers who provide insurance for retired employees who are age 55 or older, but not yet eligible for Medicare, may receive
reimbursement for 80% of retiree claims between $15,000 and $90,000. This temporary reinsurance program begins in 2010
and is available until 2014. On the other hand, employers who currently receive a tax deduction for Medicare Part D drug
subsidy payments will see that deduction eliminated in 2013.
Group health plan coverage requirements
Group health plan requirements under the health-care legislation directly apply to insurers. However, most of these provisions
are incorporated by reference into ERISA and the Internal Revenue Code, extending their application to employers offering
group health insurance. Beginning in 2010, some important group health plan requirements include:
 | In 2010, group plans that offer coverage for dependent children must extend the age for dependent coverage to age | |
| 26. For plans in existence prior to March 23, 2010 (the date of legislative enactment), the extension of dependent coverage applies only if an adult child is not eligible to enroll in any other eligible employer-sponsored health plan. | ||
| In 2010, coverage for a plan participant cannot be rescinded except for fraud or intentional misrepresentation, and | |
| plans may not impose pre-existing condition exclusions with respect to children under age 19. | ||
| Beginning in 2010, plans may not impose lifetime limits on the dollar value of essential health benefits for plan | |
| participants and beneficiaries. Essential health benefits are intended to include those benefits customarily provided under a typical employer health plan, as defined by the Secretary of Health and Human Services. Beginning in 2014, plans cannot impose annual coverage limits for essential health benefits. | ||
| Most preventive care services and immunizations recommended by the U.S. Preventive Services Task Force will not be | |
| subject to deductibles, co-pays, and co-insurance. (Plans in existence on or before March 23, 2010, are exempt from this provision.) | ||
| By 2012, most employers must meet certain reporting and disclosure requirements, which include providing a summary | |
| of plan benefits and annual reports to participants; reporting annual enrollment and claims practices to the Secretary of Health and Human Services; and providing premium and coverage information to the IRS. | ||
| For plan years beginning on or after January 1, 2014, plans may not impose pre-existing conditions on any plan | |
| participant or beneficiary. |
Tax provisions
For taxable years beginning January 1, 2011, you must include the aggregate cost of group health plan benefits (with some
exclusions) provided to employees on Form W-2. And, effective January 1, 2013, you will be responsible for collecting and
reporting an increase of 0.9% in FICA taxes on wages above $200,000. The increase applies only to the employee-paid
portion of FICA taxes.
If you sponsor a group health plan, you may be assessed a tax of two dollars per average number of insured lives beginning in
2012. The tax is intended to finance a comparative effectiveness research program measuring the value of various medical
interventions. The tax is scheduled to sunset after September 30, 2019.
Health-care legislation makes changes to health savings accounts (HSAs), Archer medical savings accounts (MSAs), flexible
spending accounts (FSAs), and health reimbursement accounts (HRAs) that affect both plan participants and employers.
Beginning January 1, 2011, over-the-counter drugs no longer qualify for distributions/reimbursements under HSAs, Archer
MSAs, health FSAs, and HRAs. In addition, the tax on nonqualified distributions from HSAs or Archer MSAs increases to 20%
in 2011. Beginning in 2013, contributions to health FSAs are limited to $2,500 per year.
In 2018, a 40% excise tax is imposed on certain group health plans (excluding long-term care, vision, and dental plans) if the
annual cost exceeds $10,200 for single coverage and $27,500 for family coverage, indexed for inflation.
For more information on Health Care Reform and how it may affect you, visit the link below.
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